Molycorp May Raise $517.5 Million Selling Bonds, Shares

Molycorp Inc., the U.S. owner of the largest rare-earth deposit outside of China, may raise as much as $517.5 million selling shares and convertible bonds to help fund construction at its mine in California.

Molycorp will offer as much as $172.5 million of shares and as much as $345 million of convertible senior notes due in 2017, the Greenwood Village, Colorado-based company said in a statement today. It intends to use the proceeds to fund operating expenses, working capital and capital expenditures.

The company’s largest shareholders, Resource Capital Fund and Chile’s Molibdenos y Metales SA, have agreed to buy $35 million and $25 million of stock respectively if Molycorp requests it, Molycorp said in a filing. Molycorp won’t request the purchase if the offering of convertible notes is successful, according to a separate filing.

Molycorp is restarting output at the Mountain Pass mine as China, which accounts for more than 90 percent of global rare-earth supply, cuts output and restricts exports. The company posted a surprise second-quarter loss on Aug. 2 after rare-earth prices fell and said it would raise funds to pay for “a substantial portion” of its remaining 2012 capital spending. Molycorp bought Canadian metals producer Neo Material Technologies Inc. for C$1.3 billion ($1.3 billion) in June.

Molycorp fell 7.5 percent to $11.16 in New York, the lowest since its July 2010 initial public offering. The shares have dropped 53 percent this year.

Mountain Pass

Morgan Stanley and Credit Suisse Group AG are managing the bond sale and Morgan Stanley is handling the share sale.

Molycorp sold $230 million of 3.25 percent convertible debt in 2011 with a conversion price of $71.40.

Mountain Pass is scheduled to produce at a rate of as much as 19,500 metric tons of rare-earth oxides a year by the fourth quarter. Molycorp plans to double the mine’s capacity to 40,000 tons by the end of 2013.

Rare earths are 17 chemically similar elements used in batteries, magnets and computer hard drives. Prices soared in 2011 after China announced quotas on exports before declining as some buyers use substitute materials.

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