NEW YORK General Moly Inc. acknowledged that it encountered "a serious bump in the road" with the termination of a $125-million loan deal, but said it has enough cash on hand to survive until it finds a new financing partner for its Mount Hope molybdenum project.
General Moly has completed preliminary construction at the Nevada mine and will begin heavy construction once it secures full financing for the project. In the meantime, the company is "focused on conserving cash," chief executive officer Bruce Hansen told AMM.
Lakewood, Colo.-based General Moly and Chengdu, China-based Sichuan Hanlong (Group) Co. Ltd. agreed last month to terminate a $125-million loan deal that was intended to supplement a $665-million term loan (amm.com, May 16), not long after negotiations with Hanlong and China Development Bank (CDB) for the $665-million loan were suspended following the reported detention of Hanlong chairman Liu Han (amm.com, March 21).
General Moly executives have visited China twice in the past five weeks seeking an investor to replace Hanlong, Hansen said. "On our first trip to China we had a chance to visit with CDB, and theyve indicated that if we can get a strong, reliable Chinese partner to invest in the company and/or the project, then theyd be willing to reengage in trying to complete our $665-million loan. Weve now met with a number of Chinese companies, and a few have some interest and are doing their due diligence."
Hansen acknowledged that the withdrawal of Hanlong as a financier was problematic but said that General Molys and Mount Hopes fundamentals are strong enough to survive.
"Its clearly a serious bump in the road, but we think we have a very robust project in terms of its cost structure and its size," Hansen said. "We have a good, strong partner in Posco Ltd. with their 20-percent stake in the project and favorable offtake arrangements for about 11 million pounds per year. We ended the first quarter with $57 million in unrestricted cash and another $36 million in restricted cash, so we have significant liquidity for quite a while."
Hansen also is undeterred by the challenge of bringing a major molybdenum project to market with moly prices at their lowest level since December 2009. Molybdic oxide is currently trading in a range of $10.90 to $11.30 per pound, according to AMMs most recent assessment, similar to pricing levels in 2009, when construction at Mount Hope was halted due to low moly prices (amm.com, March 27, 2009).
"We believe (that), over the long term, demand will reappear and it will get into robust growth mode," Hansen said. "But our project remains NPV (net present value) positive even at these prices. We have the benefit of the offtake contracts, where we have a fixed floor price negotiated between $14 and $15 per pound."