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Hot Stocks: Moly Mines with Funding, Ready for Production at Spinifex
“All’s well that ends well,” is one Shakespearean quote that suits Moly Mines (MOL in ASX and TSX) just fine. Despite some hiccups in completing the financing for the construction of its moly mine early this year, the company’s Spinifex Ridge Molybdenum/Copper Project in Western Australia is expected to give the company its first molybdenum production by Q1/2013 as planned.
And now with the required financing for the project in place, the deal appears to be sealed. Moly Mines was advised by Hanlong Mining Investment in mid-April that the China Development Bank had approved US$500 million in project finance facilities to develop the Spinifex Ridge Molybdenum / Copper mine. This was an expansion of CDB’s commitment of US$250 million, announced on 1st February 2011.
Moly Mines Managing Director and CEO Dr Derek Fisher said, “this seminal outcome signals a step-change in the fortunes of our Company and our shareholders. Having survived the hiatus of the GFC and the disappointments of 2008, we are now back on-track to building the world’s next large scale molybdenum/copper mine. This outcome and the quality of the proposed debt is a great credit to the efforts and persistence over the last twelve months of our major shareholder, Hanlong, and also signals the strong belief of the Chinese bank in the future strength of the world molybdenum market.”
Fisher is rightfully bullish about Moly Mine’s outlook. Going into production by early 2013 gives the company a first-mover advantage among new moly developers. Not only will this open a significant opportunity for the company to gain market share, fewer producers mean there is less chance for moly prices to be dragged down. Fisher explains: “Being first in terms of new projects affects the ability of other companies to finance their project. What we don’t want to do is see too much production coming out because it would force molybdenum prices down.”
Being first is not the only thing Moly Mines has going for it. Target production is 10 million tonnes per annum, which will produce on average 11 million lbs of molybdenum in concentrate and 13.5 million lbs of copper in concentrate per annum for the first 10 years.“At 10M tonnes per annum throughput, we have very sweet spot in our cash flow around 2018 onwards, “says Fisher.
With 450 million tonnes of over 650 million tonnes in total resources already proven and development-ready, another upside is the potential to upgrade the remaining 200-million-plus tonnes.
There is yet another upside to Moly Mines in the form of a small yet profitable iron-ore mine, which began its first-ever shipment in December 2010. Moly Mines’ announcement on February 28 that its mine production rate is now expected to reach 1 million tonnes per annum in the second quarter and well ahead of the planned date of July 2011, sent Moly Mines up 3.83% to $1.085 a share.