Chinese firm to invest $80 million in General Moly, secure funding for Nevada mine project

Chinese firm to invest in molybdenum mine company

LAKEWOOD, Colo. — General Moly Inc. said Friday a Chinese firm has agreed to buy a 25 percent equity stake for $80 million and secure other funding designed to fully finance a Nevada molybdenum mine.

Under the agreement, Hanlong (USA) Mining Investment Inc., a wholly owned subsidiary of Sichuan Hanlong Group, will arrange for and guarantee for a $665 million bank loan from a Prime Chinese Bank.

Hanlong also will purchase 25 percent of General Moly’s shares for $80 million, partially contingent on the completion of the loan. It also will arrange for a $20 million bridge loan.

The equity portion of the agreement is subject to stockholder approval.

General Moly, which is based in Lakewood, and Hanlong also signed a supply agreement under which Hanlong will take delivery of some production from the mine once it is in operation.

Shares of General Moly closed up $1.39, or 53 percent, to $3.99 in Friday trading.

Molybdenum is used in strengthening steel. General Moly owns 80 percent of the Mount Hope mine near Eureka, Nev., where production is estimated at about 40 million pounds a year in the first five years of operation. POSCO owns the remaining 20 percent.

General Moly said it has executed a stockholder agreement with Hanlong that limits Hanlong’s ability to acquire additional shares without board approval.

In addition, General Moly’s board of directors has adopted a stockholder rights plan with the goal of protecting stockholders from any takeover attempts.

The board has not received any unsolicited offers but took the action as a way to have potential buyers negotiate directly with the board, the company said.

For the quarter that ended Dec. 31, General Moly said its net loss was $2.2 million, or 3 cents a share, compared with a net loss of $2.6 million, or 4 cents a share, in the year-ago quarter.

For 2009, General Moly reported a net loss of $10.2 million, or 14 cents a share, compared with a net loss of $14.4 million, or 21 cents a share, in 2008.