re: Ann: Company Update - Enters Strategic Al...
Article from SMH 30th December 2011
MOLY Mines is prowling for a new acquisition after deciding not to go ahead with its $700 million molybdenum mine, managing director Derek Fisher says.
But it will be in the market with a slimmer wallet after financier China Development Bank cut its line of credit by $US210 million.
Mr Fisher said a fall in the price of molybdenum, which is used in steel making, coupled with the strong Australian dollar made the Spinifex Ridge project, in Western Australia's Pilbara, uneconomic.
'If we were in production today we'd be making money but enough to service debt - we'd have our head out of water but only just,'' he said. ''So we're putting it on ice. It's ready to go.''
He said that under its financing agreement with the China Development Bank, the company had until May to find a new project.
''We're on the prowl and there's a lot out there,'' he said. ''We've got two things that we're looking at very closely.''
He said the company was ''comfortable'' with ferro alloy and specialty metal projects.
''Watch this space,'' he said.
Moly's small but lucrative iron ore mine, which is also at Spinifex Ridge, will remain in operation.
The company's shares yesterday fell 2¢, or 6 per cent, finishing at 31.5¢.
This year, the price of molybdenum has fallen from a peak of about $US40,000 a tonne in February to $US29,000 a tonne yesterday.
The dollar reached parity with the US dollar in November last year and since then has only occasionally dipped below the $US1 mark.
Mr Fisher said that while molybdenum was sold in US dollars, the project's expenses would have been paid for in Australian dollars.
Moly's new deal with China Development Bank will preserve the company's access to cheap capital at the cost of reducing the funding available from $US454 million to $US244 million.
This is to be accomplished by Moly drawing $US210 million from the loan and repaying almost immediately.
Moly also plans to extend a deal with 55 per cent shareholder Hanlong, which bought into the company in 2009.
Hanlong was not charged a control premium for its stake, but instead guaranteed the finance and lent the company an additional $45 million.
The reduction of the loan means Hanlong has not met its financing commitments and Moly is entitled to keep the $45 million.
But, in order to keep its access to the loan, Moly's non-Hanlong directors have agreed to roll the agreement with Hanlong over into new projects.
The extension requires shareholder approval.
MOL Price at posting:
31.0¢ Sentiment: LT Buy Disclosure: Held
