Shares of Molycorp (NYSE: MCP) moved higher in early trading Friday after the company reported third-quarter earnings. The market seems to be happy with the company's results beating expectations, but shares plummeted 14% in late trading after an SEC investigation was unearthed. 

First off, what happened this quarter?
Molycorp continues to make progress in expanding production in Mountain Pass. Phase 1 of Project Phoenix is still expected to be up and running this year at a rate of 19,050 metric tons, and they say they're already 80% there. 

But despite a 100% increase in rare earth oxide equivalent production and a 49% increase in revenue, the company still posted a $21.7 million loss in the quarter. Increased production doesn't matter if you're not making money on everything you sell. 

Same old story
The enduring problem has been falling prices of Molycorp's products at the same time that production is increasing. The price bubble in rare earth minerals is popping, and there's no end in sight. This quarter, the average sale price of rare earth oxide equivalent was $43.45 per kg, down from $52.48 just a quarter ago. This even caused a $41 million inventory writedown.

The one positive is the strength in rare metals pricing, but the company made only 96 metric tons of this in the quarter.

What's up with the SEC investigation?
The bigger problem yesterday was an SEC investigation into the company's public disclosures. Apparently, the SEC began investigating the company in August, and the company didn't feel the need to tell investors until it slipped the nugget into the 10-Q filing. No mention in the earnings press release, the conference call, or any release before that.

When the SEC comes knocking, the best move is to run, and that's exactly what investors did on Friday. 

It doesn't get better from here
I've been negative on Molycorp for a long time, and I really don't see a reason to own the stock until the SEC investigation is resolved, prices stabilize for a long period of time, and we can get an idea what long-term cash generation will look like.

Maybe a better question is how Rare Element Resources (NYSEMKT: REE) and Avalon Rare Metals (AVLNF -4.18%) are still in business? If Molycorp can't make money, there's no way these companies can.