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Molycorp Falls on Concern Probe Disclosure Took 2 Months

Molycorp Slumps on Concern Probe Disclosure Took Two Months
Molycorp Inc. shares have tumbled 71 percent this year after a slump in prices for rare earths, a group of 17 chemically similar elements used in wind turbines and hybrid cars. Photographer: Jacob Kepler/Bloomberg

Nov. 12 (Bloomberg) -- Molycorp Inc., the rare-earths producer being investigated by the U.S. Securities and Exchange Commission, dropped to a record low on concern the company took more than two months to disclose the probe.

Molycorp fell 4.4 percent to $7.17 in New York, the lowest closing price since the Greenwood Village, Colorado-based company began trading in July 2010. The shares have tumbled 70 percent this year after a slump in prices for rare earths, a group of 17 chemically similar elements used in wind turbines and hybrid cars.

It was “naive” for Molycorp managers to delay notifying the public of the investigation from August until the company’s Nov. 9 filing, said Jonathan Hykawy, a Toronto-based analyst at Byron Capital Markets.

“It’s plummeting not because of the SEC investigation but because of the potential implications of management withholding that information,” Hykawy said today in a telephone interview. “That choice that they were going to keep this confidential for as long as possible. That’s the negative thing that’s driving the stock right now.”

The company, owner of the largest rare-earth deposit outside of China, said in a Nov. 9 filing that it’s being probed by the SEC over the accuracy of its public disclosures. The SEC requested information from Molycorp on Aug. 28, the company said in a statement later that day.

Increasing Production

Jim Sims, a spokesman for Molycorp, declined to comment in an e-mail today.

The company is increasing output at its Mountain Pass mine in California. It also sells magnetic raw materials and other rare-earth products from plants it acquired with its June takeover of Canada’s Neo Material Technologies Inc. for C$1.3 billion ($1.3 billion).

Molycorp’s shares sold for $14 apiece in the 2010 initial public offering and more than tripled that year after China curbed output and cut export quotas to conserve resources and protect the environment.

Lanthanum oxide, a rare earth used to refine gasoline, dropped 56 percent in the past year, according to Shanghai Steelhome Information data. Cerium oxide, used in glass polishing, has declined 61 percent and neodymium oxide, used in magnets, has fallen 59 percent, the data show.

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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