In earlier issues of Metal News, we covered the growth and future plans of Moly Mines Limited. (See Moly Mines: Molybdenum, Copper, Iron: Profiting from China's Rapid Growth and Moly Mines Ready for Market Upturn.) With their financing deal just about ready to close, we took a minute to touch base with Dr. Derek Fisher, CEO of Moly Mines Limited to discuss Moly Mines and the progress to date.
Over the last several years, Dr. Derek Fisher and his team have been working diligently to move Moly Mines Limited's Spinifex Ridge Project into production. With offices in Australia and Canada, Moly Mines is focused on molybdenum and iron ore production for clients around the world, including China. Listed on the Australian Stock Exchange and the Toronto Stock Exchange under the symbol MOL, Moly Mines has recently discovered and developed an iron ore deposit near their primary molybdenum site.
Dr. Fisher says of the Spinifex Ridge Project, “Right next to the moly deposit, within 500 meters of it, we have a small iron ore resource of seven million tons. Our current mine design captures four and a half million tons. That mine was designed when ore was $90 per ton. It's now $165 per ton, so we're currently re-optimising the mine design, and we anticipate that most of the resource will fall into the new pit design.” The iron ore mine including processing plant was developed last year starting in April. Dr. Fisher says, “We're currently mining at a rate of one million tons per year and we shipped our first iron ore to China in December.”
The Spinifex Ridge Project has turned out to be an excellent investment for Moly Mines. Dr. Fisher says, “We've spent eighteen million dollars developing the iron mine. It will cost us about $65 a ton to mine it, crush and screen, and to truck it into Port Hedland and put it on a ship.” At today's high price of about $165 per ton, even with shipping costs and discountsfor impurities, Moly Mines will net about $70 per ton pre-tax. With one million tons per year, Dr. Fisher projects possible profits of $70 million dollars starting next year. He wryly comments, “It’s a pretty neat little operation considering that we only spent $18 million dollars to develop it.”
With the new iron ore mine, Moly Mines has been presented with additional opportunities. “You don't need a billion tons to do well at mining iron ore. It clearly demonstrates that small scale iron ore mines can be very profitable. Having our own small mill plus access to port facilities means that other small deposits in our area become attractive targets. We are already in negotiations with other parties.”In terms of mine life based on their own ore bodies, Dr. Fisher, an experienced geologist, estimates up to a 10 year mine life, “but I don't think we'll go beyond that,” he says.
One of the most exciting opportunities for Moly Mines in the near term is the completion of their China-based financing deal for their molybdenum/copper deposit. This financing deal will springboard Moly Mines’ operations into the next few years. According to Dr. Fisher, “Our Chinese shareholders put $200 million in to help pay off the debt we had. We'll have the financing complete during April, I believe. We should have the cash available for drawdown by the end of the second quarter or the beginning of the third quarter with construction to begin in Q3. This financing will not only eliminate any debt that Moly had been carrying, but also position them for rapid growth and development of mines and infrastructure over the next few years.
The short-term challenges that Moly Mines will face revolve around stabilizing iron ore product and completing the molybdenum financing deal. Dr. Fisher says, “Our third ship-load is out and we're moving about 3000 tons per day and have been doing so for several weeks. The operation is performing to capacity and is ahead of schedule, which is a credit to my staff and management.” He continues, “After that, the big challenge is to now finalize the financing for the molybdenum. That process has gone on for the last eight months. We have a commitment letter from one Chinese bank for half the debt required for the development and expect to have the other half committed during April” . According to Dr. Fisher, “Part of the delay in the financing has been the need to finalize a fixed price engineering (EPC) contract to build the mine. The Chinese require a fixed-price contract for the financing they are doing.” This contract will cover the engineering and construction of the mine and infrastructure.” Even with that challenge, Moly Mines is in a good position. Dr. Fisher says, “I believe we'll have that finalized by the end of April as well. That's the last hurdle before we execute the financing with the Chinese banks. Then, the challenge is building it.”
Investing in Moly Mines
Clearly, Dr. Fisher and his team have successfully led Moly Mines into a position of strength. Dr. Fisher says, “We have 365 million shares on issue, we have a market price of about $1 per share. Cash has started flowing, about $70 million dollars this year. We are also looking to double the size of the iron ore operation.” With production underway and the completion of the financing deal, Dr. Fisher believes that Moly will continue to develop in a positive direction. “With the additional financing, we'll be a significantly different company than we are today. . . The moly mining business is very much in balance at the minute. Production levels are being achieved and very little inventory is sitting in warehouses.”
Dr. Fisher believes that economic recovery will also assist in the development of Moly Mines, “As the US economy picks up and the European economy picks up, you'll see a significantly different Moly price.” With a significant amount of financing in place, production of molybdenum and iron ore at the Spinifex Ridge Project, and the elimination of debt load, Moly Mines is in a strong position to make positive growth in the short and long term.
For more information:
Moly Mines Limited
Principal & Registered Office
46-50 Kings Park Road
West Perth WA6005
PO Box 8215
Subiaco East, WA
Telephone: +618 9429 3300
Fax: +61 9429 3399