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http://www.proactiveinvestors.com/companies/news/1834/derek-fisher-managing-director-of-moly-mines-speaks-to-proactive-investors-1834.html

Wednesday, July 08, 2009
Derek Fisher, Managing Director Of Moly Mines Speaks To Proactive Investors
by Proactive Investors

If you would like to listen to this interview please click here
Please give investors a brief introduction to Moly Mines Ltd.

Moly Mines is an Australian Incorporated Company. The company is dual-listed, both on the ASX and the TSX in Toronto. We have two major assets. One is our Spinifex Ridge molybdenum copper deposit. That is a very large moly deposit. And very close by on the same property we have an iron ore resource. Now, our listing in Canada is very important to us because North America is really the centre of the world molybdenum scene and most of our financing for Spinifex Ridge has come out of there. The Australian listing at the moment is very important because the Australian market understands iron ore, so we get a double bang for our buck.


Recently there has been a slight recovery in the molybdenum price. Would it be possible for Moly Mines to develop a small starter mine at Spinifex Ridge with a lower capital cost and lower output than the envisaged longer term moly project?

Very much so. In fact, if you look back, our original plan was to build a mine with a capacity of 20million tonnes per year. That mine and the mill had two parallel processing circuits, and it is very easy to put a line through the centre and build only half of it at 10million tonnes. We have recently completed an engineering study on that with very favourable results and we have redesigned the mine. We have called this a starter project, obviously with the intent down the road to build the second, parallel circuit, so we double the capacity basically.


In the longer term, given that there will be capacity closing down, analysts are predicting a recovery in the molybdenum price. How likely is it that Moly Mines will be able to bring in an end-user to finance it’s Spinifex Ridge molybdenum project?

Yes with the recent downturn in moly prices there has been significant closure of moly production around the world. If you go to China, something like 40% of their moly mines have closed. A lot of them are small mines but they are high cost. So, at the moment there is a high likelihood that we will see the moly price come back and probably come back reasonably quickly. We are talking to end-users, particularly in the steel industry – the Asian steel industry – but also to metal traders, and they are our targets in terms of partners for the project and to assist us with financing.


Moly Mines recently announced a high grade, iron ore JORC resource at 7.3million tonnes at Spinifex Ridge. What are your thoughts on the possibility of significantly increasing the iron ore tonnage there?

We will increase the tonnage. We have a drill operating on the property at the moment and the drilling is targeting the on-strike extensions of the known mineralisation. We have also recently found other occurrences of iron ore several kilometres to the west of the known mineralisation and we will be prospecting that and sampling that in the near term. So, increasing the resource? Yes, I think there is a high likelihood. Is it going to be a major increase? I think there is certainly a possibility of doubling the scale and maybe a little bit beyond that, but that’s about the size it will become.


Could Moly Mines monetize this existing iron ore resource by selling output to a Pilbara iron ore producer?

That is a possibility and we would consider it. But probably a more sensible approach is to mine it ourselves and export it through Port Hedland. We are very close to Port Hedland – by Australian standards anyway! We are only about 170 kilometres from Port Hedland, within easy trucking distance on sealed bitumen roads. So mining is a relatively simple process for us. We would use contract miners, who would probably do the crushing and screening as well, and contract trucking to take it into Port Hedland and put it on ships. So, that is a very attractive alternative for us, and that’s the one we are pursuing at the moment.


What is the financial situation of Moly Mines?

Moly Mines has a large amount of cash in the bank at the moment, in excess of AU$50million. We also have debt and that debt is payable before the end of this year and we are in active negotiations at the moment with respect to restructuring that debt. Obviously, that would most likely be on the back of developing the iron ore project in the short term. Restructuring our debt position is clearly critical.


The company recently indicated that it was considering making use of its cash reserves and was looking at potential acquisitions. Can you provide us with an update on these investigations?

Yes, that is an ongoing process. Our lender, an US institution that provides us with the debt facility is encouraging us, in fact, to apply our excess cash to other projects. Obviously we are looking for high quality projects – or project – and that is an ongoing activity. We have been scouring the world in fact, and we have narrowed it down to a shortlist and we are in active negotiations on a number of projects at the moment.

What can we expect from Moly Mines over the next twelve months?

Well, there is a lot of news coming. Obviously, the iron ore development. If our assessment is positive on that and we are successful in terms of finalising some aspects of that which we are working on at the moment, there will be an announcement firstly on completion of the feasibility study and the outcome, and that is due in the next couple of months. That will lead into mining contracts etc and to sales contracts. So that is coming along. The resolution of our negotiations on our debt facility – that is obviously another aspect of news.

And, obviously, if we are successful in our acquisition campaign, that will be generating considerable news for the company. The other things that are happening that, again, are going to impact positively and will be newsworthy is any recovery we have seen in the molybdenum price – and that’s certainly showing signs at the moment. It has come off lows of around AU$7.00 and it’s up more than 50% on that now, within the last three or four months.

So the moly price is starting to come back and if it really starts moving then some of the shortfall, or some of the warehouse moly, gets used up and we start seeing a shortage in supply, then I think we will see significant price rises in the metal. And that could easily happen in the next six to twelve months.

What are your thoughts on the medium and long-term prospects for iron ore?

I think they are excellent. Iron ore is obviously driven by the emergence of the brick economies, particularly China, India and places like that. China hasn’t stopped. China has let the genie out of the bottle and you are not going to put it back in. Sure, we are going through a recession at the moment, but I don’t think you would call it a recession in China. Their growth this year is still looking at around 7% - 8%; that is still a major increase compared to Western economy, and demand for steel is just going to rise in China. I don’t think there is any doubt about that, and we are already seeing the specialty steel industry and the stainless steel industry recover over the last three months, and I think we will see that reflected both in iron ore and also, very importantly for us, in molybdenum.

What are your thoughts on the medium and long-term prospects for molybdenum?

I think they are excellent again and again driven by some of my previous comments. The moly industry is driven by the same things that drive the steel industry, although there are some other drivers as well. That’s a general background but the big, probably the biggest driver, of the moly industry is the hydrocarbon industry. It has been the trend from using the better quality hydrocarbons to our greater dependence on poor quality hydrocarbons and these are usually sulphurous. Sulphur in hydrocarbons means corrosion, and they need corrosive steel for a lot of the equipment and as the world trends rapidly towards the dependence on poor quality hydrocarbons we are seeing an acceleration in the consumption of moly in those steels. And this is not going to turn around. The hydrocarbon resources in the world are finite, and that is why we have started using the poor quality hydrocarbons, just because we are running out of the better quality ones, and that is not going to change. And that all does very well for moly. So, the world hasn’t had a new moly mine in 25 years. We need it. We need it now.