Moly Mines has postponed its US$720 million Spinifex Ridge molybdenum project in the Pilbara, admitting that the mine development was not commercially viable at current market prices.
The company said that the continued weakness of global molybdenum prices and the strength of the Australian dollar had rendered the project sub-economic.
This is the second time Moly has postponed the project. It was on the brink of a go-ahead in 2007 but was forced to scrap its plans after the onset of the global financial crisis.
It said a final investment decision was unlikely to be made prior to the expiry of a US$454 million financing agreement with the China Development bank (CDB), which was finalised in June 2011 and will expire in May 2012.
In its place, the company has struck a new strategic alliance, under which CDB will consider providing funding of up to US$244 million for future mining projects introduced by Moly.
“Whilst it is disappointing that the economics do not allow us to proceed with the Spinifex Ridge molybdenum / copper mine at this stage, the strategic alliance further cements the excellent rapport we have built with CDB and supports a platform for future growth for the company,” Moly managing director Derek Fisher said.
Moly also announced variations to a funding agreement with China’s Hanlong.
Suspension of the project has deprived Perth-based GR Engineering Services of one of its major growth opportunities.
GR announced last May that it had been appointed as a sub-contractor on the project, subject to completion of financing and other conditions.
It said at the time that the Moly project would deliver revenue of about A$360 million over a period of 30 months.
However, GR managing director Joe Ricciardo told WA Business News that the Moly contract was never factored into its revenue and profit projections, because of the conditions precedent.
“That was never included in any of our budgets; that’s what we’ve been telling the financial markets all the way along,” Mr Ricciardo said.
GR had previously completed a definitive feasibility study on the 10 million tonnes per annum development, which would have been one of the world’s largest molybdenum mines.
Moly currently operates a small iron ore mine at Spinifiex Ridge, with exports of one million tonnes in the past year.
