With plenty of money available due to a positive cash flow from its iron ore mine and a new strategic alliance and direction, Moly Mines is looking to diversify and expand the scale of its operations.
In December 2011 Moly Mines signed a Memorandum of Understanding with China Development Bank (CDB) that establishes a Strategic Alliance between the two organizations for the financing of new mining projects identified and introduced by Moly Mines. The Strategic Alliance recognizes the expansionary vision of Moly Mines and its 53% major shareholder the Sichuan Hanlong Group and is the result of 18-24 months spent in developing a good relationship with CDB.
As a result, it's currently looking to make acquisitions. CEO and Managing Director Derek Fisher says: “We have a large amount of cash. We've got about $65 million in the bank and we've got an undrawn debt facility, fully signed off with CDB, for about $244 million that is looking for a home at the moment and a Strategic Alliance partner in CDB that brings funding certainty. So we are on the acquisition trail.”
The Company is looking for a major project to replace its Spinifex Ridge Molybdenum project in Western Australia that was put on hold in late 2011. “We've got low molybdenum prices and at the same time we're seeing prolonged strength in the Australian Dollar against the US Dollar which has had a massive affect on our potential revenues. Added to that, with the sustained strength in copper prices there's a lot of new molybdenum production coming on stream in the next four or five years from the copper industry so for the time being we've taken the decision to basically put the molybdenum project on hold until we see things turn around.”
Fortunately for Moly Mines, 2011 has been a very successful year for its own iron ore mine, located on the same mining property as the molybdenum project. The iron ore mine was a virgin discovery for Moly Mines and was brought into production in a short time. “We're operating an iron ore mine,” explains Derek. “We built the mine and put it in production in 2010, 2011 was our first full year of production.”
Activity is currently over four mining areas and an NI 43-101 compliant report shows 6.11 million tonnes indicated at 58.9% iron ore and 1.16 million tonnes inferred at 57.2% iron. Production commenced in late 2010 and the expected annual production rate was 800,000 tonnes. However, as Derek points out, this was exceeded in the first year: “The mine performed at 25% above capacity. We shipped about one million tonnes last year. It's a small mine but very profitable and it paid for itself within six months of production starting.
“We netted cash of nearly $40 a tonne from the one million tonnes we shipped last year so it's very profitable. It's all going into China. We have a contract with a Chinese group and it’s being marketed, so it's very successful. Iron ore prices fell dramatically in fourth quarter affecting our results but they've come back quite nicely. This year’s looking good as well. We expect to ship between one million and 1.2 million tonnes this year. We're very lucky.” At current prices Moly Mines’ iron ore mine will generate another $30-40 million before overheads this coming year.
Moly Mines is now embarking on a new corporate direction and is looking at a variety of near term development projects which include iron ore due to it having a lot of iron ore knowledge. It's also looking at, ferrous alloys because of its molybdenum experience and, with a lot of contacts in the steel industry developed through the times it spent in molybdenum and specialty metals as well. Moly Mines has a very strong technical team that comprises a broad range of highly experienced people across quite a number of metals so it's fairly relaxed about dealing with the opportunities.
It's a technically driven company with a good track record, which it has demonstrated through its iron ore project having paid for itself within six months of going into production. It’s looking in Australia and overseas, including North America, having looked in the United States and Canada at some projects, and also having looked in Africa.
“We know within twelve months this will be a very different company and that's where we're heading,” remarks Derek. “It's a good time for us. It's a buyer's market and we're looking at a lot of things at the moment, one of them will come off I’m sure.”
Moly Mines Limited
Principal & Registered Office
46-50 Kings Park Road
West Perth WA
PO Box 8215
Subiaco East, WA
Telephone: 08 9429 3300
Fax: 08 9429 3399
Toronto – Canada
PO BOX 78023 784 Taunton Rd. E.
Telephone: +1 416-777-1801
or: +1 416 371 7541