Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-KSB
For
the fiscal year ended December 31, 2007
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For
the transition period from _____________ to _____________
General
Moly, Inc.
(Name
of
small business issuer in its charter)
DELAWARE
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|
001-32986
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91-0232000
|
(State
or other jurisdiction of
|
|
Commission
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
File
Number
|
|
Identification
No.)
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1726
Cole Blvd., Suite 115
Lakewood,
CO 80401
Telephone:
(303) 928-8599
(Address
and telephone number of principal executive offices)
SECURITIES
REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE
ACT:
Common
Stock, $0.001 par value
SECURITIES
REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE
ACT:
None
Check
whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. o
Check
whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for at least the past 90
days. YES x
NO
o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. o
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES o
NO
x
Revenues
of the registrant for its fiscal year ended December 31, 2007 were
$0.
The
aggregate market value of voting and non-voting common stock held by
non-affiliates of the registrant was $287,458,319 as of March 14,
2008.
The
number of shares outstanding of registrant’s common stock as of March 14, 2008
was 66,698,724.
DOCUMENTS
INCORPORATED BY REFERENCE
The
information required certain portions of by Part III of this report is
incorporated by reference from the registrant’s definitive proxy statement,
relating to the Annual Meeting of Stockholders scheduled to be held in June
2008, which definitive proxy statement will be filed not later than
120 days after the end of the fiscal year to which this report
relates.
Transitional
Small Business Disclosure Format (check one): YES o NO
x
TABLE
OF CONTENTS
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Page
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Part
I
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ITEMS
1 & 2.
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DESCRIPTION
OF BUSINESS AND PROPERTIES
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1
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|
ITEM
3.
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LEGAL
PROCEEDINGS
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28
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|
|
|
ITEM
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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28
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Part
II
|
|
|
|
ITEM
5.
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES
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29
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ITEM
6.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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30
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ITEM
7.
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FINANCIAL
STATEMENTS
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33
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|
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ITEM
8.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
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52
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ITEM
8A.
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CONTROLS AND PROCEDURES
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53
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ITEM
8B.
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OTHER
INFORMATION
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53
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Part
III
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|
|
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ITEM
9.
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS
AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
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53
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|
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ITEM
10.
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EXECUTIVE
COMPENSATION
|
54
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|
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ITEM
11.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
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54
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|
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ITEM
12.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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54
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ITEM
13.
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EXHIBITS
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54
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ITEM
14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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56
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SIGNATURES
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57
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PART I
ITEMS
1& 2. |
DESCRIPTION
OF BUSINESS AND PROPERTIES
|
The
Company
References
made in this Annual Report on Form 10-KSB to “we”, “our”, “us”, “GMI” and the
“Company” refer to General Moly, Inc.
We
are a
development stage company in the business of the exploration, development and
mining of properties primarily containing molybdenum. Our primary asset is
an
80% interest in the Mt. Hope Project (“Mt. Hope Project”), a primary molybdenum
property, located in Eureka County, Nevada. The Mt. Hope Project has contained
Proven and Probable molybdenum reserves totaling
1.3 billion pounds (1.1 billion pounds owned by GMI) of which
1.1 billion pounds (0.9 billion pounds owned by GMI) are estimated to
be recoverable. In 2006, we acquired a second significant molybdenum project,
the Hall-Tonopah Property (the “Hall-Tonopah Property”), located in Nye County,
Nevada which we own 100%. The Hall-Tonopah Property is anticipated to become
our
second molybdenum operation with production, depending on market conditions,
expected to begin in 2013 or 2014. In addition, we own other non-core properties
and mineral rights on which we may conduct mineral exploration and evaluation.
Mt.
Hope Project.
In
August 2007, we completed a Bankable Feasibility Study on the Mt. Hope Project
that provided data on the viability and expected economics of the project (the
“Bankable Feasibility Study” or “BFS”). The Bankable Feasibility Study includes
plans to mine and process 60,625 short tons of ore per day through a
conventional SAG mill and ball mill circuit.
The
Bankable Feasibility Study forecasts (on a 100% basis) molybdenum production
over the first five years of 38 million pounds per year at projected
average direct operating costs of $4.42 per pound of molybdenum. Royalties,
based on expected molybdenum prices, are anticipated to average $1.15 per
pound in addition to the direct operating costs. Processed ore grades are
expected to average 0.10% over the first five years. The mine is anticipated
to
have a 44-year life with 32 years of open pit mining and processing
operations followed by 12 years of processing lower grade stockpiled ore.
The BFS estimates initial development capital costs, in 2007 dollars, for the
project at $852 million, based on the assumptions contained
therein. The accuracy of the estimate is considered to be plus or minus
15%. Based on the current expectation of inflationary trends in the
industry-wide cost structure, we would expect increases to the development
cost
amounts would be more likely than decreases to the estimated amounts.
Additionally, the current initial reclamation financial assurance is estimated
at $53 million and the estimated payment of Advance Production Royalties
(as hereinafter defined) will total $22.0 million.
In
October 2007, our Board of Directors approved the transition of the Mt. Hope
Project into the development phase and authorized our management to proceed
with
the execution of the project as outlined in the Bankable Feasibility Study.
Accordingly, we have commenced placing long-lead equipment orders and we
anticipate receiving the required permits in mid-2009. We do not expect to
generate revenues from operations before production of molybdenum begins at
the
Mt. Hope Project. Based on the foregoing assumptions, we estimate that mine
production at the Mt. Hope Project will commence in late 2010.
In
November 2007, we entered into a Securities Purchase Agreement with
ArcelorMittal S.A. (“ArcelorMittal’) whereby an affiliate of ArcelorMittal, the
world’s largest steel producer, agreed to purchase
8.257 million shares of General Moly’s common stock at $8.50 per
share, generating approximately $70 million in proceeds. In connection with
the Securities Purchase Agreement, we also entered into a Molybdenum Supply
Agreement with an affiliate of ArcelorMittal to supply an aggregate of
6.5 million pounds (plus or minus 10% at ArcelorMittal’s option) of
molybdenum annually for five years, beginning once Mt. Hope Project reaches
certain production levels. The agreement provides for a floor price
significantly higher than estimated cash costs of production and includes a
variable discount to spot molybdenum prices above the floor.
In
February 2008 we formed a joint venture with POS-Minerals Corporation
(“POS-Minerals”), an affiliate of POSCO, a Korean steel company, the world’s
third largest steel producer, for the development of the Mt. Hope Project.
Under
the terms of the joint venture, we contributed all of our rights related to
the
Mt. Hope Project into a newly formed entity Eureka Moly, LLC (“Eureka Moly”).
POS-Minerals contributed $50 million to Eureka Moly in February 2008 and is
obligated to contribute an additional $50 million in July, 2008, and
$70 million within 15 days after the Mt. Hope Project obtains all
material permits required for the Mt. Hope Project (the “Third Contribution
Installment Date”). On the Third Contribution Installment Date POS-Minerals will
also fund its proportionate share of project capital and operating expenses
incurred from January 1, 2008 to the Third Contribution Installment Date.
POS-Minerals owns 20% of the Mt. Hope Project and will be required to fund
its
20% proportional share of all capital and operating costs and will be entitled
to 20% of the production from the Mt. Hope Project.
In
the
event POS-Minerals does not make its required contributions to Eureka Moly,
the
joint venture agreement provides for a reduction or forfeiture of POS-Minerals
ownership interest in Eureka Moly. In the event we do not obtain the permits
required for the Mt. Hope Project by December 31, 2009, POS-Minerals may
elect to either (1) not make the capital contribution on the Third
Contribution Installment Date ($70 million) and reduce its ownership to 13%
or (2) may reduce the amount of its third contribution on such date to
$56 million with no reduction in ownership. Also, if production at the Mt.
Hope Project is delayed beyond December 31, 2011 for reasons other than an
event of force majeure, the joint venture agreement provides for return of
up to
$50 million with no corresponding reduction in ownership.
Hall-Tonopah.
In
March 2006, we purchased the Hall-Tonopah property, an approximately ten square
mile property in Nye County, Nevada, including water rights, mineral and surface
rights, buildings and certain equipment, from High Desert Winds LLC. The
Hall-Tonopah Property includes the former Hall molybdenum and copper deposit
that was mined by open pit methods between 1982 and 1985 by the Anaconda
Minerals Company (“Anaconda”) and, between 1988 and 1991, by Cyprus Metals
Company (“Cyprus”) for molybdenum. In addition, Equatorial Tonopah, Inc. mined
copper from 1999 to 2000 on this property, although their operations were in
a
separate open pit. Much of the molybdenum deposit was drilled but not developed
or mined by these previous owners.
