Molycorp Inc., the only U.S. producer of rare earths, on Wednesday said it would mothball its mine in California, laying off almost 500 workers and suspending the country's sole source of the 15 elements used in magnets, batteries and other high-tech products.

Molycorp said it would put its Mountain Pass mine on the California-Nevada border on "care and maintenance" by Oct. 20, although it would continue to produce at processing plants in Estonia and China.

Rare earths are essential to making everything from cars to iPhones, but they are needed in such minuscule quantities that it doesn't take much to oversupply the market.

That is what happened to Molycorp. Prices collapsed, forcing the Greenwood Village, Colo.-based company to file for chapter 11 protection in June, one of the biggest corporate failures in a rotten year for miners hit by slumping commodity prices and slowing demand from their biggest customer, China.

Molycorp said Wednesday it could restart the mine depending on "market conditions and other factors that are difficult to forecast." Demand is still relatively good for rare earths, especially from the clean-energy sector, the company said. A bigger problem is supply, which Molycorp said has been exacerbated by "an ongoing tsunami of rare earths that are produced via unregulated and illicit mines and processors in China."

It has been a punishing downfall Molycorp. Fueled by restrictions on exports of rare earths by China, the world's dominant supplier, the company's stock market value rocketed to more than $6 billion at the start of this decade.

But then China ended its limits on rare-earths exports, and battery and magnet makers found alternative materials, sending Molycorp into a long slide. It hasn't turned a profit since 2011.

Molycorp employs "just under 500 workers" represented by the United Steelworkers union, said Jim Sims, a company spokesman. "The overwhelming majority of those jobs will almost certainly be lost," he said, adding, "It also represents a loss to the U.S. of intellectual capital and workforce skills that is difficult to measure."

A USW spokesman declined to comment.

Rare earths are considered a strategic resource because they are used in military electronics. The U.S. government, however, has a large stockpile, and isn't planning to bail out Molycorp.

In 2010, Molycorp—formerly a unit of Chevron Corp. and bought by private-equity firms in 2008 for $80 million—raised $394 million in a public offering. Then, as rare-earths prices and its stock market value soared, Molycorp overextended itself and took on debt. It committed to an expansion at the California mine, which after overruns cost $1.5 billion, and bought Neo Material Technologies Inc., a Toronto-based rare-earths-processing firm, for $1.3 billion.

Write to John W. Miller at john.miller@wsj.com

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(END) Dow Jones Newswires

August 26, 2015 15:35 ET (19:35 GMT)

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