General Moly Inc has announced its unaudited financial results for the second quarter ended June 30th 2011. Net loss for the three months ended June 30th 2011 was approximately USD 5.4 million as compared to a loss of USD 3.2 million for the year ago period. Net loss for the six months ended June 30th 2011 was approximately USD 9.5 million as compared to a loss of USD 6.0 million for the year ago period.
Cash balance at the end of the second quarter was approximately USD 59 million compared to approximately USD 54 million at the end of 2010. During the second quarter, cash use of approximately USD 5 million was the result of approximately USD 2.1 million in development, engineering, and equipment deposit costs, approximately USD 2 million in General and Administrative costs, and approximately USD 0.9 million in debt issuance costs related to procurement of the Hanlong sourced Chinese Bank Loan.
Additionally, at June 30th 2011, the company took a USD 3.4 million non cash write down representing approximately 50% of a long term deposit on mining equipment with the passage of a June 30th 2011 deadline for a firm purchase order. During the remainder of 2011, spending levels will largely be tied to progress toward receipt of the Mt Hope project's permits, not including a USD 9 million advanced royalty payment due in the fourth quarter of 2011 under the Company's Mt Hope lease.
Mt Hope project financing update
When final permits are received, POS Minerals Corporation (a 20% owner of the Mt Hope project) is anticipated to fund its final USD 56 million initial contribution, plus 20% of all the funds the Company has spent on the Mt Hope project at that point. The Company estimates this combined payment will be approximately USD 100 million. From that point forward, the project will be funded 80% by the Company and 20% by POS Minerals Corporation.
Also, within nine months after the Mt Hope project’s permits are received, pursuant to the amended Securities Purchase Agreement between the Company and Hanlong (USA) Mining Investment Inc, Hanlong is obligated to procure a drawable loan from a Chinese bank of not less than USD 665 million. Despite the increased timing and flexibility provided to Hanlong, both parties remain committed to the availability of a drawable loan as expeditiously as possible following receipt of Mt Hope's permits and continue to work toward a two or three month availability timeframe.
During the quarter, the company completed work with a Chinese engineering firm to reformat and translate its Bankable Feasibility Study for the Chinese banks at a cost of approximately USD 0.9 million. Work is now focused on drafting and negotiating a specific term sheet for the Mt Hope debt facility. When the bank loan is in place and required permits are received, the Company intends to close on Hanlong's Tranche 2 equity sale for USD 40 million, bringing Hanlong's share position in the Company to 25% on a fully-diluted basis.
Mt Hope project permitting update
The Bureau of Land Management and its independent Environmental Impact Statement contractor are continuing work to complete the Draft Environmental Impact Statement by incorporating and responding to comments received on May 6th 2011 from the second draft of the Mt. Hope project’s Preliminary DEIS. The DEIS is currently anticipated to be completed in the third quarter and published in the Federal Register in the third or fourth quarter. Following publication of the DEIS, full permits are anticipated within six to nine months.
Mt Hope project water rights update
On July 15th 2011, the Nevada State Engineer issued ruling 6127 granting the Company’s water right applications for the use of 11,300 acre feet annually of water for mining purposes, which will facilitate the pumping of water necessary for the Mt Hope project’s planned operations. The specific permits are anticipated to be issued following payment of statutory fees, and, following the State Engineer’s approval of a Monitoring, Management, and Mitigation Plan, prepared in cooperation with Eureka County, the water will be available for consumptive use.
The company continues to hold discussions with area stakeholders, including Eureka County, to cooperatively develop a long term 3M Plan. Participation, transparency and input of area stakeholders is a major goal of the 3M Plan. On July 28th 2011, Eureka County issued a press release announcing that it is considering appealing the State Engineer’s decision on water rights for the Mt Hope project. The deadline to appeal is August 15th 2011.
Mt Hope project engineering and equipment procurement update
The company will restart engineering and procurement efforts following the publication of the DEIS. Although the Company has purchased and ordered most of the long lead milling equipment, firm orders for much of the mobile mine fleet and other process equipment must still be placed. The Company had remitted USD 6.8 million against a contract to purchase two electric shovels in 2008. The Company took a non cash write down of USD 3.4 million with the passage of the first order deadline of June 30th 2011. The Company continues discussions concerning applying previous payments to future orders, including the remaining USD 3.4 million tied to an order deadline of June 30th 2012.
Liberty project update
During the second quarter, the Company announced the results of 33 core holes that were not previously included in the Liberty project 2008 pre feasibility study. These core holes are being incorporated into a revised resource estimate, which is anticipated to be released in the third quarter of 2011. The revised resource estimate will form the basis for an updated pre feasibility study that is anticipated to be completed early next year.
The company is also initiating discussions with a variety of parties regarding investment and off-take opportunities with respect to the Liberty project.
Molybdenum market update
During the second quarter of 2011, molybdenum prices traded slightly lower and finished the quarter at USD 14.90 per pound, compared to USD 16.40 per pound at the end of last year, according to Ryan’s Notes, an industry publication.
Since the end of the second quarter, prices have continued to decline and are currently at approximately USD 14.70 per pound. The company believes that current price declines are primarily related to seasonal steel production trends and that molybdenum demand and prices will strengthen later in the year.