In
January 2007, we purchased the corporation that owned a 12% net smelter
royalty on the Hall-Tonopah Property,
effectively eliminating all 3rd
party
royalties on the property. Additionally in 2007, we purchased all outstanding
mineral claims associated with this property that were not previously owned
by
us, thus giving us control over all mineral rights within the boundary of the
Hall-Tonopah Property.
Since
purchasing the Hall-Tonopah Property, we have completed two drilling programs
at
the property focused on validating, confirming and expanding the existing
molybdenum mineralization identified and developed by Cyprus. As a result of
completed exploration and evaluation work through November 2007, we have
identified mineralization totaling 433 million tons averaging 0.071%
molybdenum. We are continuing our evaluation of the Hall-Tonopah Property and
we
are currently incorporating additional assay results into our estimates and
we
anticipate completion of a pre-feasibility study in the 2nd
quarter
of 2008. This study will detail initial capital and operating costs as well
as
anticipated mining and milling rates and parameters.
Other
Properties.
We
currently own several other, small, non-core, properties located in the western
United States. These properties include additional molybdenum deposits as well
as copper, silver and gold deposits.
Corporate
Information
The
Company was initially incorporated in Idaho under the name “General Mines
Corporation” on November 23, 1925. In 1966, we amended our articles of
incorporation to change our name to “Idaho General Petroleum and Mines
Corporation,” and amended our articles again in 1967 changing our name to “Idaho
General Mines, Inc.” On October 5, 2007, we reincorporated the Company in
the State of Delaware (the “Reincorporation”) through a merger involving Idaho
General Mines, Inc. and General Moly, Inc., a Delaware corporation that was
a
wholly owned subsidiary of Idaho General Mines, Inc. The Reincorporation was
effected by merging Idaho General Mines, Inc. with and into General Moly, with
General Moly being the surviving entity. In connection with the Reincorporation,
all of the outstanding securities of Idaho General Mines, Inc. were converted
into securities of General Moly on a one-for-one basis. For purposes of the
Company’s reporting status with the SEC, General Moly is deemed a successor to
Idaho General Mines, Inc. Our common stock is traded on the American Stock
Exchange (AMEX) under the symbol “GMO” and, in
February 2008, the Company began trading on the Toronto Stock Exchange (TSX)
under the same symbol. Our
registered and principal executive office is located at 1726
Cole
Blvd., Suite 115,
Lakewood,
Colorado 80401 and the phone number for that office is
(303) 928-8599.
Corporate
Strategy and Objective
Our
corporate strategy is to acquire and develop highly profitable advanced stage
mineral deposits. Our near-term corporate objective is to profitably develop
and
operate the Mt. Hope Project and to continue our exploration and evaluation
of
the Hall-Tonopah Property.
We
believe we have the following business strengths that will enable us to achieve
our objectives:
|
·
|
A
strong, proven management team with experience in mine development,
project financing, and operations.
|
|
·
|
Our
80% interest in the Mt. Hope Project, currently in the permitting
and
development stage, is anticipated to be one of largest and lowest
cost
primary molybdenum producers in the world, driven, in part, by high
grades
that are processed early in the mine
life.
|
|
·
|
The
Hall-Tonopah project, which is currently undergoing a pre-feasibility
study, has the potential to become a second, significant, molybdenum
operation and is wholly-owned by the Company and
royalty-free.
|
|
·
|
Mt.
Hope and Hall-Tonopah are located in Nevada, which is geopolitically
stable and has a long and ongoing history of large-scale, open pit
mining
operations.
|
|
·
|
Strong
market fundamentals for the supply and demand of
molybdenum.
|
Products
We
do not
currently produce any products. We are in the process of developing the Mt.
Hope
Project of which we own 80%. When in production, we expect the Mt. Hope Project
to produce an average of 38 million pounds of molybdenum per year over the
first five years of production and approximately 1.1 billion pounds of
molybdenum over the 44-year life of the project. The Mt. Hope Project will
primarily focus on producing Technical Grade Molybdenum Oxide (“TMO”) which is
widely utilized by the steel industry. In the future we may also consider
producing FerroMolybdenum (FeMo), which is utilized in the production of steel
and stainless steel.
Molybdenum
is a refractory metal with very unique properties. Approximately 70% to 80%
of
molybdenum applications are in steel making. Molybdenum, when added to plain
carbon and low alloy steels, increases strength, corrosion resistance and high
temperature properties of the alloy. The major applications of molybdenum
containing plain and low alloy steels are automotive body panels, construction
steel and oil and gas pipelines. When added to stainless steels, molybdenum
imparts specialized corrosion resistance in severe corrosive environments while
improving strength. The major applications of stainless steels are in industrial
chemical process plants, desalinization plants, nuclear reactor cooling systems
and environmental pollution abatement. When added to super alloy steels,
molybdenum dramatically improves high temperature strength, creep resistance
and
resistance to oxidation in such applications as advanced aerospace engine
critical components. The effects of molybdenum additions to steels are not
readily duplicated by other elements and as such are not significantly impacted
by substitution of other materials.
Other
significant molybdenum applications include lubrication, catalytic sulfur
reduction in petrochemicals, lighting, LCD activation screens, x-ray generation,
high temperature heat dissipation and high temperature conductivity. These
areas
represent the highest technical and value added applications of molybdenum
but
are also the most readily replaceable in times of technical or economic
downturns.
The
steel
industry is a primary consumer of molybdenum and will be the primary market
target for Mt. Hope TMO. We will also consider the production of value-added
molybdenum products suitable for use as catalysts in petroleum refining and
other energy markets.
The
supply of Molybdenum comes from both primary molybdenum mines, such as our
proposed Mt. Hope Project and as a byproduct of porphyry copper
production.
Description
of the Mt. Hope Project
Overview
Effective
as of January 1, 2008 we contributed all of our interest in the assets
related to the Mt. Hope Project, including the Company’s lease of the Mt. Hope
property, into a newly formed entity, Eureka Moly and entered into a
joint
venture for the development and operation of the Mt. Hope Project with
POS-Minerals. Under the joint venture, POS-Minerals owns a 20% interest and
General Moly owns, through a wholly-owned subsidiary, an 80% interest in Eureka
Moly. The discussion in this section “Description of the Mt. Hope Project” is
based on the entire project of which we own an 80% interest.
Eureka
Moly is proceeding with the permitting and development of the Mt. Hope Project.
The project will include the development of an open pit mine, construction
of a
concentrator plant, construction of a roaster plant, and construction of all
related infrastructure to produce TMO, the most widely marketed molybdenum
product.
From
November 2004 through August 2007 we conducted numerous exploration, drilling
and evaluation studies, culminating with the Bankable Feasibility Study for
the
Mt. Hope Project. In 2006, we initiated the baseline studies necessary for
development of an Environmental Impact Statement (“EIS”). We completed an
initial Plan of Operations that the Bureau of Land Management (BLM) accepted
in
September 2006. In December 2006, the BLM selected an environmental firm to
complete the EIS for the Mt. Hope Project. Various environmental data and study
tasks are ongoing in connection with the permitting process.
Work
is
progressing to complete the EIS, transfer water rights to mining use and obtain
necessary permits. The current schedule for the development of the Mt. Hope
Project indicates a Record of Decision (“ROD”) in mid-2009 and commencement of
production in late 2010. Based on these schedules, we have begun the procurement
process for long-lead items including grinding mills and motors, a primary
crusher and two electric shovels. Design and engineering is progressing at
a
pace intended to meet the project schedule. Planning for and acquisition of
property for construction and employee housing is also underway. Delays in
permitting, construction or delivery of long-lead equipment may delay this
production schedule.
The
Mt. Hope Project - Eureka Moly
The
Mt.
Hope Project is owned and will be operated by Eureka Moly, which is a joint
venture between the Company and POS-Minerals. Eureka Moly currently has a
30-year renewable lease with Mount Hope Mines, Inc. (“MHMI”) for the Mt. Hope
Project (the “Mt. Hope Lease”). Located in Eureka County, Nevada, the Mt. Hope
Project consists of 13 patented lode claims, one millsite claim, and 1,577
unpatented lode claims, of which 109 unpatented lode claims are owned by MHMI
and 1,468 unpatented lode claims are owned by Eureka Moly. The Bankable
Feasibility Study contains a current claim map of the property.
The
Mt.
