General Moly presents at Goldman Sachs conference

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 American Stock Exchange, with a hefty 4.7 million shares changing hands.

Canaccord Wealth Management attributed the jump in the share price to the posting of a corporate presentation on General Moly’s website yesterday ahead of its presentation today 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 @ $15/lb molybdenum.”

The near-term producer holds two molybdenum assets in central Nevada — Mt. Hope and Liberty — and has fully committed sales or off-take agreements for the first five years at a hard floor price of 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 (Hanlong), APERAM, formerly the stainless steel division of ArcelorMittal but spun off as a separate company in January 2011; SeAH Besteel, and Sojitz Corporation.

In General Moly’s corporate presentation at the Goldman Sachs conference, the company also noted that the El Creston copper/moly project is in the prefeasibility stage, while Mt. Hope has completed a bankable feasibility study. It also pointed out that El Creston published an NPV of US$562 million using US$15 per lb. copper and US$2.60 per lb. copper, while Mt. Hope’s NPV at US$15/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.

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

Annual production at Mt. Hope on a 100% basis is forecast to be about 40 million pounds of molybdenum with direct operating costs of US$5.29 per lb.

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

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

Directors and management hold about 17.6% of the company. Other top owners include Hanlong with about 12.4%, Coghill Capital Management with about 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 debt of US$10 million.