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Molycorp shares hit all-time low on funding woes

NEW YORK (AP) -- Shares of Molycorp Inc. fell to an all-time low Friday after the rare earth minerals mining company said it will need to secure additional financing to cover a substantial portion of capital expenditures and other cash requirements this year.

THE SPARK: The Greenwood Village, Colo., company said late Thursday that cash flow from operations will be less than anticipated this year. It is in negotiations with respect to financing, including potential equipment leading, asset-based revolving credit facilities and other debt arrangements.

"We cannot assure you that we will be able to obtain any financing on commercially acceptable terms or at all," Molycorp said in a statement.

The announcement came as Molycorp reported a loss of $67.6 million, or 71 cents per share, for the April-through-June quarter. That compared with net income of $47.8 million, or 53 cents per share, a year ago. Revenue rose 5 percent to $104.6 million.

THE BIG PICTURE: Molycorp produces and sells rare earth minerals that are used in a wide variety of applications, including hybrid and electric vehicles, consumer electronics, night vision equipment and global positioning systems.

It is in the process of expanding a flagship mine at Mountain Pass, Calif., with increased production expected by mid-2013.

China is the world's largest producer of rare earth minerals but it has limited exports as it tries to build up its industry to manufacture products that use rare earths.

THE ANALYSIS: JPMorgan analyst Michael Gambdardella lowered his ratings on Molycorp in wake of its financing announcement. He reduced the company to "Underweight" from "Neutral," and lowered the share price target to $11.50 from $19.50.

He also cut his 2012 per-share earnings estimate to 30 cents from 56 cents. Analysts surveyed by FactSet, on average, were predicting 2012 earnings of 90 cents per share.

In a research note to clients, Gambardella noted that Molycorp did not specify how much of a funding shortfall it anticipated, nor how much it will need in additional financing.

"This warning by the company is concerning to us, however, as it is tough to determine whether they will be able to raise enough funds and/or at what cost, especially after recent, significant financings," he wrote.

Dahlman Rose & Co. analyst Anthony Young said in a research note that he believes Molycorp managers are assuming a "more conservative stance" with the financing announcement, which should lead to a higher multiple for the shares over the long term. He reduced his price target on the stock to $36 but kept a "Buy" rating on the stock.

SHARE ACTION: Shares of Molycorp fell $4.18, or 26 percent, to $11.89 in midday trading, after earlier in the day dropping to $11.64, the lowest point since its July 2010 initial public offering. Its high in the past 52 weeks was $63.60 per share.