Hope Lease is subject to the payment of certain royalties. See“Business—Description
of the Mt. Hope Project—Royalties, Agreement and Encumbrances” below. In
addition to the royalty payments, Eureka Moly is obligated to maintain the
property and its associated water rights, including the payment of all property
taxes and claim maintenance fees. Eureka Moly must also indemnify MHMI against
any and all losses incurred as a result of any breach or failure to satisfy
any
of the terms of the Mt. Hope Lease or any activities or operations on the Mt.
Hope property.
Eureka
Moly is not permitted to assign or otherwise convey its obligations under the
Mt. Hope Lease to a third party without the prior written consent of MHMI,
which
consent may be withheld in its sole discretion. However, if the assignment
takes
the form of a pledge of our interest in the Mt. Hope Project for the purpose
of
obtaining financing, MHMI’s consent may not be unreasonably withheld. The Mt.
Hope Lease further requires Eureka Moly keep the property free and clear of
all
liens, encumbrances, claims, charges and burdens on production except as allowed
for project financing.
The
Mt.
Hope Lease provides that the terms of any project financing must provide that:
(i) any principal amount of debt can only be repaid after payment of the
periodic payments as set out in the Mt. Hope Lease; (ii) the lenders may
not prohibit or interfere with any advance royalty payments due to MHMI under
the Mt. Hope Lease; and (iii) no cash sweeps or payments of excess cash
flow may be made to the lenders in priority of such advance royalty
payments.
The
Mt.
Hope Lease also contains an after acquired property clause, which requires
that
any property acquired by Eureka Moly within two miles of the boundary of the
Mt.
Hope Project be conveyed to MHMI if requested within a certain time period
following notification of such acquisition. MHMI has requested that we maintain
ownership of all new claims filed by Eureka Moly, which now includes 1,468
unpatented lode claims.
The
Mt.
Hope Lease may be terminated upon the expiration of its 30-year term, earlier
at
the election of Eureka Moly, or upon a material breach and failure to cure
such
breach. If Eureka Moly terminates the lease, the termination is effective 30
days after receipt by MHMI of written notice to terminate the Mt. Hope Lease.
If
MHMI terminates the lease, termination is effective upon receipt of a notice
of
termination of a material breach, representation, warranty, covenant or term
contained in the Mt. Hope Lease and followed by failure to cure such breach
within 90 days of receipt of a notice of default. MHMI may also elect to
terminate the Mt. Hope Lease if Eureka Moly has not cured the non-payment of
obligations under the lease within 10 days of receipt of a notice of default.
The term of the lease can be extended beyond 30 years if the Mt. Hope
Project is in production or intends to resume production (and has provided
notice accordingly).
Property
Description and Location
The
Mt.
Hope Project is located on the eastern flank of Mt. Hope approximately
21 miles north of Eureka, Nevada. The Mt. Hope Project is located at the
southern end of the northwest-trending Battle Mountain-Eureka mineral belt.
Mt.
Hope is approximately 2.6 miles due west of State Route 278, and the Mt. Hope
Project centers in sections 1 and 12, T22N-R51E and sections 12 and 13,
T22N-R51½E
Nature
and Extent of the Eureka Moly’s Title
The
land
package for the Mt. Hope Project contains 13 patented lode claims, one
patented mill site, and 1,577 unpatented lode claims. The total surface
area covered by the Mt. Hope Project land package is 7,311 hectares. MHMI
owns all of the patented claims and 109 of the unpatented lode claims.
These claims are the subject of the Mt. Hope Lease. Eureka Moly owns the
remaining 1,468 unpatented lode claims. The patented claims and unpatented
claims comprising the Mt. Hope Project are listed by number and ownership in
the
Bankable Feasibility Study. Patented claims are owned real property and
unpatented claims are held subject to the paramount title of the United States
and remain valid for as long as the holder pays the applicable
fees.
Royalties,
Agreements and Encumbrances
Advance
Royalty
The
Mt.
Hope Lease may be terminated upon the expiration of its 30-year term, earlier
at
the election of Eureka Moly, or upon a material breach of the agreement and
failure to cure such breach. If Eureka Moly terminates the lease, termination
is
effective 30 days after receipt by MHMI of written notice to terminate the
Mt.
Hope Lease and no further payments would be due to MHMI. In order to maintain
the lease, Eureka Moly must pay certain deferral fees and advance royalties
as
discussed below.
The
Mt.
Hope Lease Agreement requires a royalty advance (the “Construction Royalty
Advance”) of the greater of $2,500,000 or 3% of certain construction capital
costs, as defined in the Mt. Hope Lease, upon the earliest of the Company’s
securing project financing in sufficient amounts to develop and put into
operation the Mt. Hope property at an annual production level of at least
10 million pounds or October 19, 2008.
Eureka
Moly has the right to defer the Construction Royalty Advance for one or two
years by payment of a deferral fee (the “Deferral Fee”) in the amount of
$350,000 on or before October 19, 2008 and October 19, 2009 in the
event project financing for the project has not been secured by each of the
dates. By October 19, 2010, Eureka Moly must pay at a minimum $2,500,000 of
the Construction Royalty Advance with the remainder due upon either securing
project financing or 50% of the remainder due on October 19, 2011 and the
other 50% due on October 19, 2012.
Once
the
Construction Royalty Advance has been paid in full, Eureka Moly is obligated
to
pay an advance royalty (the “Annual Advance Royalty”) each October 19
thereafter in the amount of $500,000 per year. The Construction Royalty
Advance and the Annual Advance Royalty are collectively referred to as the
“Advance Royalties.” All Advance Royalties are credited against the MHMI
Production Royalties (as hereinafter defined) once the mine has achieved
commercial production. The Deferral Fees are not recoverable against Production
Royalties.
Eureka
Moly is obligated to pay a portion of the Construction Royalty Advance each
time
capital is raised for the Mt Hope Project based on 3% of the expected capital
to
be used for those certain construction capital costs defined in the lease.
Based
on the current estimate of raising capital and developing and operating the
mine, we believe Eureka Moly’s contractual obligations under the Mt. Hope Lease
will be as shown in the following table. This estimate is based on current
estimates of the timing of securing project financing and the construction
capital costs estimated in the Bankable Feasibility Study.
Year
|
|
Deferral
Fees
|
|
Advance
Royalties
|
|
Total
|
|
2008
|
|
$
|
350,000
|
|
$
|
2,200,000
|
|
$
|
2,550,000
|
|
2009
|
|
|
—
|
|
|
18,200,000
|
|
|
18,200,000
|
|
2010
|
|
|
—
|
|
|
500,000
|
|
|
500,000
|
|
2011
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Thereafter
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
350,000
|
|
$
|
20,900,000
|
|
$
|
21,250,000
|
|
(1)
|
After
the first full year of production, Eureka Moly estimates that the
Production Royalties will be in excess of the Annual Advance Royalties
for
the life of the project and, further, the Construction Royalty Advance
will be fully recovered (credited against MHMI Production Royalties)
by
the end of 2012.
|
Production
Royalty
Following
commencement of commercial production, Eureka Moly will be required to pay
a
production royalty to MHMI and Exxon Corporation (“Exxon”) as
follows:
(a) MHMI
Production Royalty
After
commencement of commercial production at the Mt. Hope Project, Eureka Moly
will
be required to pay to MHMI a production royalty equal to the greater of:
(i) $0.25 per pound of molybdenum metal (or the equivalent of some other
product) sold or deemed to be sold from the Mt. Hope Project; or (ii) 3.5%
of net returns (the “Base Percentage”), if the average gross value of products
sold is equal or lower than $12.00 per pound, or the Base Percentage plus 1%
of
net returns if the average gross value of products sold is higher than $12.00
per pound but equal or lower than $15.00 per pound, or the Base Percentage
plus
1.5% of net returns if the average gross value of products sold is higher than
$15.00 per pound (the “MHMI Production Royalties”). As used in this paragraph,
the term “products” refers to ores, concentrates, minerals or other material
removed and sold (or deemed to be sold) from the Mt. Hope Project; the term
“gross value” refers generally to proceeds received by us or our affiliates for
the products sold (or deemed to be sold); and the term “net returns” refers to
the gross value of all products, less certain direct out of pocket costs,
charges and expenses actually paid or incurred by us in producing the
products.
(b) Exxon
Production Royalty
Exxon
will receive a perpetual 1% royalty interest in and to all ores, metals,
minerals and metallic substances mineable or recoverable from the Mt. Hope
Project, equal to 1% of total amount of gross payments received from the
purchaser of ores mined/removed/sold from property net of certain
deductions.
Environmental
Regulations and Permits
The
Mt.
