14/10/2008 - 12:51

Power failure lifts Moly's project costs

14/10/2008 - 12:51

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The cost for Moly Mines Ltd's Spinifex project in the Pilbara has risen from $1.1 billion to $1.26 billion following the inclusion of costs for a power station after a deal with an infrastructure company fell through.

Power failure lifts Moly's project costs

The cost for Moly Mines Ltd's Spinifex project in the Pilbara has risen from $1.1 billion to $1.26 billion following the inclusion of costs for a power station after a deal with an infrastructure company fell through.

In a corporate file interview posted on the ASX, managing director Derek Fisher said Moly had originally planned for the infrastructure company to build the station on-site and sell power at the mine gate.

"Unfortunately this provider was unable to meet financing hurdles imposed by our lenders due mainly to the uncertainties in the global credit markets," Mr Fisher said.

"We have now taken over responsibility for the engineering and design of the power station to ensure continuity of the design work.

"However, we remain in discussions with two other parties to replace the previous provider."

Mr Fisher added he was confident the company will achieve the target budget of $1.26 billion.

"We will have locked in 70% of our capital cost with contracts prior to financing with
over 50% of capital cost already contracted," he said.

"Although we are experiencing some delays at the moment and some variation in steel prices, we're confident that we can remain on budget.

"We also have A$110 million in contingency that was included in the initial A$1.08 billion. This will now apply to the remaining 30% of the total capital cost not locked in at financing."

Last month, Moly executed full financing documentation for a $US150 million interim debt financing facility, of which $US30 million has already been drawn down.

Mr Fisher expects to draw down the remaining $US120 million by the end of the month.

Moly has signed a 10-year off-take agreement with German steelmaker ThyssenKrupp.

The company is aiming for first production in early 2010.

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