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General Moly Breaks Ground At Mount Hope

One challenge facing all moly miners is the metal's recent price decline. Molybdenum oxide has pulled back from $14 a pound a year ago to around $11.50 today, according to data from Metal-Pages.

General, for its part, is taking the long view. “We view Mount Hope as a long-term asset,” said Kozak. "Molybdenum prices have pulled back recently, but it's important to keep in mind that this project has a 44-year life. Over the long term, we believe demand for high-grade steels will be robust and prices will improve. The characteristics moly provides, especially strength and corrosion resistance, remain essential for high-demand products like pipelines; desalinization plants; high-strength, low-weight steels increasingly used in automobiles; and aircraft parts, such as jet engines.”

He added, “emerging markets such as China, but also including India, Brazil and others, are moving up the steel production value curve. Transitioning to the production of higher-grade, moly-based steels will accelerate as they develop.”

Another plus for General is that the company has already sold the first five years of Mount Hope's production at a floor price that's above current moly prices, according to Kozak.

Cost containment remains crucial

In August 2012, the company reported that Mount Hope's capital cost estimate had risen 11 percent over its 2008 estimate, or $130 million in total. The largest increase was in owners' cost, which jumped 48 percent, or $82 million, largely due to permitting delays and higher permitting costs. Mining equipment costs rose 12 percent, while construction, material and plant facility costs increased 11 percent, largely due to higher construction labor costs and prices for specialized processing equipment.

In October, General signed a $125-million subordinated debt facility with Hanlong (USA) Mining Investment, a subsidiary of Sichuan Hanlong Group of China, which General expects will meet the higher funding requirements.

“We remain laser-focused on managing costs,” said Kozak. “One advantage the Mount Hope project maintains is that it doesn't require many of the expensive add ons that often lead to cost blowouts. There is a big pool of experienced miners in the region, so we don't need a fly-in/fly-out workforce. Also, Mount Hope has access to water and power. We have good transportation links, including a two-lane highway a few miles from the mine and rail service in the vicinity that links all the way to the Port of Oakland.”

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