Hope Project is subject to numerous state and federal environmental regulations
and permitting processes. See
“Applicable
Mining Laws” and “Permitting” below for a detailed description of these
requirements.
Accessibility,
Climate, Local Resources, Infrastructure and Physiography
Access
The
Mt.
Hope Project has year-round access from Nevada State Route 278. The land package
includes the land between the project site and State Route 278.
Climate
Climate
in the area is moderate, with average highs in July of about 86 degrees
Fahrenheit and lows in January of about 17 degrees Fahrenheit.
Precipitation in the area is relatively low with annual rainfall averages about
12 inches. Operations at the site are planned to continue
year-round.
Local
Resources and Infrastructure
The
town
of Eureka, Nevada is approximately 21 miles to the south of the Mt. Hope
Project, via State Route 278. The infrastructure requirements to support the
mine and concentrator consist of bringing power to the property, acquiring
water
rights within the adjacent Kobeh Valley area commensurate with the operational
requirements, developing a water well field within the Kobeh Valley, site access
roads, and constructing maintenance shops for the mine and plant administrative
offices. A 230kV power line is expected to be developed from the Machacek
substation near the town of Eureka to the mine site.
Water
Rights and Surface Rights
In
January of 2008, we announced that we had secured all required water rights
anticipated to be necessary to operate Mt. Hope Project’s planned facilities.
Planned water wells, located approximately 6 miles to the west of the planned
operating facilities, are anticipated to supply approximately 7,000 gallons
per minute (gpm) to the Mt. Hope Project. Exploration for water is ongoing.
We
completed the first phase of exploration in November 2007 with identification
of
three target wells and identification of additional carbonate fracture targets
in the planned wellfield area. Well testing is ongoing and geophysics
exploration for water is ongoing. The process of Applications to Change in
point
diversion and manner of use of the purchased water rights is in process. A
pre-hearing conference occurred on March 17 and hearings on the Applications
to
Change are scheduled for October 2008 with the state engineer.
Surface
rights on the Mt. Hope Project include BLM open range grazing rights and stock
water rights. Two power line easements cross within the property boundaries.
A
345 kV transmission line operated by Sierra Pacific Power runs north-south
on the western edge of the property and the other easement is a medium-voltage
power line that runs from the old mill facilities east along State Route 278
to
the eastern property boundary.
Physiography
The
Mt.
Hope area lies within an area of north-south trending mountains separated by
alluvial valleys. The primary mountain ranges in the Mt. Hope area include
the
Roberts Mountains, Sulphur Spring Range, Diamond Mountains, Simpson Park Range
and the Cortez Mountains. Elevations of the mountains range from over
10,000 feet for the Roberts Mountains to approximately 6,800 feet for
the crests of the Sulphur Spring range.
The
major
valleys in the Mt. Hope region are Diamond Valley to the east, Garden Valley
to
the north, and Kobeh Valley to the west. Diamond and Garden Valleys are
elongated in a north-south direction. Kobeh Valley is roughly equidimensional
in
form and to the west and southwest of Mt. Hope.
The
upper
portions of the valleys are similar in nature and are characterized by slightly
incised stream channels with no significant associated floodplain. The uplands
and mountains have slopes ranging from moderate to steep (over 30 percent)
with shallow to deep, moderately alkaline to medium acidic soils. Bedrock is
often within 0.5 meters of the surface, particularly on the steep upland
slopes.
Lake
sediments make up the largest areas in the valleys. The slopes range from smooth
to rolling (0 to 15 percent), and the soils vary from shallow to deep and
mildly to strongly alkaline. The surface textures range from silty clay loams
to
gravelly sandy loams and local sand. The permeability of these soils ranges
from
slow to rapid.
The
natural vegetation of the region consists of pinion juniper and sagebrush with
grass. The pinion juniper occupies the higher elevations of the mountain slopes,
with the lower areas in the valley covered predominantly with sagebrush and
shrubs with perennial bunchgrasses.
Mt.
Hope,
located in the lower foothills of the southeast flank of the Roberts Mountains,
stands approximately 8,400 feet in elevation. Areas to the east and
southeast slope gently to elevations from 6,400 to 7,900 feet. Diamond
Valley, situated to the south and east, is approximately 5,450 feet in
elevation.
History
Prior
Ownership and Results of Exploration Work Ownership
Lead-zinc
ores were discovered at Mt. Hope in 1870, and small scale mining carried out
sporadically until the 1970s. Zinc and adjacent copper mineralization were
the
focus of drilling activities by Phillips Petroleum in the early 1970s and by
ASARCO and Gulf (“ASARCO”) in the mid-1970s which outlined further zinc
mineralization. The last drill hole of this series encountered significant
molybdenum mineralization at depth west of the zinc deposits. The significance
of this mineralization was first recognized by ASARCO in 1976, but ASARCO did
not reach an agreement with MHMI to test this potential.
Exxon
recognized molybdenum potential at Mt. Hope in 1978 and acquired an option
on
the property from MHMI. By 1982, Exxon had completed 69 holes, which partially
defined a major molybdenum deposit underlying the east flank of the Mt. Hope
property. Exxon conducted a +/-25% feasibility study of the Mt. Hope prospect
in
1982. The Exxon study focused on an ore production rate of 27,500 tpd starting
in 1985. In December 1983, Exxon completed an optimization study, which
generally involved a reduced capital and operating cost estimate based on more
aggressive project parameters. An extensive environmental database of multiple
assessments by consultants formed the basis of the environmental assessment
and
was utilized in the Exxon permitting process for their intended BLM land
exchange. The Exxon feasibility study calculated a sizable molybdenum deposit.
A
draft EIS was completed on the project and public hearings were held in early
1985. Exxon drilled an additional 60 holes on the property between 1983 and
1988 but did not update their deposit block model with data from the post 1982
holes. Cyprus Metals Company (“Cyprus”) drilled four holes on the property in
1989-90 under an agreement with Exxon but did not pursue the
project.
We
established an agreement with MHMI in 2004 pursuant to which we obtained access
to the work completed by previous companies that had evaluated the property,
including drill core and drill data. We used this data as the basis for
developing an evaluation of the Mt. Hope deposit. The evaluation provided the
basic engineering, plant design and other aspects of analysis of the Mt. Hope
Project and outlined a positive operating process, waste disposal, mine design
and plan, environmental, permitting plan, operating and capital cost estimates,
and the corresponding estimates of mineralized material.
Geology
Central
Nevada represents a band of north-south trending mountain ranges which are
composed of rock units characterized into three groups: (1) Western
Assemblage rocks made up of carbonaceous shale, mudstone, chert, and volcanic
rocks; (2) Eastern Assemblage rocks consisting of thick sequences of
carbonate and clastic rocks; and (3) overlap assemblages of mixed carbonate
and coarse to fine siliciclastic rocks.
The
Western Assemblage was thrust faulted eastward over the Eastern Assemblage
sequence. This area of thrusting is known as the Roberts Mountain Thrust Zone.
Materials shed off the fore front of the thrust sheet formed the overlap
assemblage. Mt. Hope is located on the leading edge of this zone on the west
side of the overlap group of rocks.
The
Mt.
Hope deposit is located on the eastern edge of a mineral belt linking deposits
of diverse ages along a northwest-southeast trending line. The Battle
Mountain-Eureka mineral belt, 240 miles long, has served to localize intrusive
and mineralizing activity and has resulted in major deposits of gold, silver,
copper, and molybdenum.
The
Mt.
Hope deposit is centered in an elevated area of igneous rock exposure 1 by
1.5
miles in size. The complex contains extrusive igneous rocks derived from
a
common volcanic source. Quartz porphyry, the principal molybdenum host rock,
is
commonly veined with quartz in the deposit area, and a quartz vein stockwork
is
well developed in the subsurface. The molybdenum deposit occurs as two dome
shaped intrusions or “stocks” about 1,450 feet in diameter, the tops of
which approach but do not reach the surface. These stocks are important centers
of molybdenum mineralization. The mineralization, which is symmetrical about
the
overlapping domes, is differentiated into separate western and eastern mineral
systems.
The
Mt.
Hope deposit is a molybdenum porphyry, is classified as a low fluorine,
sub-climax type deposit. This type of deposit has well zoned molybdenum
mineralization. The molybdenum mineral content, termed grade zoning, surrounds
the central area of the deposit and forms geometries that are circular in plan
and arch (inverted bowl) shaped in section.
The
mineral zones or “shells” consist of quartz porphyry cross-cut by quartz
stockwork veining containing molybdenite. The higher grade shells are near
the
surface.
