"The history of Eureka lies in its future." - Lambert Molinelli, 1878


The author/editor of the Eureka Miner owns common shares of local mining stocks, General Moly (GMO) and Newmont Mining (NEM); together with benchmark miner Freeport-McMoRan (FCX). Please do your own research, markets can turn on you faster than a feral cat.

Friday, March 5, 2010

General Moly Announces Significant Investment from Hanlong, Stock Surges

*** BREAKING NEWS *** GENERAL MOLY trades over 12 million shares, intraday high is $4.08, closing price is $3.99 (1:00 PM PST)

Morning Miners!

It is 6:53 AM and a major news day for General Moly (GMO) and Eureka County. Grab a cup of that fortifying Raine's TGIF coffee, we've got a lot of work to do. The ole Colonel awoke this morning expecting to digest the Labor Department's monthly jobs report and the General Moly quarterly earnings release. We got a whole lot more, pardner. I'll close on jobs, let's checkout what GMO put on the wires this morning:


General Moly Adopts Stockholder Rights Plan

General Moly Announces Fourth Quarter And Full Year 2009 Results

The blockbuster is the first link; General Moly has announced a significant investment and strategic relationship with Hanlong (USA) Mining Investment Inc., a wholly-owned subsidiary of Sichuan Hanlong Group (Hanlong), that is anticipated to provide full project funding for the Company's 80% owned Mt. Hope project.

Holy Cow.

Here is the summary of the investment deal:

1) $665 million bank loan from a Prime Chinese Bank to be procured and guaranteed by Hanlong at an anticipated rate of Libor plus 2%-4%;

2) $80 million equity investment in General Moly through the purchase of 25% of the Company's fully diluted shares, partially contingent upon completion of the $665 million bank loan;

3) $20 million bridge loan to assist in Mt. Hope project restart, repayable from the proceeds of the bank loan; and

4) A long-term molybdenum supply off-take agreement for Hanlong from Mt. Hope production.

Investors went nuts on this release sending GMO stock up more than 35% to $3.52 in early trading.

General Moly CEO, Bruce Hanson, had this to say,

"I am extremely pleased to have Hanlong as a major investor and partner. This transaction with Hanlong provides superior value to our stockholders than alternative transactions we have recently evaluated. Hanlong will, in accordance with the terms and conditions of the agreement, invest $80 million in equity and procure $665 million in senior secured debt, which we believe will fully fund the Mt. Hope project."

And there's more about South Korean steelmaker, POSCO. Mr. Hanson continues,

"We would also like to express our appreciation to POSCO, our Joint Venture partner at Mt. Hope, for its immense support as we have evaluated numerous financing alternatives and its commitment to remain a 20% partner in the Mt. Hope project."

The President of Hanlong (USA) Mining Investment Inc., Hui Xiao (Steven) commented,

"We are extremely pleased to invest in General Moly and we feel their Mt. Hope and Liberty projects are two of the most promising moly assets worldwide. Our investments in General Moly and Moly Mines position Hanlong to be a significant participant in the future of the molybdenum industry, which we find very attractive."

How's that for some Friday news? The second release provides coverage for shareholders followed by a link to their fourth quarter and full year 2009 report. Here are some new dates and status for the Mt. Hope Project:

"The Company currently expects the Bureau of Land Management (BLM) to complete an administrative Draft Environmental Impact Statement (EIS) mid-year and to receive its Record of Decision late in the fourth quarter of this year or early in the first quarter of 2011..The Company continues to believe that these studies confirm that the Mt. Hope project will have minimal long term impact to local ground water."

And an update on Engineering:

"The Company will restart engineering efforts, which had been paused in March 2009 to conserve cash, following stockholder approval of the equity issuances in connection with the Hanlong transaction and publication of the Draft EIS, currently anticipated to occur by mid-year. Equipment procurement efforts, which had also been paused, will resume later in the year. Although the Company has secured orders for most of the milling equipment, firm orders for much of the mobile mine fleet still must be placed."

That's a lot to absorb, give it all a good read on your break buckaroos.

Oh, I almost forgot, there was the monthly jobs report that I listened to on CNBC Business News at 5:30 AM. The weather affected the numbers much less than expected which has sent the broader markets up. The unemployment rate remains steady at 9.7% despite stormy weather on the East Coast last month. Slow but steady improvement, things are looking up.

Enough talk, let's walk the walk:

4-WD is OFF - the VIX or "fear index" is below 25, improving broader markets are expected; metals & miners have a smoother road with FCX above $74 (what is this?)

The YELLOW light has returned on our fuel gauge with oil above $80

An ORANGE light is ON for possible adverse regulation/legislation: Miner's claim fee, Miner taxation, Cortez Hills & mercury emissions

Otherwise, all lights are green on the Eureka Outlook Dashboard (upper right, what's this?)

NYMEX/COMEX: Oil is up $1.54 in early trading to $81.75 (April contract, most active); Gold is up $6.4 to $1139.5 (April contract, most active); Silver is up $0.264 to $17.440 (May contract); Copper is down $$0.0660 to $3.4415 (May contract); Western Molybdenum Oxide is steady at $18.25, LME Moly 3-month (seller) is up to $19.05

The DOW is up 67.79 points to 10511.93; the S&P 500 is up 8.48 1131.45. The miners are are rocking:

Barrick (ABX) $40.38 up 1.46%
Newmont (NEM) $51.38 up 1.02%
US Gold UXG) $2.73 down 0.73%
General Moly (Eureka Moly, LLC) (GMO) $3.52 up 35.50%
Thompson Creek (TC) $14.36 up 3.38%
Freeport-McMoRan (FCX) $79.86 up 1.30% (a bellwether mining stock spanning gold, copper & molybdenum)

The Steels are up, (a "tell" for General Moly & Thompson Creek):

ArcelorMittal (MT) $42.16 up 3.46% - global steel producer
POSCO (PKX) $120.85 up 2.27% - South Korean integrated steel producer

The Eureka Miner's Grubstake Portfolio is is up 4.63% to $1,362,366.15 (what is this?).


Colonel Possum

Headline photograph by Mariana Titus