Moly Mines gets debt reprieve

Vancouver – Moly Mines (MOL-T, MOL-A) caught a lifeline on its US$150-million bridge loan from U.S.-based lender TCW.

TCW granted Moly Mines a one-month extension to the debt’s looming Oct. 31 repayment deadline.

Moly Mines had drawn down the facility during better economic climes of last year in order to begin equipment purchases for its then A$1 billion development of the Spinifex Ridge moly project in northwestern Australia.

Moly Mines and TCW will use the interim period to finalize ongoing restructuring of the loan, proposed terms of which Moly Mines also released.

The blistering 20% interest is set to be reduced to 15% on US$140 million worth of notes and the repayment structure is to be divied up over a five year period: US$20 million would be due Oct. 31, 2014; US$80 million would be due Oct. 31, 2011; and US$40 million would be due April 30, 2011.

Moly Mines would eliminate another US$43 million of notes and interest, using an existing cash balance, once restructuring is finalized.

Terms of the debt restructuring would be conditional on Moly Mines raising at least US$25 million to advance its Spinifex Ridge iron ore project (not Spinifex Ridge moly). Surplus proceeds would go to TCW. Moly Mines plans to raise the necessary funds in September.

As part of the restructuring Moly Mines would also issue TCW about 6 million warrants at a bargain basement price, A$0.0001. The warrants would mature in ten years and would not be issued if Moly Mines manages to pay off the TCW debt by Nov. 30, 2009.

News of the restructuring battered Moly Mines’ share price which lost 15¢ to close at $1.15.

A day after it announced the loan extension Moly Mines also released details of its Spinifex Ridge iron ore project.

The project, though small in terms of many other iron ore operations, is exceedingly high grade and carries both low capital costs and high financial returns. The indicated resource at the Spinifex Ridge iron ore project stands at 6.1 million tonnes grading 58.9% iron and has low silica content.

Moly mines pegs the iron ore project’s mine life at 5 years, capital costs at A$9.4 million and the internal rate of return at 65.7% based on 5-year benchmark iron ore prices.