Mineralization
The
main
form of molybdenum mineralization is molybdenite (molybdenum disulfide) and
occurs within the intrusive quartz porphyry rocks of the Mt. Hope complex and
to
a lesser extent in the metamorphosed Vinini formation adjacent to the southern
margin of the mineralized domes. Much of the known molybdenite is distributed
around two mineralized systems consisting of two dome shaped zones of
mineralized stockworks. The top of the mineral system has, however, been sliced
off exposing the high grade portion of the system and displacing little ore
above the Mt. Hope fault shown above.
A
concentration of higher grade mineralization, averaging approximately 0.15%
molybdenum, is present between the eastern and western mineral systems. Referred
to as the overlap zone, this zone is roughly 1,300 feet in diameter and
varies from 325 to 985 feet deep. The top is 325 feet below the ground
surface. This zone is the nucleus of the open pit mineralization to be mined
in
the first 32 years with lower grade mineralization being mined and
stockpiled during these first 31 years and being milled in the succeeding
12 years.
Exploration
Since
acquiring access to the Mount Hope Project, we have completed additional
exploration drilling for molybdenum for the purposes of supporting our Bankable
Feasibility Study and obtaining engineering information for items such as
geotechnical design, hydrology, and condemnation for waste dumps and tailings
ponds as well as infill drilling for ore calculation purposes.
The
Mt.
Hope Project has been extensively drilled and all core and assay results are
available. Accordingly we have been able to analyze and quantify the mineral
resource based on an extensive high quality database. The drilling at the Mt.
Hope Project has been predominately performed by utilizing diamond core methods,
and subsidiary reverse circulation (RC) in areas of condemnation and water
well
drilling. To date, 257 holes have been drilled into the property for a total
of
300,901 feet of drilling; 232,189 feet of which is core, the remaining
68,712 feet is RC.
Mineralization
to Be Mined
The
table
below summarizes the ore and head grades we expect to be milled under our
current mine plans for Mt. Hope.
Mill Feed Ore Statistics
|
Category
|
|
|
Ktons
|
|
|
Average
Grade
Mo
%
|
|
|
Mo
Recovery %
|
|
Ore
in Years 1-5
|
|
|
110,346
|
|
|
0.100
|
|
|
87.0
|
|
Ore
in Years -1-10
|
|
|
220,737
|
|
|
0.094
|
|
|
86.7
|
|
Ore
in Years 1-20
|
|
|
439,195
|
|
|
0.086
|
|
|
86.2
|
|
The
modeled pit, including the above mineralized material, contains an estimated
2.7 billion tons of total material. From the inception of production
through year 32, the mill will process 702,953 thousand tons of ore at
an average head grade of .078%. During this time period low grade ore totaling
262,973 thousand tons with an average head grade of .042% will be
stockpiled for later feed into the mill from years 32 through 44. Waste
material totaling 1,741,815 thousand tons will also be mined and disposed of
on
site. The total production is based on a life of mine and has an average 0.042%
Mo cutoff grade.
Mining
The
Mt.
Hope Project is planned for production by conventional large-scale, hard-rock,
open-pit mining methods. The current mine plan provides for primary loading
by
two electric cable shovels and one hydraulic shovel. Clean up and support
loading will be provided by a 24 cubic yard capacity front end loader. The
mine fleet is expected to include 22 240-ton trucks by the end of the first
full
year of production.
Ore
will
be hauled directly to the crusher at the southeast side of the pit. Waste will
be delivered to one of four waste sites located around the mine. One low grade
stockpile will be located on the south of the pit. Although much of the
“stockpile grade” material is expected to go directly to the mill, some will be
temporarily stockpiled depending on the cutoff grade. This material will be
re-handled and processed through the plant following the initial 32 years
of mining. The planned storage of low-grade ores is 263 million tons at a
grade of .043% Mo.
Process
Overview
The
process circuit will include:
|
·
|
Primary
Crusher & Coarse Ore Stockpile—The primary crusher (60x89
superior gyratory) will be located adjacent to the pit and crushed
ore
will be fed to a 70,000 ton live capacity
stockpile.
|
|
·
|
SAG &
Ball Mill Circuit—Ore will be reclaimed from the stockpile from one of
four feeders and fed by conveyor to the SAG mill operating in a closed
circuit with a pebble crusher. Following the SAG mill, the ore will
be
ground to 80% passing 150 microns (0.006 in.) in the two balls mills
at an
average daily processing rate of 60,625
tons.
|
|
·
|
Flotation
Circuit—Following the grinding circuit, the ore will be processed in a
conventional flotation plant. The molybdenum ore will be treated
through
two banks of rougher/scavenger flotation, one stage of first cleaners
followed by regrind, and four additional stages of cleaner flotation.
Some
molybdenum concentrates with higher levels of contaminant metals
will be
treated through a concentrate leach facility to produce the final
molybdenum concentrate. Recent metallurgical results on the ore,
indicated
that an estimated mill recovery of approximately 85.8% is achievable
across grades ranging from 0.04% through 0.1% Mo with final concentrate
grades of approximately 54% to 56% Mo. The initial 32 years of
higher-grade ores will achieve recoveries of about
87%
|
|
·
|
Roaster
Circuit—Molybdenum concentrate will be further processed in two
multi-hearth roasters to produce technical grade molybdenum oxide
product.
The roasting facility will provide a fully integrated
process.
|
Tailings
Facility
The
proposed mining and processing operation is expected to produce approximately
22 million tons of tailings (including SO2
scrubber
residue) per year. Approximately 966 million tons of tailings will be
produced under the current mine plan. The Tailings Storage Facility (“TSF”)
layout provides for the construction of one tailings impoundment that will
contain the first 30 years of operations. A second facility is planned for
the remaining years for the mine life. The tailings impoundments will be
constructed with HDPE plastic liners for groundwater protection.
Bankable
Feasibility Study
On
August 30, 2007, we completed the Bankable Feasibility Study which
established proven reserves totaling 189,675 thousand tons of ore at an average
grade of .083% molybdenum sulfide and probable reserves totaling 776,251
thousand tons of ore at an average grade of .065% molybdenum sulfide. The BFS
includes an estimate of the initial capital for the Mt. Hope Project (including
the roaster) to be approximately $852 million and project cash operating
costs are estimated to be $4.42 per pound of molybdenum for the first five
years
of operations and $4.67 per pound of molybdenum for the first 10 years of
operations. These estimates are based on 2007 constant dollars and will be
subject to cost escalation. We expect that these cost estimates will continue
to
evolve over time based on changes in the industry-wide cost structure as well
as
changes in our operating strategies and initiatives for the
project.
Statement
of Reserves and Mineralized Material
|
Units
= Short Tons
|
|
|
|
|
|
|
|
|
|
Reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proven
Reserves
|
|
Probable
Reserves
|
|
Proven+Probable
Reserves
|
|
|
|
|
Sulfide
|
|
|
|
Sulfide
|
|
|
|
Sulfide
|
K$Net/hr
|
|
%Mo
Sulfide
|
|
Ktons
|
|
Mo
Grade%
|
|
Ktons
|
|
Mo
Grade%
|
|
Ktons
|
|
Mo
Grade%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3.000
|
|
0.034
|
% |
189,675
|
|
0.083
|
|
776,251
|
|
0.065
|
|
965,926
|
|
0.068
|
Additional
Mineralized Material
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured
|
|
Indicated
|
|
Measured+Indicated
|
|
|
|
|
Sulfide
|
|
|
|
Sulfide
|
|
|
|
Sulfide
|
K$Net/hr
|
|
%Mo
Sulfide
|
|
Ktons
|
|
Mo
Grade%
|
|
Ktons
|
|
Mo
Grade%
|
|
Ktons
|
|
Mo
Grade%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.001
|
|
0.024
|
% |
11,089
|
|
0.029
|
|
98,552
|
|
0.030
|
|
109,641
|
|
0.030
|
Mineralized
material is tabulated at the breakeven cutoff at $10.00/lb Moly.
|
Breakeven
cutoff covers the cost to mine and process the material.
The
Moly cutoff grades in sulfide form are close approximations to
K$Net/hr.
|
As
noted
above, the Bankable Feasibility Study included an overall capital cost estimate
of $852 million for the Mt. Hope Project. Cost estimates for certain items
indentified in the Bankable Feasibility Study are summarized below. These
estimates were completed in 2007 and used constant dollars as the basis for
the
estimates. The accuracy of the estimates is considered to be accurate within
a
range of plus or minus 15%. Based
on
the current expectation of inflationary trends in the industry-wide cost
structure, we would expect increases to the development cost amounts would
be
more likely than decreases to the estimated amounts.
