When investors bemoan the unceremonious slap in the face that they've just received from controversial rare-earth elements developer Molycorp (NYSE: MCP), interim CEO Constantine Karayannopoulos will say he had no choice. He'd be absolutely right, and I think now we have a much clearer explanation for prior CEO Mark Smith's sudden departure from the project he helped to launch.

Molycorp's shares crumbled by more than 20% Thursday morning after the company slashed 2013 revenue expectations and delayed phase 1 production from the revamped Mountain Pass mine in California until mid-year. Ramp-up delays are commonplace in the mining industry, as for example with the recent delay impacting IAMGOLD's (NYSE:IAG) Sadiola expansion. But typically, some indication of a schedule revision is communicated to the market before the previously targeted time frame has expired.

Molycorp investors, of which I am one, rang in the new year with the understanding that phase 1 annual output of 19,050 tons of rare-earth oxide (REO) equivalent from Mountain Pass was already imminent. According to Karayannopoulos: "The targets of achieving full phase-1 run rate by the end of 2012 in my view were too aggressive. The expectation that somehow we would have pushed a button and boom we would have gotten to phase-1 operating rates overnight was not realistic and it should not have been the expectation."

Quite apart from my sense of outrage that investors were ill-informed regarding a realistic timeline for the Mountain Pass mine's historic revival, this development carries with it some very troubling implications regarding the potential need for an additional capital raise during 2013 atop the $414 million raised in mid-2012 that was supposed to carry the project through to fruition. Of all the unsettling news that Molycorp released Thursday, as a shareholder I am most unnerved by the phrase: "... is evaluating its capital needs for 2013". I've watched in dismay as capital cost overruns have ravaged the shares of mine developers from gold majors like Barrick Gold (NYSE:GOLD) and Kinross Gold (NYSE:KGC), to copper-gold sob story Thompson Creek Metals (OTC:TCPTF). It is not a pretty picture.

On the other hand, Molycorp's interim CEO appears committed to pursuing a more measured and staged growth process than that envisaged by his departed predecessor, and his decision to forestall the mine's transition to phase 2 annual output of 40,000 tons REO-equivalent while the company reassesses market conditions and the availability of capital strikes me as a sound move under the circumstances. With those capital outlays now shelved, perhaps Molycorp can still deliver a smooth ramp-up process along the revised timeline and begin to unlock the value of its unparalleled strategic position across the full rare-earth metal supply chain and turn cash flow positive before the funds from that last capital raise are depleted.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.