Shares of Molycorp (NYSE:MCP) plunged more than 22% to $8.33 in heavy volumes on Thursday after the rare earth miner served up more bad news to already shell-shocked investors.

The Colorado-based company said 2013 revenue will be lower than previously forecast  as rare earth oxide prices continue to spiral downwards .

That would not have surprised anyone following the rare earth industry.

More damaging is the announcement by Molycorp that it is "evaluating its capital needs" and that phase two of production ramp-up at its California mine is on hold until "market demand, product pricing, capital availability, and financial returns justify" it.

Translation:  Don't hold your breath for the long-promised output of 40,000 tonnes rare earth equivalent per year.

And  don't be surprised if Molycorp comes back to the market looking for more funds to complete the $1.25 billion phase I – a 20,000 tonne run rate – which is already six months behind schedule.

What could not have helped sentiment in the industry either is the announcement just yesterday by the US Dept of Energy and private partners of $120 million to set up the Critical Materials Institute.

A primary mission for the new research institute will be to  find alternatives and increase the recycling of rare earths used in green technologies such as wind turbines .

The irony? Molycorp is a sponsor of the program.

Perhaps the miner – and hopefully, eventually shareholders – could still benefit from the research: The institute will also look at ways to make "extraction more commercially viable".

Still, that's cold comfort for punters who picked up MCP for $35.79 in April.