However,
the overall project costs include an estimated contingency amount and, within
such contingency amount, we can experience higher than projected costs for
certain line items without an increase in the overall project costs. We also
intend to update engineering plans in response to any increased costs in
order
to manage project costs. These costs will be re-evaluated and updated as
the
engineering and construction progresses.
Estimated Capital Costs
|
|
|
$ Millions
|
|
Mine
Preproduction Stripping
|
|
$
|
44
|
|
Initial
Mine Equipment
|
|
$
|
171
|
|
Process
Plant and Infrastructure (excluding Roaster)
|
|
$
|
494
|
|
Roaster
Facilities
|
|
$
|
78
|
|
Owners
Costs
|
|
$
|
40
|
|
Community
and Housing Infrastructure
|
|
$
|
25
|
|
Total
Estimated Initial Capital
|
|
$
|
852
|
|
In
addition to the foregoing costs, prior to commencement of production on the
Mt.
Hope Project, we anticipate Eureka Moly will be required to post cash bonds
for
initial reclamation financial assurance totaling $53.0 million and we will
be required to pay approximately $22.0 million in advance royalties under
the Mt. Hope Lease. Ongoing replacement and sustaining mine equipment and
process plant capital over the 44 year operating life plus the three-year
reclamation period is currently estimated to be approximately
$635 million.
Pricing
Molybdenum
market prices used in the BFS were prepared by an independent commodities
research company, CPM Group. The resulting market price assumptions per pound
of
molybdenum contained in TMO were $28.00 in year one; $24.00 in year two; $22.00
in year three; $19.50 in year four; $16.00 in year five; $14.50 in year six
and
$13.50 in year seven through 44.
Production
Production
over the life of the project is estimated to be 1.1 billion pounds of
saleable molybdenum. Production over the first five years is estimated to
average approximately 38 million pounds of molybdenum. Cash costs over the
first five years of production are estimated to be approximately $5.57 per
pound
of molybdenum, including forecast royalty payments, which vary with molybdenum
prices. Life of mine cash costs are estimated to be approximately $6.94 per
pound of molybdenum.
Description
of the Hall-Tonopah Project
On
March 17, 2006, we purchased the Hall-Tonopah Property, an approximately
ten square mile property in Nye County, Nevada, including water rights, mineral
and surface rights, buildings and certain equipment from High Desert Winds
LLC
(“High Desert”), pursuant to an option granted to us by High Desert in February
2005. The property includes the former Hall molybdenum and copper deposit that
was mined by open pit methods between 1982 and 1985 by the Anaconda and between
1988 and 1991 by Cyprus for molybdenum. Equatorial Tonopah, Inc. mined copper
from 1999 to 2000 on this property, although their operations were in a separate
open pit also located on the property. Much of the molybdenum deposit was
drilled but not developed or mined by these previous owners. At closing, we
paid
High Desert a cash payment of $4.5 million for a portion of the property,
and in November 2006, made an additional payment of $1.0 million for the
remainder of the property.
On
January 30, 2007, we purchased Equatorial Mining North America, Inc. and
its two subsidiaries, which owned a 12% net smelter returns (NSR) royalty on
the
Hall-Tonopah Property, from Equatorial Mining Pty. Limited. The consideration
paid for the Equatorial acquisition was $4.8 million with an additional
deferred payment of $6 million due upon commencement of commercial
operation of the property. In connection with the transaction, we acquired
$1.2 million in cash accounts and assumed certain environmental liabilities
on the reclaimed site. Additionally
in 2007, we purchased all outstanding mineral claims associated with this
property that were not previously owned by us thus giving the Company 100%
control over all mineral rights within the boundary of the property.
Additionally, we hold claims on BLM property adjacent to the patented
grounds.
Since
purchasing the Hall-Tonopah Property, we have completed two drilling programs
focused on validating, confirming and expanding the existing molybdenum
mineralization identified and developed by Cyprus. These programs, in aggregate,
included 60 new drill holes and seven twin drill holes.
When
the
Company initially acquired the property in March 2006, it estimated that
identified mineralization was 300 million tons averaging 0.091% molybdenum.
This estimate was based primarily on mineralization estimates developed by
prior
owners and known mining activities already conducted on the deposit. Since
then,
and as a result of the Company’s drilling and modeling work, we have expanded
identified mineralization to 433 million tons averaging 0.076% molybdenum.
The Company is currently awaiting drill assay results that may influence
identified mineralization. We expect to receive these results in March
2008.
We
are
currently conducting
a
pre-feasibility study on the Hall-Tonopah Property, which will detail initial
capital and operating costs as well as anticipated mining and milling rates
as
well as permitting requirements. We expect to complete the pre-feasibility
study
in the second quarter of 2008.
History
In
1955,
Anaconda leased and optioned the Hall Tonopah molybdenum prospect and mine
in
order to evaluate extensive molybdenum and copper occurrences. From 1956 through
1966, Anaconda explored or delineated molybdenum mineralization over an
approximate one mile square area. Drilling indicated extensive mineralization
from the surface to a depth of approximately 2,000 feet. Drilling
delineated approximately 200 million tons of mineralization grading
0.091 percent molybdenum which was included in a long term mining plan.
Mine construction began in 1979 with production from the Hall Mine starting
in
1981. Anaconda ceased operations in 1985 due to low metal prices. Between 1982
and 1991, Anaconda and successor operator Cyprus Minerals mined a total of
50 million tons of ore grading 0.11 percent molybdenum. No further
molybdenum mining took place after 1991, leaving an estimated 150 million
tons of the plan un-mined at a grade of 0.09 percent molybdenum. Our
current interest in the Hall-Tonopah Property is to review and confirm the
mineralization contained in the previous mining plan and to extend the
molybdenum zone by additional drilling in support of the development of a mining
plan and pre-feasibility study.
A
100 million ton copper zone independent of the molybdenum was the subject
of copper leach operation by Equatorial between 1995 and 2002. Approximately
10 million tons were mined before operations ceased in 2002. The copper
zone is not currently being evaluated.
The
molybdenum mine remains open and un-reclaimed and is easily accessed for mining.
Various facilities and improvements continue to exist on the property that
may
be of future use for molybdenum operations including a power supply, water
rights, water and well system, office and truck and vehicle shops, thickening
tanks, water and fuel tanks, roads and other structures. All of the mobile
equipment was removed from the property. Much of the plant area was reclaimed
after the 2002 closure with most of the crushing, conveying, grinding,
concentrator equipment and other milling equipment being removed from the
property.
Our
combined purchases of the assets and mineral rights at the Hall-Tonopah Property
included all of the lands required for future operations and all of the mineral
rights without reservations or royalties. The initial years for a new molybdenum
operation and mine on this property will be entirely on fee lands owned by
us.
As a result, permitting will be through state agencies, including the Nevada
Department of Environmental Quality (NDEP), and we will not be required to
go
through the Federal NEPA permitting process. Based on this and because we will
be seeking to permit what has been a previous mining operation, we expect to
have an expedited permitting schedule as compared to other start-up
projects.
Geology
The
ore
body at the Hall-Tonopah Property is geometrically displayed as a cylinder,
roughly coincident with and draped across, the igneous contact of a Cretaceous
quartz porphyry stock and the metamorphosed volcanic host rock. The cylinder
plunges -35o
to the
southeast. Molybdenite occurs as selvages on stockwork quartz veins and on
bedding planes and tensional shears in the country rock with the majority of
the
molybdenum resource is located in the intrusive. Current estimated contained
resource is 433 million tons of 0.071% molybdenum.
Host
rocks consist of fine grained volcaniclastic rocks, formerly identified as
schists and quartzites, intruded by a Cretaceous coarse grained quartz-feldspar
porphyry. These are overlain by Tertiary volcanic rocks varying from rhyolitic
welded ash-flow tuffs to dacitic and basaltic lava flows. Tertiary andesite
dikes intrude the welded tuffs.
The
Cretaceous quartz-feldspar porphyry is extensively altered by quartz-muscovite
and K-spar flooding. Internal textures are often obscured by overprinting
alteration.
The
deposit is cross-cut and offset by a number of post mineral faults. Major
structural trends are north-south and east by northeast-west by
southwest.
Molybdenum
mineralization is concentrated in molybdenite, molybdenum di-sulfide, with
lesser amounts of molybdenum oxide. Copper is concentrated in a blanket of
chalcocite above the oxidation boundary and in chalcopyrite below the oxide
zone. Pyrite is a common constituent of most of the ore body.
