Michael Vaughan The Australian Financial Review | 10 Jul 2008 |...

Michael Vaughan
The Australian Financial Review | 10 Jul 2008 | Page: 20 | Companies and Markets
Philip Falcone's Harbinger Capital is examining ways of participating in Moly Mines' raising of up to $1.4 billion to fund the development of the Spinifex Ridge molybdenum project in Western Australia.
After postponing the raising due to the higher cost of debt, Perth-based Moly Mines is now hopeful of finalising the package by September.
A raising in the vicinity of $1 billion in the high-yield bond market is likely to be attempted in September, which implies the company may need to consider securing some bridging finance in the interim to accelerate the project's development. After the delays experienced so far it is likely to take a big financial shock to derail the financing of the $1.1 billion Spinifex Ridge mine for a second time.
Moly Mines managing director Derek Fisher said the project could support up to 70 per cent debt and 30 per cent equity. Given the company's share price had fallen by 60 per cent from a high of $7.06 almost a year ago, Dr Fisher said a sale of equity in the project was more attractive than issuing new shares.
European specialty steel maker ThyssenKrupp is one of a number of groups that have expressed an interest in being involved in the equity component of the raising. The German group has also agreed to buy all of the molybdenum produced at Spinifex Ridge.
Investment banks Morgan Stanley, JPMorgan and Azure Capital are advising Moly on the fundraising.
Dr Fisher said there were strong indications of support in North America after a recent roadshow.
The financing package could have a similar structure to Fortescue Metals Group's funding of its $2.8 billion Pilbara iron ore project in WA. Fortescue chief executive Andrew Forrest was formerly Moly Mines' chairman and still holds more than 7.5 million options with an exercise price of 20¢, worth about $20 million at the current share price. If all options were converted, he would rank as Moly Mines' second-largest shareholder.
Mr Forrest introduced Mr Falcone to the investment and the New York fund manager now ranks as Moly Mines' biggest shareholder with 19.9 per cent.
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Moly within sight of Spinifex funding Michael Vaughan
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Harbinger, a New York-based hedge fund, provided Poseidon Nickel, another of Mr Forrest's current ventures, with $US50 million ($52.4 million) through a convertible note late last month. The fund is also Fortescue's second-largest shareholder with a 15.9 per cent stake worth $4.1 billion.
Moly Mines cleared a major environmental approval hurdle for Spinifex Ridge yesterday and upgraded the ore reserves to 451 million tonnes at a grade of 0.05 per cent molybdenum and 0.08 per cent copper. Initially the project will produce 24 million pounds of molybdenum and 27.3 million pounds of copper. A further expansion of about another 50 per cent is being considered.
The planned mine will be one of the biggest open pits in Australia with a diameter of up to 2 kilometres.
Molybdenum is used to increase the temperature resistance and hardness of steel.
Shares in Moly Mines closed down 20¢ at $2.80.