01/05/2009 - 13:19

Moly restructures plan as deadline looms

01/05/2009 - 13:19

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Moly Mines says it is looking for projects with cash-flow potential to ease its debt pressures as a six-month deadline for a $US150 million ($A206 million) loan looms.

Moly Mines says it is looking for projects with cash-flow potential to ease its debt pressures as a six-month deadline for a $US150 million ($A206 million) loan looms.

In its quarterly report released today, Moly added that depressed molybdenum prices have forced it to evaluate its smaller Spinifex Ridge project.

The West Perth-based company said it will use its cash balance of $US67 million to fund new acquisition opportunities where the target's existing or near-term cash flow could assist in the restructure of financial obligations.

Moly is due to repay its $US150 million interim financing facility, provided by the Trust Company of the West, by the end of October this year.

Managing director Derek Fisher told WA Business News that the company had identified 120 projects around the world and had shortlisted around half a dozen.

He said Moly was already in negotiations with some of the project owners.

A decision is expected to be announced in a couple of months, Mr Fisher said.

Meantime, the company's flagship asset Spinifex Ridge has been put on hold on the back of depressed molybdenum prices which have fallen from around $US34 per pound to $US8/lb over the past year.

The sharp decline has prompted Moly to say the current price "does not support a full project funding from the debt and equity capital markets for either a 20 million tonne per annum or 10 million tonne per annum Spinifex Ridge development scenarios".

Mr Fisher said molybdenum prices needed to be about $US18/lb for at least six months before markets had enough confidence to finance the project.

Earlier this year, Moly downsized the start-up operation from 20mtpa to 10mtpa and considered selling surplus mining items no longer deemed necessary.

Mr Fisher said Moly had received strong interest and expect to generate around $US40 million from the sale of about 50 per cent of the mining items.

In its report today, the company said it had spent $US69 million on long lead items for Spinifex Ridge, which has a capital cost estimate of $604 million for a 10mtpa operation.

Previously, the capital cost estimate was pegged at $1.26 billion for a 20mtpa operation.

On the upside, Moly said a constrained supply side supported a strong medium-term price outlook.

"As the economy-boosting, infrastructure development programs of the major countries commence, demand for the metal could return quickly to a sustained increase in price," it said.

"The Spinifex Ridge project, either in its 10 million tonne per annum or 20 million tonne per annum form, remains a viable opportunity for strategic investors seeking a long term stable supply of molybdenum."

Shares in Moly shed two cents to 39.5 cents at 14:32 AEST.

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