Molycorp Inc., owner of the largest rare-earth deposit outside China, fell 12 percent after Dahlman Rose & Co. cut its recommendation to hold from buy following the mining company’s decision to sell bonds and stock.
The shares slid to $9.84 at the close in New York, the lowest since the company’s July 2010 initial public offering. They have tumbled 82 percent in the last 12 months.
Molycorp, which is working to reopen the Mountain Pass mine in California, agreed to sell 12 million shares at $10 apiece and $360 million of convertible notes. It plans to use the proceeds for operating expenses, working capital, capital expenditures, “and any other cash requirements,” the Greenwood Village, Colorado-based company said today in a statement.
“The size of the capital offering raises questions whether this project will be completed on time and whether the previous operating cost metrics can be achieved in a timely fashion,” Anthony Young, an analyst at Dahlman Rose in New York, said in a note today. “This mine will not ramp up as previously indicated.”
Molycorp is on schedule to increase output at Mountain Pass to an annual rate of 19,050 metric tons in the fourth quarter, Jim Sims, a company spokesman, said in today in an e-mail.
Young also lowered his full-year earnings estimate for this year by more than half to 80 cents a share from $1.70 and cut his 2013 estimate to $1.20 from $3.50.
Dahlman Rose was one of seven co-managers of Molycorp’s IPO and had kept a buy rating on the shares since initiating coverage in November 2010.