Shares in Moly Mines surged higher today after the company last night announced a $US700 million deal with privately-owned Chinese company Hanlong Mining Investment for its flagship Spinifex Ridge molybdenum project in the Pilbara.
Shares in Moly Mines surged higher today after the company last night announced a $US700 million deal with privately-owned Chinese company Hanlong Mining Investment for its flagship Spinifex Ridge molybdenum project in the Pilbara.
Moly will effectively hand control over to the Chinese company, which has agreed to provide $US200 million in equity and debt funding, and potentially provide a further $US500 million.
The latest agreement puts to rest funding difficulties Moly has encountered for more than a year for its flagship Spinifex Ridge molybdenum project in the Pilbara.
Shares in Moly surged 32 cents, or 26 per cent, to a high of $1.545 before easing to $1.415 at 11:12 AEDST.
Under the agreement, Hanlong has agreed to subscribe for 207.1 million shares at A74.7 cents each for a total of $US140 million and provide Moly with an interest bearing $US60 million, 10-year loan.
Hanlong is a privately-held Chinese company with a diversified portfolio containing resources, electricity production, pharmaceuticals, food and alcoholic beverages and real estate development.
The equity and debt funding arrangement is in addition to the recently announced $C31.5 million ($A33 million) capital raising, which was a condition of a debt restructure agreement with Trust Company of the West.
TCW last year loaned $US150 million to Moly, which it had planned to repay through project funding for the Spinifex Ridge molybdenum project.
However, Moly had so far been unsuccessful with securing the funds to repay the debt and to finance the project, and had planned to fund the scaled down, flagship project through its small, $9.4 million Spinifex Ridge iron ore operation.
In a statement today, Moly said funds from Hanlong's debt and equity package will be used to repay TCW's debt, which is estimated to currently be at $US134 million.
The remaining $US66 million will remain as free cash in addition to the first $US25 million raised from the institutional placement and share purchase plan.
Also under the agreement, Hanlong has committed to provide or arrange $US500 million in debt funding by June 30 2010, which will be used for the $675 million, 10 million tonne per annum Spinifex Ridge molybdenum project.
Hanlong will also receive 35.5 million, unlisted three-year options exercisable at $C1 each, but will have to forfeit those if it is not able to procure the $US500 million in debt, and pay a further $52.4 million to Moly.
Moly said in the statement that, assuming the options are converted, Hanlong will have a fully diluted interest of about 54 per cent.
The agreement is subject to shareholder and regulatory approvals, and also a further restructuring of the financing facility with TCW.
"This Agreement represents a wonderful opportunity for Moly Mines to clear the Company's existing debt and build the Spinifex Ridge Molybdenum/Copper Project significantly ahead of the point at which funding from the traditional debt and equity markets becomes available," Moly managing director Derek Fisher said in a statement.
"The Company could be in the envious position of having constructed the molybdenum/copper mine at the beginning of the next metals cycle, benefitting from higher metal prices in the mine's early production years."
Hanlong managing director Hui Xiao said the agreement represented a major step in the international expansion of the group, which had $A1.5 billion in revenues in 2008.
Meantime, Moly said both companies are currently discussing an offtake arrangement relating to the Spinifex Ridge molybdenum project.
Further comment was being sought from Mr Fisher at time of publishing.
Moly is currently progressing plans for the 1 million tonne per annum iron ore operation
