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Rare Earth Miner Molycorp to Sell More Shares

Monday, 24 Jan 2011 | 2:44 PM ET

Rare earth company Molycorp is, once again, making news. The stock was halted briefly on Monday, and for good reason. Once it resumed trading, there was quite a bit for investors to contemplate.

The long-awaited expiration of the post-IPO lock-up expires this week, and the company announced about $500 million of shares will be sold by stockholders.

In addition, the company will make a secondary offering of mandatory convertible stock worth approximately $172 million.

That's a lot of shares hitting the market, yet the stock traded to the upside when it re-opened.

Why? Perhaps, it's because the company also announced the board of directors approved an expansion of capacity for the processing plant that just began construction.

With the proceeds from the secondary, Molycorp will go from 20,000 metric tons per year to 40,000 by the end of 2013. If prices forrare earths remain high, this will mean an incredible boost to revenue and cash flow when the company begins to bring new rare earths to market.

Another possible boost to the stock is that at least one analyst told CNBC the $500 million worth of share sales is actually below expectations.

"We find it interesting that the insiders are selling such a small portion of their shares," said Anthony Young, who covers Molycorp for Dahlman Rose. He added that the stockholders will continue to hold approximately 45 percent of the company.

With the stock up about 250 percent in the last six months, some view it as a bullish sign that owners want to hold on to so much stock.

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