Monday, May 4, 2009
General Moly Conserves Cash, Adjusts Time Line
It is 6:18 am, the coffee is hot and warmer days are on the horizon! Perhaps no mining interest in our area is more influenced by global recovery than General Moly and their Mt. Hope Project. The Report has covered aspects of steel demand and production (a major use of Molybdenum) for the past several weeks. The jury is still out but there do seem to be encouraging signs coming from China's stimulus package. Rising demand in China helps all steelmakers, whether or not they have plants in China, because it keeps excess Chinese steel from flooding the market and depressing prices. Last week the price of Molybdenum jumped from slightly below $8 to a thin flat washer above $9, another encouraging sign.
General Moly announced their first quarter 2009 results Friday. You can access their entire report by clicking on the link in the "Miner's Corner" to your right. The two important elements are their cash conservation plan and adjustments to the time line for initial production. Here are the relevant extracts from their report:
CASH CONSERVATION PLAN
Given the continued uncertainty in the project finance market, current low molybdenum prices, and a longer than expected timeframe to receive the federal permits to begin construction at the Mt. Hope project, on March 26, 2009 the Company implemented a cash conservation plan to reduce expenditures and conserve cash for 2009 and 2010 in order to maximize financial flexibility. With a March 31, 2009 consolidated cash balance of $80.4 million, the Company has the capacity to continue its current level of permitting efforts, maintain efforts to secure project financing, and secure the most critical long lead equipment for the ultimate construction of the Mt. Hope project.
The cash conservation plan will also reduce total cash utilization to approximately $1 million per month by the fourth quarter of this year for all expenditures other than the key equipment purchases. Based on current cash on hand and the cash conservation plan, the Company expects it will have adequate liquidity for operations, as modified, through the end of 2010. Engineering efforts, currently approximately 60% complete, have been suspended pending the completion of financing.
PERMIT AND DEVELOPMENT UPDATE
Following recent discussions with the BLM related to the Company's hydrologic studies of both pit lake geochemistry and regional hydrology, the Company determined that additional analysis and data acquisition will be conducted to improve the technical adequacy of the studies. The Company believes this further work does not indicate a concern related to ultimate permit receipt; however, this work is the primary reason for the delay in the expected receipt of the Record of Decision (ROD) from the fourth quarter of 2009 to mid-year 2010. State-issued permits related to Air Quality, Tailings Dam Safety, and Water Pollution Control are anticipated to be received well before the federal permit (ROD) is received. Once financing is obtained and we have received the major operating permits and the ROD from the BLM, it is expected that Mt. Hope can be constructed and in production within 20 months.
The ole Colonel wishes General Moly the best of luck and will continue providing updates on the pace of global recovery affecting their future.
By the by, here's a new beer bet with a 12-month stretch (the Colonel bought Barrick at $29.09, Friday):
Barrick (ABX) sees $39 before $26 on or before 5/31/2010
Enough talk, let's walk the walk:
Oil is up $0.19 in early trading to $53.39(June contract). The dollar ("Dixie" or .DXY) is down 0.18% at 84.392. The commodity index (.CRB) is up 0.31% to 229.33.
Gold is up $3.1 to $891.3 (June contract); Silver is up $.045 to $12.545; Copper is continuing its rally, up $.0525 to $2.1535 (July contract); Molybdenum holds slightly above $9.
The DOW is down slightly to 8,318.34; the S&P 500, up 11.39 points to 888.91 continuing its strong rally. Miners are ripping today:
Barrick (ABX) $29.98 up 3.38%
Newmont (NEM) $39.82 up 2.81%
General Moly (GMO) $1.62 up 3.85%
Freeport McMoran (FCX) $47.57 up 6.95% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are rocking (a "tell" for General Moly):
Nucor (NUE) $44.17 up 6.61% - domestic steel manufacturing
ArcelorMittal (MT) $26.47 up 3.44% - global steel producer