Moly Mines shelves Spinifex Ridge moly-copper project in Oz

Falling metal prices and a higher Australian dollar have forced Moly Mines (MOL-T, MOL-A) to put on hold its Spinifex Ridge molybdenum-copper project in Western Australia’s Pilbara region.

The company had signed a financing deal with the China Development Bank (CDB) for US$494 million in June. The money was intended for development but the company held back on building and waited for underlying economic factors, such as moly prices and exchange rates, to improve.

Molybdenum oxide traded for US$13.61 per lb. on Dec. 23. It had been trading in the US$17 range in the earlier part of the year, but never approached pre-2008 levels, when it sold for over US$30 per lb.

As for the Australian dollar, the currency surged from US85¢ per Australian dollar in May 2010 to above US$1.05 in mid-2011. Currently, US$1 buys A99¢.

On a more positive note, Moly Mines announced that it signed an agreement with the CDB that should ensure access to capital – albeit at a reduced sum – despite the hold on Spinifex. The deal was signed with the aim of restructuring loans with the Chinese bank, so that it can finance new mining projects.

“The strategic alliance further cements the excellent rapport we have built with CDB, and supports a platform for future growth of the company,” says Moly Mines chief executive Derek Fisher.

The new deal will see CDB provide financial support for projects other than Spinifex Ridge under similar terms, under a US$454-million loan.

The catch is that CDB wants Moly Mines to make a US$210-million drawdown and repay the amount within one week.

This leaves Moly Mines with just US$244 million in funding, but it retains the favourable terms of Spinifex’s earlier financing agreement.

Meanwhile 500 metres east of the the moly-copper resource, Moly Mines’ small Spinifex Ridge iron ore mine is in production. The mine has an indicated resource of 6.1 million tonnes grading 58.9% iron, and inferred resources of 1.16 million tonnes grading 57.2% iron.

The Spinifex Ridge molybdenum-copper project has measured and indicated resources of 652 million tonnes grading 0.05% molybdenum and 0.08% copper.

The company had planned to build a 20-million-tonne-per-year open-pit mine, but after the fall in molybdenum prices in late 2008, it scaled back its plans to 10 million tonnes per year.

At presstime Moly Mines shares traded at 30.5¢ apiece within a 52-week range of 27¢ to $1.29.