UPDATE 2-Molycorp warns of dwindling cash, to raise money
* Estimates negative cash flow for third quarter
* Expects to write down finished goods, inventory
(Adds detail on public offering.)
Oct 15 (Reuters) - Rare earths producer Molycorp Inc said on Tuesday its cash cushion has dwindled to insufficient levels and announced its second major financing in less than a year, sending its shares down 18 percent in pre-market trading.
Molycorp said it could sell up to $200 million worth of common stock in a public offering, or up to $230 million if its underwriters exercise their options in full.
Molycorp also announced a deal with its largest shareholder, Chilean molybdenum processor Molibdenos y Metales S.A. - or Molymet - under which, at Molycorp's request, Molymet could purchase up to $50 million worth of common stock.
Colorado-based Molycorp said that if its offering is successful, it does not expect to trigger the deal.
Molycorp raised $414 million in common stock and convertible notes offerings completed on Jan. 30, 2013. The funds were needed in part to complete an expansion and modernization project at its main mine, Mountain Pass in California.
The company has been hit by higher costs and lower rare earth prices in recent years, and the project is meant to make it more competitive. But its ramp up is taking longer than expected.
It said on Tuesday it expects to report negative cash flow for the third quarter, due in part to lower production, demand and prices. It also said it expects to write down finished goods and inventory in the quarter, partly due to high production costs and slow moving inventory.
Molycorp said it may be unable to sell a substantial portion of the cerium produced at Mountain Pass in 2014. The site's main ore material is bastnasite, and about 49 percent of the rare earth material in that ore is cerium, traditionally a lower demand product. (http://r.reuters.com/wac83v)
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.
Shares fell 18 percent to $5.84 in trading before the bell.
(Reporting by Allison Martell in Toronto and Garima Goel in Bangalore; Editing by Maju Samuel and W Simon)