By Denver Business Journal

Rare-earth mining company Molycorp Inc. said Monday existing shareholders plan to sell up to $500 million of their stock holdings to help pay for planned upgrades and the expansion of its Mountain Pass mine in California.

Molycorp (NYSE: MCP), based in Greenwood Village, also said it plans to offer another $172.5 million in convertible preferred stock to help pay for the mine projects, according to a filing with the Securities and Exchange Commission.

Molycorpâ¿¿s board of directors also formally approved a $250 million, Phase 2 expansion at the mine, near Las Vegas, that will double production capacity to about 40,000 metric tons of rare-earth oxides by the end of 2013. Phase 1 projects at the mine include building a new processing plant for the mined ore.

Rare earths are critical to the manufacture of small, powerful, rare earth magnets, used in electronics ranging from wind turbines to defense technology. China is the leading provider of rare earth ore, but has slashed exports in recent months causing prices to surge. Molycorpâ¿¿s Mountain Pass mine â¿¿ the only rare earth mine in the Western Hemisphere â¿¿ was shut in the 1990s. The company restarted mining operations in December 2010 and plans to expand up the supply chain that produces rare earth magnets.

The shareholders that are selling stock â¿¿ affiliates of Resource Capital Funds, Pegasus Capital Advisors LP and The Traxys Group â¿¿ are the three main investors that helped buy the Mountain Pass mine in 2008. The companies will continue to be substantial investors in Molycorp after the sale, the company said.

⿿Without the foresight and long-term, strategic commitment of Resource Capital Funds, Pegasus Capital Advisors, and The Traxys Group, Molycorp would not be in the position we are today,⿝ said Mark Smith, Molycorp⿿s CEO and a board member. ⿿Their willingness to take on significant, early stage risk has positioned Molycorp, and all of our stakeholders, to continue to benefit from the very positive fundamentals of the rare earth sector.⿝

J.P. Morgan Securities LLC and Morgan Stanley & Co. Inc. will act as joint book-running managers for the proposed offerings, Molycorp said.

Copyright 2011 American City Business Journals

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