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Moly Mines signals shitf in primary focus to iron ore
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Neil Dowling
August 31, 2009 01:04pm
PERTH-based Moly Mines has signalled a shift in focus to iron ore and the possible sale of a stake in the company to help alleviate its massive debt.

Managing director Dr Derek Fisher says Moly is poised to start producing and shipping iron ore as early as the first quarter of next year.

``We aim to get our iron ore project up first and have put molybdenum production on hold,'' he says of the company's Spinifex Ridge open-cut iron ore, molybdenum and copper mine near Marble bar in the Pilbara.
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Moly Mines today announced it had been granted a one-month extension to its $178 million interim financing facility.

Investors reacted nervously to the financial restructuring plans, with Moly shares slumping 13.6 per cent to last trade at $1.30 at 14:59 AEST.

The debt restructure will be accompanied by a capital raising of a minimum of $30 million to bring the Spinifex Ridge iron ore project to production planned for next year.

Moly Mines says that surplus funds to its proposed capital raising will go to the repayment, firstly, of its $95 million of two-year note debt and then the extinguishing of its $24 million of five-year notes.

Dr Derek Fisher said the proposed restructure and accompanying capital raising will allow it to develop its mineral deposits in an orderly fashion and bring the Spinifex Ridge project to fruition.

The mine is located 20km off a major road to Port Hedland's shipping facility which Dr Fisher says makes it easy to delivery the iron ore.

The molybdenum project, adjacent to the company's iron ore deposit, could be started up within 12 months.

Despite the company announcing it would sell some of its molybdenum production equipment to raise cash, Dr Fisher says sufficient equipment would remain to produce the metal.

Though investors appear nervous at the complexity of the finance deal, Dr Fisher says "it gets the monkey off our back''.

"We financed the equipment for the mine and were caught in the sub-prime mortgage collapse,'' he says.

"The debt facility we now have has saved the company.

"The lender is asking us to demonstrate that we have shareholder support with the capital raising. There's no issue with the debt facility.''

Dr Fisher expects the majority of the capital raising, to be completed next month, to come from offshore interests.

He also has not ruled out a major stake in Moly being sold.

"It's pretty obvious that we would consider that,'' he says.

Moly Mines says its open pit has a resource of 24 million pounds a year of molybedenum concentrate.

Dr Fisher says the strengthening molybdenum market, reflecting continued growth from China, is expected to be further supported by demand from Western Europe and North America as these economies recover from the impacts of the global financial crisis.

Molybdenum prices have averaged about $10 a pound this year but a recent analysis by J.P. Morgan Securities says it expects prices to rise to about $22 a pound next year.

New York-based J.P. Morgan analyst Michael Gambardella says: "most Western molybdenum producers have little to no inventory, leaving traders scrambling given the recent increase in demand outside China''.