General Moly (GMO) In Agreement w/Hanlong for 80% Funding of Mt. Hope Project; POSCO Commits to 20% Mt. Hope Equity Interest

March 5, 2010 9:29 AM EST
General Moly (NYSE: GMO) announced a significant investment and strategic relationship with Hanlong (USA) Mining Investment Inc., a wholly-owned subsidiary of Sichuan Hanlong Group (Hanlong), that is anticipated to provide full project funding for the Company's 80% owned Mt. Hope project.

Highlights of the transaction include:

  • $665 million bank loan from a Prime Chinese Bank to be procured and guaranteed by Hanlong at an anticipated rate of Libor plus 2%-4%;
  • $80 million equity investment in General Moly through the purchase of 25% of the Company's fully diluted shares, partially contingent upon completion of the $665 million bank loan;
  • $20 million bridge loan to assist in Mt. Hope project restart, repayable from the proceeds of the bank loan; and
  • A long-term molybdenum supply off-take agreement for Hanlong from Mt. Hope production.

Bruce D. Hansen said, "I am extremely pleased to have Hanlong as a major investor and partner. This transaction with Hanlong provides superior value to our stockholders than alternative transactions we have recently evaluated. Hanlong will, in accordance with the terms and conditions of the agreement, invest $80 million in equity and procure $665 million in senior secured debt, which we believe will fully fund the Mt. Hope project. Given the robust cash flows anticipated to be generated from the Mt. Hope project, we feel we can adequately service the $665 million loan. Assuming $15 per pound molybdenum prices, during the first full five years of production, total debt service will consume approximately 50% of our anticipated cash flow after sustaining capital. Additionally, our post-transaction levered after-tax Net Present Value (NPV) of General Moly’s 80% share of Mt. Hope is estimated at $1.2 billion using an 8% discount rate at a $15 per pound moly price growing to over $2 billion at $20 per pound prices. Of note, these figures do not include any value for the Liberty project, which we now believe becomes increasingly viable with the Mt. Hope project financing arranged. We believe this transaction positions General Moly to reach its strategic goal of being the world’s largest publicly listed pure-play moly producer with ultimate targeted production of approximately 50 million pounds per year."

Mr. Hansen added, “We would also like to express our appreciation to POSCO, our Joint Venture partner at Mt. Hope, for its immense support as we have evaluated numerous financing alternatives and its commitment to remain a 20% partner in the Mt. Hope project."

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