Shares of Molycorp Inc. dropped to a year low on Thursday after the cash-strapped rare earths miner announced on the same day plans of selling a combination of stock and debt in order to raise as much as $517.5 million to help fund operations at its California mine.

Molycorp shares in early New York Stock Exchange trading Thursday dove $11.16 before recovering marginally to $11.40. Shares before premarket were trading 5 per cent lower at $11.45.

In a statement, the American rare earths miner said it will offer as much as $172.5 million of shares and as much as $345 million of convertible senior notes due in 2017, the proceeds of which will be utilized to finance operating expenses, working capital and capital expenditures through the first six months of 2013.

Molycorp is currently working on an $895 million redevelopment of its rare earths mine in Mountain Pass, California. The mine is expected to produce 19,500 metric tonnes of rare earth oxides annually by the fourth quarter this year. Plans to double its capacity to 40,000 tonnes by end of 2013 have been mapped out.

The company has traded as high as $58.74 in the past year and reached a peak above $74 in April 2011, 10 months after holding an initial public offering at $14 per share.

But the cash generated seems to be still inadequate because early this month, executives had implied they would need to seek additional financing since cash from operations were less than expected.

In a separate filing, Molycorp said Resource Capital Fund and Chile's Molibdenos y Metales SA (MOLYMET), its largest shareholders, have agreed to buy $35 million and $25 million, respectively, of stock if Molycorp requests it.

Molycorp said it should the convertible notes offering proved successful, it will no longer request the purchase.