half price molly, page-4

  1. 202 Posts.
    Not sure if you're interested but this is the latest from Diggers and Drillers
    Here's the best sign yet of the quality of Moly Mines' (ASX:MOL) Spinifex Ridge molybdenum project. It has officially secured the proposed US$150 million loan you read about in the last update. The fact that investors still want in on the project - despite the sharp contraction in lending - is good news.

    Moly will draw on the funds over the next two months.

    The company is late on this. It took a long time to finally bring the investor, Trust Company of the West (TCW), on board. And it wasn't easy either. In the end, Moly had to offer a sweetened deal to TCW. It included a very, very cheap option for TCW to buy 15% of Moly at some stage in the next ten years.

    That has diluted the shares a little further. But we're still bullish on the stock in the long run.

    Here's how the whole situation for Moly stacks up at the moment.

    Spinifex Ridge should be worth $850 million or so to Moly, according to its feasibility study. That's at conservative molybdenum prices much lower than today's traded price. But the financing is still a large risk. That's why the company's market cap is around one-eighth that figure. The capital investment is large, at $1.1 billion. The market simply isn't convinced Moly can find the funds.

    But the good news is that Moly is finding the funds, as this week's development shows.

    It's taking longer than expected. The project still has a lot of good selling points for investors though. Molybdenum is one commodity powering through the economic crisis. The super-metal is still trading at the same price (US$33 per pound) as when you first read about MOL here in May.

    Additionally, Moly has since found more value at the site in an iron ore deposit. This may help to offset increases in capital costs. Those are likely to increase.

    If creditors aren't happy with the company, there are other options to raise the funds. Moly has said previously it may have to sell some equity in the mine itself. But even if it sells 20% of Spinifex Ridge, that leaves $680 million worth of net cash flow compared to today's market cap of $100 million.

    That's what this boils down to. If Moly can't find any funding, the project isn't worth much at all. If it secures the required funds, it can go much, much higher.

    Additionally, with one investor on board this month, Moly becomes less of a risk to other potential partners.

    It's a good time to re-iterate that this is a mining junior. It's not a stock to invest money you can't afford to lose. But if it makes it through the financing process, like we believe it can, it stands to gain a whole lot. Moly is currently trading for $1.14.

    Cheers

 
Add to My Watchlist
What is My Watchlist?
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.

Currently unlisted public company.

arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.