Quadra eyeing moly production in Greenland

Vancouver — Eyeing molybdenum production in Greenland, Quadra Mining (QUA-T, QADMF-O) is launching a $34-million takeover bid for International Molybdenum (IMY-L), after securing the backing of the English junior’s largest shareholder.

As Quadra is already producing copper and gold in Nevada, the Vancouver company is aiming to diversify by capturing InterMoly’s Malmjberg molybdenum project in Greenland.

With an estimated resource of 212 million tonnes grading 0.12% molybdenum (560 million lbs. measured and indicated), it is one of the more significant advanced-stage molybdenum projects on the market, according to Quadra.

The deposit is located in an alpine region near the coast of eastern Greenland, about 200 km northwest of Scoresbysund, the nearest settlement. Reykjavik, Iceland, the nearest international city, is located about 700 km southeast of Malmbjerg.

Quadra said a technical report prepared for InterMoly sees the development of a 25,000-tonne-per-day open pit at the site, operating 365 days per year at a scale of 25,000 tonnes per day.

The ore would be processed by standard flotation procedures, producing 15,000 to 20,000 tonnes of molybdenite concentrate annually.

“It’s a very large project and it will cost lots of money to develop it,” says InterMoly chief executive Morris Beattie.

Malmjberg has become available because InterMoly began shopping the project around after finding itself unable to finance a bankable feasibility study.

“In our minds, this is a very significant resource in terms of tonnes and grade,” said Quadra CEO Paul Blythe during a conference call with analysts to discuss the deal. But in a brief interview, he said it’s too early to tell how much it will cost to bring the project into production.

Under the terms of the bid, InterMoly shareholders will receive one Quadra share for each 36.22 shares of the AIM-listed junior. Holders of InterMoly warrants will receive one Quadra share for each 99.23 warrants they hold now.

The offer values the combined shares and warrants of InterMoly at $34.4 million, based on the $8.79 closing price of Quadra shares on March 28. Valuations are also based on 10.68 pence per InterMoly share or 3.9 pence per InterMoly warrant.

That marks a 78% premium over the price of InterMoly shares on March 6, 2007, the last day of trading before a surge in the price of the stock and an announcement 48 hours later that preliminary discussions regarding a possible offer had begun.

News of the offer sent Quadra’s stock price up $1.19 to $10.29 in Toronto on March 30, the day the terms of the bid were announced.

On the London Stock Exchange’s AIM market, InterMoly shares closed at 14.25 pence, down 5.88 pence.

Quadra is launching the bid following a surge in moly prices, which Blythe attributes to a lack of investment in new primary capacity due to a slump in prices during the last two decades.

Mainly used as an alloying element in the production of iron and steel, molybdenum is selling for US$30 a lb., an increase from US$5 in 2004. Forecasts by analysts that prices could continue to rise are tied to potential demand from the Chinese stainless steel sector and the oil and gas pipeline industry.

“We believe in a strong, sustained molybdenum price going forward,” Blythe says.

The bid was launched after Galahad Gold — which holds 78% of InterMoly’s shares outstanding and 25% of the warrants — agreed to accept Quadra’s offer in an “irrevocable undertaking.”

The agreement will continue to be binding even in the event that a competing offer is made for InterMoly, said the company in announcing the deal to AIM.

Based on the advice of Matrix Corporate Capital, the InterMoly directors consider the offer to be fair and reasonable, and have agreed to recommend it to the company’s shareholders and warrant owners.

“We are pleased to have secured this agreement with Quadra as it will provide the funding to allow the Malmbjerg project to be developed towards production,” Beattie says.

By accepting the deal, he says InterMoly shareholders can participate in Quadra’s other assets, including 125 million lbs. copper and 65,000 oz. gold at the Robinson mine in Nevada.

The offer is subject to a number of conditions, including approval by the Toronto Stock Exchange and Greenland government, as well as 90% of the holders of shares and warrants of InterMoly.