General Moly impresses

Investors always like to know when chief executives buy stock in the companies they head. So it didn’t pass unnoticed last week when Bruce Hansen, chief executive of General Moly (GMO-T, GMO-X), spent US$99,250 on the purchase of 25,000 shares of the company at US$3.97 per share.

On May 25, General Moly’s shares closed at US$4.83 apiece on the NYSE Amex, with a hefty 4.7 million shares changing hands.

Canaccord Wealth Management attributed the jump in share price to a corporate presentation posted on General Moly’s website one day before its May 26 presentation at Goldman Sachs Basic Materials Conference in New York.

“Investors focused on two slides which shined some light on GMO’s potential valuation,” Canaccord wrote in its daily “Morning Coffee” report.

“On the first slide GMO highlighted that by using the same metrics in the recently announced Mercator Minerals acquisition of Creston Moly, GMO shares would be valued at $7.05 per share. Moving to the next slide, GMO demonstrated the share price potential from its current level to a value of more than $15 per share using an NPV share at $15 per lb. molybdenum.”

The near-term producer holds two molybdenum assets in central Nevada – Mount Hope and Liberty – and has fully committed sales or off-take agreements for the first five years at a hard floor price between US$14.25 per lb. and US$15 per lb. on average. The buyers include South Korea’s POSCO, China’s Sichuan Hanlong Group, Aperam, formerly the stainless steel division of ArcelorMittal, but spun-off as a separate company in January 2011; SeAH Besteel, and Sojitz.

In General Moly’s corporate presentation at the Goldman Sachs conference, the company noted that the El Creston copper-moly project is in the prefeasibility stage, while Mount Hope has completed a bankable feasibility study. It also pointed out that El Creston published a net present value (NPV) of US$562 million using US$15 per lb. copper and US$2.60 per lb. copper, while Mount Hope’s NPV at US$15 per lb. molybdenum is US$1.2 billion, and Liberty’s NPV at US$15 per lb. molybdenum and US$1.50 per lb. copper in a prefeasibility study was US$485 million.

Mount Hope has an estimated mine life of 44 years, and proven and probable reserves of 1.3 billion lbs. molybdenum according to a bankable feasibility study. General Moly owns 80% of Mount Hope with its joint-venture partner, steel giant POSCO, owning the remaining 20%.

Annual production at Mount Hope on a 100% basis is forecast at 40 million lbs. molybdenum with direct operating costs of US$5.29 per lb.

The Liberty project, 80 km southwest of Mount Hope, has reserves of 615 million lbs. molybdenum, 606 million lbs. copper and an estimated 33-year mine life. According to a prefeasibility study in April 2008, the first five years of production are estimated at 19 million lbs. molybdenum and 18 million lbs. copper.

The company expects to complete the draft Environmental Impact Statement (DEIS) toward the end of the second quarter, and to publish it late in the second or third quarter this year. Final permits are expected six to nine months after the DEIS is published, the company says. Water permits are expected this third quarter.

Directors and management hold 17.6% of the company. Other top owners include Hanlong with 12.4%, Coghill Capital Management with 9.7%, Aperam with 8.6%, State Street Global with 5.2%, BlackRock Trust with 3.5% and Vanguard Group with 3.2%.

As of March 31, the company held cash-on-hand of US$64 million and a debt of US$10 million.