UPDATE 1-Molycorp warns of dwindling cash, writedowns
* Estimates negative cash flow for third quarter
* Expects to write down finished goods, inventory
* Shares down 14 pct premarket
Oct 15 (Reuters) - U.S. rare earths company Molycorp Inc said its cash cushion dwindled to insufficient levels and it expects to report negative cash flow for the third quarter, due to lower production, demand and prices.
Molycorp shares fell 14 percent in trading before the bell.
The company also said it expects to write down finished goods and inventory in the third quarter, partly due to high production costs and slow moving inventory. The company did not give more details.
Molycorp said it would be unable to sell a substantial portion of the cerium metal produced at its main mine, Mountain Pass in California, in 2014. (http://r.reuters.com/wac83v)
Light rare earths cerium, used in light bulbs and flatscreen TV, has traditionally been a lower demand product, the company said.
The company, nearing completion of a $1.25 billion modernization and expansion project at the mine to cut costs, said revenue and cash flow have been significantly lower than expected as the chloralkali plant at Mountain Pass in not yet ready.
Produced primarily in China, rare earths are an essential part of many high-tech products including smartphones, tablets and hybrid vehicles. Prices skyrocketed in 2010 and early 2011 as China clamped down on exports, but it has eased export controls since then and prices have declined.
(Reporting by Garima Goel in Bangalore; Editing by Maju Samuel)