Sprott Molybdenum Participation Corp (MLY.TO) said on Friday it will liquidate itself and distribute assets to shareholders in the face of plummeting prices and demand for molybdenum, a rare metal used as a steel-hardening agent.

Launched less than two years ago by Canadian resource guru Eric Sprott, the fund said its net assets were valued at C$1.75 per share on Jan. 7, of which C$1.51 per share was in cash and short-term securities.

Sprott said in December that it was considering strategic alternatives to make best use of its cash position because its shares were trading at a discount to net asset value.

The stock closed on Thursday at C$1.39 on the Toronto Stock Exchange, but jumped 13 percent to C$1.57 on Friday.

A one-time market darling, the fund purchased shares of both molybdenum miners and the physical metal.

Prices for molybdenum, which ran up sharply in 2003 and 2004, have fallen more than 50 percent since mid-September. Producer stocks have also been hammered.

Shares in Thompson Creek Metals (TCM.TO), the world's top pure producer of molybdenum, have shed about two-thirds of their value over the past 12 months.

Adanac Molybdenum Corp (AUA.TO) stock has plunged from 89 Canadian cents a year ago to 3 Canadian cents.

Sprott said it has not yet determined the timing of its distribution plan.

($1=$1.19 Canadian) (Reporting by Susan Taylor; editing by Peter Galloway)

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