Other
Properties
We
currently own several other, small, non-core, properties located in the western
United States. These properties include additional molybdenum deposits as well
as copper, silver and gold deposits. We may conduct mineral exploration and
evaluation on these properties in the future for determining economic viability
for further development or sale.
Environmental
Investigation - Shoshone
County, Idaho
Our
mineral property holdings in Shoshone County, Idaho include lands contained
in
mining districts that have been designated as “Superfund” sites pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act. This
“Superfund Site” was established to investigate and remediate primarily the
Bunker Hill properties of Smelterville, Idaho, a small portion of Shoshone
County where a large smelter was located. However, because of the extent of
environmental impact caused by this large smelter, the Superfund Site covers
the
majority of Shoshone County including our Chicago-London and Little Pine Creek
properties (which are distant from the original smelter location) as well as
many small towns located in Northern Idaho. We have conducted a property
environmental investigation of these properties which revealed no evidence
of
material adverse environmental effects at either property. We are unaware of
any
pending action or proceeding relating to any regulatory matters that would
affect our financial position due to these inactive mining claims in Shoshone
County.
Applicable
Mining Laws
Mining
in
the State of Nevada is subject to federal, state and local law. Three types
of
laws are of particular importance to the Mt. Hope Project: those affecting
land
ownership and mining rights; those regulating mining operations; and those
dealing with the environment.
The
Mt.
Hope Project is situated on lands owned by the United States (“Federal Lands”).
Eureka Moly, as the owner or holder of the unpatented mining claims, has the
right to conduct mining operations on the lands subject to the prior procurement
of required operating permits and approvals, compliance with the terms and
conditions of the Mt. Hope Lease, and compliance with applicable federal, state,
and local laws, regulations and ordinances. On Federal Lands, mining rights
are
governed by the General Mining Law of 1872 as amended, 30 U.S.C. UU 21-161
(various sections), which allows for the location of mining claims on certain
Federal Lands upon the discovery of a valuable mineral deposit and on proper
compliance with claim location requirements. Historically, the holder of an
unpatented mining claim could, upon strict compliance with legal requirements,
file a patent application to obtain a full fee title to the surface and mineral
rights within the claim; however, continuing Congressional moratoriums have
precluded new mining claim patent applications since 1993.
Aside
from environmental regulations, the operation of mines is governed by both
federal and state regulatory programs. The predominant non-environmental Federal
regulatory program affecting operation of the Mt. Hope Project is the mine
safety regulations administered by Mine Safety and Health Administration.
Additional federal laws, such as those governing the purchase, transport or
storage of explosives, and those governing communications systems, labor and
taxes also apply. State non-environmental regulatory programs affecting
operations include the permitting programs for drinking water systems, sewage
and septic systems, water rights appropriations, Department of Transportation,
and dam safety (engineering design).
Environmental
regulations require various permits or approvals before any mining operations
on
the Mt. Hope Project can begin. Federal environmental regulations are
administered primarily by the BLM. The EPA has delegated authority for the
Clean
Water Act and Clean Air Act to the State of Nevada. Thus, the Nevada Division
of
Environmental Protection (the “NDEP”) has primacy for these programs and is
responsible for administering the associated permits for the Mt. Hope Project.
The Bureau of Mining Regulations and Reclamation (“BMRR”) within NDEP also
administers the permits for Water Pollution Control and reclamation. The NDEP
also administers the permit program for onsite landfills. The Nevada Division
of
Wildlife administers the artificial industrial pond permit program. Local laws
and ordinances may also apply to such activities as waste disposal, road use
and
noise levels.
Permitting
Permit
Acquisition and Fundamental Environmental Permitting
Considerations
We
have
initiated a plan to obtain the required principal environmental operating
permits for the Mt. Hope Project in anticipation of a possible construction
start in early 2009. A staged permit acquisition program is in progress.
Baseline studies and data acquisition to support permitting was initiated in
the
fourth quarter of 2005. Facility designs and operational plans are being refined
as data is collected and reviewed to minimize environmental impacts and
facilitate the permitting process. The Mt. Hope Project is very large, even
in
the context of the extensive levels of mining in Nevada. In addition, the
proposed 44-year project life compares to typical open-pit mine plans of 10
to
15 years. Permits for large, long-lived mines are the same as that for smaller
mines, and the same regulations, regulatory agencies and standards apply. The
planned mining and processing operations are consistent with numerous other
permitted projects in Nevada, in terms of methods, facility design, equipment,
and related engineering plans.
Permitting
Process Overview
The
development, operation, closure and reclamation of mining projects in the United
States require numerous notifications, permits, authorizations and public agency
decisions. This section does not attempt to exhaustively identify all of the
permits and authorizations that need to be granted, but instead focuses on
those
that are considered to be critical for project start-up.
Environmental
Inventories
There
are
certain environmental evaluations that routinely must be completed in order
to
provide the information against which project impacts are measured. Both the
BLM
and the NDEP, as well as the BMRR have requirements to profile existing
conditions and to evaluate what effects will result from implementing the
project plans on the Mt. Hope Project within the mine plan.
Background
information on geology, air quality, soils, biology, water resources, wildlife,
vegetation, noise, visual resources, social and economic conditions, and
cultural resources is currently being assembled for us and will be submitted
to
the appropriate regulatory agencies.
Mt.
Hope Permitting Requirements
As
noted
previously, numerous environmental permits are required to initiate operations
at the Mt. Hope Project. However, five of these permits are the most significant
in terms of the level of analysis and support documentation required, the
potential for associated environmental impacts, and review time and associated
costs. These are the Plan of Operations approval, Water Appropriations Permits,
the Water Pollution Control Permit, the Reclamation Permit and the Air Quality
Permit.
Plan
of Operations Approval—Bureau of Land Management
Prior
to
the BLM being able to approve the Plan of Operations and the commencement of
our
project related operations on public lands, the BLM must comply with the
requirements of the United States National Environmental Policy Act Process
(the
“NEPA Process”). The NEPA requirements include preparation of an Environmental
Impact Statement (“EIS”), which is a complete review of the environmental
impacts associated with the project as well as alternatives to the project.
Preparation of an EIS will require the completion of several baseline studies
in
the Mt. Hope Project area, including but not limited to: cultural, biological,
ground water and geochemical studies.
The
initial Plan of Operations has been submitted to the BLM and preliminary plans
to support other required permits have been developed and conceptually reviewed
with regulatory agencies. Some potential environmental issues associated with
the proposed operations have been identified. Eureka Moly anticipates that
the
mine plan can be refined to address these issues and minimize impacts. This
will
support permitting efforts and will also reduce potential environmental
liability.
Issues
of
concern are primarily related to geochemistry and the associated potential
for
acid generation from waste rock, the water quality in the post-mining pit lake,
and the potential mobilization of constituents in the tailings. Other
significant potential impacts include effects of groundwater pumping on existing
water rights and the population influx to the community of Eureka. Extensive
laboratory testing has been conducted and is underway to fully evaluate the
geochemistry of all material types that will be mined. The waste rock disposal
facilities and tailings impoundment designs incorporate components to minimize
potential impacts, consistent with accepted and demonstrated industry practices.
State of the art hydrological and geochemical computer modeling is being
conducted to determine if treatment of the post-mining pit lake will be
required. Eureka Moly is working with Eureka County to identify opportunities
to
mitigate socioeconomic impacts.
Baseline
studies to completely characterize the existing environmental conditions have
been nearly completed. These baseline studies will support a full analysis
of
impacts, as required by the BLM review process. Eureka Moly has five
Notice-level (less than 5 acres of disturbance) approvals from BLM to conduct
drilling and other surface activities to further define the geology, hydrology,
collect metallurgical samples, support geotechnical analysis and collect other
information needed to refine operational plans and designs. Additional permit
support activities such as expanded baseline surveys, hydrologic modeling and
air dispersion modeling are being conducted per regulatory requirements and
standards.
Environmental
regulations related to reclamation require that the cost for a third party
contractor to perform reclamation activities on the mine site be estimated.
This
reclamation cost estimate, once approved by BLM and the NDEP will become the
basis for the required bond amount. Eureka Moly will be required to post a
financial instrument shortly after receiving ROD to provide a guarantee that
this amount will be available to BLM and NDEP for use in conducting reclamation
should we become insolvent or default on our reclamation obligations. Although
the Reclamation Permit is administered by the NDEP-BMRR, BLM review is required
and the reclamation cost estimate must be approved in conjunction with
completion of the EIS.
Although
the Plan of Operations describes anticipated activities at the mine for the
entire mine life, Eureka Moly intends to phase the reclamation bond to reduce
bond maintenance costs. The phased reclamation cost estimate will only address
the anticipated activities for a three-year period from the point of Plan of
Operations approval. The bond estimate must then be recalculated every three
years to include the current activities and those activities anticipated to
be
completed during the subsequent three-year period. It is estimated, based on
project assumptions that the project reclamation bonding requirements during
the
first three-year period will be $53 million. The estimated cost of
reclamation will increase with every three-year update in conjunction with
the
growth of the waste rock pile and the tailings impoundments. It is estimated
that bond costs could reach $125 million at the end of the project (year
44).
Water
Appropriation Permits—Nevada Division of Water Resources
The
Mt.
Hope Project is primarily centered between two water basins: the Kobeh Basin
and
the Diamond Basin. Operation of the Mt. Hope Project is expected to require
7,000 gallons per minute (gpm) of fresh water which will be sourced from
wells located in Kobeh Valley, west of the Mt. Hope Project. The Company has
purchased from existing water rights holders essentially all available water
rights in the Kobeh Basin, totaling more than 16,000 acre feet annually.
The Company believes it has sufficient water rights for its planned mining
and
milling operations. Applications to Change have been filed and are awaiting
action by the State Engineer which is scheduled for hearing in October 2008.
Water exploration drilling to prove out the wellfield development is ongoing.
The Company is in the process of testing multiple well locations and plans
to
complete wellfield development and testing in 2008.
Water
Pollution Control and Reclamation Permits—Nevada Division of Environmental
Protection—Bureau of Mining Regulation and Reclamation
The
BMRR
administers the programs for the Water Pollution Control (WPC) Permit and the
Reclamation Permit, both of which are required for the Mt. Hope Project. The
WPC
Permit program specifies design criteria for containment of process fluids
and
mandates development of monitoring, operational and closure plans. We believe
that the standards for facility design are well-defined and we do not anticipate
that the WPC permitting process will be delayed by technical issues. In
addition, the permit review process is well-defined, including timelines, and
is
codified in regulation. This results in a reliable permitting timeline of
approximately nine months. Permit application submittal in mid-2008 is
anticipated.
Air
Quality Permit—Nevada Division of Environmental Protection—Bureau of Air
Quality
Prior
to
the commencement of construction activities and in conjunction with facility
operations, an air quality permit will be necessary. The Nevada Bureau of Air
Quality regulations categorize permit types as Class 1 or Class 2,
based on the estimated emissions amounts. The Mt. Hope Project is subject to
Class 2 permit (smaller emissions) based on preliminary emissions
estimates. The permit applications will require completion of an emissions
inventory and dispersion modeling to demonstrate that emissions from the project
will not exceed established air quality standards. An initial model has been
completed and demonstrates that modeled concentrations will be within the
standards. Emissions are primarily associated with the crush/grind circuit
(particulate matter) and the roaster (sulfur oxides). Roaster emissions will
be
controlled with a 99.7% estimated removal efficiency for sulfur
oxides.
We
believe the planned roaster for the Mt. Hope Project is consistent with, and
allowed by, the current regulatory and permitting program in Nevada. The
permitting duration for this permit is approximately six to nine months, and
application submittal is planned in the first half of 2008.
Hall-Tonopah
Property Permitting Requirements
We
anticipate that the permitting schedule for the Hall-Tonopah Property will
be
shorter than for the Mt. Hope Project, due to a relatively shorter permitting
process under Nevada State regulations as opposed to the Federal NEPA process.
We control over 14,000 acres, including 5,054 acres of fee land,
946 acres of patented lode claims, 63 acres of patented mill site claims
and 7,984 acres of unpatented lode claims. By locating proposed operations
entirely on private lands the requirement to evaluate environmental impacts
under NEPA is eliminated. Other permits including the water pollution and
control, reclamation and air quality as described in previous sections would
be
required for the Hall-Tonopah Property site and the level of analysis and time
required is anticipated to be consistent with those described for Mt. Hope
Project.
In
addition to land ownership, two other factors distinguish this property from
Mt.
Hope with respect to environmental permitting. First, water consumption is
not
as significant an issue at Hall-Tonopah. Unlike Mt. Hope, the areas surrounding
Hall-Tonopah are not extensively irrigated. In addition, we own significant
water rights at the Hall-Tonopah site. Second, the area has been mined
previously which has resulted in significant surface disturbance. By conducting
exploration drilling on pre-existing disturbance to the extent possible, the
amount of disturbance created by exploration drilling is greatly reduced, and
permitting requirements to support exploration are reduced. Furthermore, there
is extensive environmental information developed to support permitting of the
previous mine operation. We anticipate that this information can be used to
streamline the permitting process for us by reducing the amount of baseline
studies and other technical information that must be developed.
Other
United States Regulatory Matters
The
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as
amended (“CERCLA”), imposes strict, joint, and several liability on parties
associated with releases or threats of releases of hazardous substances. Liable
parties include, among others, the current owners and operators of facilities
at
which hazardous substances were disposed or released into the environment and
past owners and operators of properties who owned such properties at the time
of
such disposal or release. This liability could include response costs for
removing or remediating the release and damages to natural resources. We are
unaware of any reason why our undeveloped properties would currently give rise
to any potential CERCLA liability. We cannot predict the likelihood of future
CERCLA liability with respect to our properties, or to surrounding areas that
have been affected by historic mining operations.
The
Resource Conservation and Recovery Act (“RCRA”)
and related state laws, regulates generation, transportation, treatment,
storage, or disposal of hazardous or solid wastes associated with certain
mining-related activities. RCRA also includes corrective action provisions
and
enforcement mechanisms, including inspections and fines for
non-compliance.
Mining
operations may produce air emissions, including fugitive dust and other air
pollutants, from stationary equipment, such as crushers and storage facilities,
and from mobile sources such as trucks and heavy construction equipment. All
of
these sources are subject to review, monitoring, permitting, and/or control
requirements under the federal Clean Air Act and related state air quality
laws.
Air quality permitting rules may impose limitations on our production
levels or create additional capital expenditures in order to comply with the
permitting conditions.
Under
the
federal Clean Water Act and
delegated state water-quality programs, point-source discharges into “Waters of
the State” are regulated by the National Pollution Discharge Elimination System
(“NPDES”) program, while Section 404 of the Clean Water Act regulates the
discharge of dredge and fill material into “Waters of the United States,”
including wetlands. Stormwater discharges also are regulated and permitted
under
that statute. All of those programs may impose permitting and other requirements
on our operations.
NEPA
requires an assessment of the environmental impacts of “major” federal actions.
The “federal action” requirement can be satisfied if the project involves
federal land or if the federal government provides financing or permitting
approvals. NEPA does not establish any substantive standards; it merely requires
the analysis of any potential impact. The scope of the assessment process
depends on the size of the project. An “Environmental Assessment” (“EA”) may be
adequate for smaller projects. An EIS, which is much more detailed and broader
in scope than an EA, is required for larger projects. NEPA compliance
requirements for any of our proposed projects could result in additional costs
or delays.
The
Endangered Species Act (“ESA”)
is administered by the U.S. Department of Interior’s U.S. Fish and Wildlife
Service. The purpose of the ESA is to conserve and recover listed endangered
and
threatened species and their habitat. Under the ESA, “endangered” means that a
species is in danger of extinction throughout all or a significant portion
of
its range. “Threatened” means that a species is likely to become endangered
within the foreseeable future. Under the ESA, it is unlawful to “take” a listed
species, which can include harassing or harming members of such species or
significantly modifying their habitat. We conduct wildlife and plant inventories
as required as part of the environmental assessment process prior to initiating
exploration projects. We currently are unaware of any endangered species issues
at any of our projects. Future identification of endangered species or habitat
in our project areas may delay or adversely affect our operations.
We
are
committed to fulfilling our requirements under applicable environmental laws
and
regulations. These laws and regulations are continually changing and, as a
general matter, are becoming more restrictive. Our policy is to conduct our
business in a manner that attempts to safeguard public health and mitigates
the
environmental effects of our business activities. To comply with these laws
and
regulations, we have made, and in the future may be required to make, capital
and operating expenditures.
You
should carefully consider the risks described below and elsewhere in this
report, which could materially and adversely affect our business, results of
operations or financial condition. If any of the following risks actually
occurs, the market price of our common stock would likely decline. The risks
and
uncertainties we have described below, however, are not the only ones we face.
Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our operations.
Our
investors may lose their entire investment in our
securities
An
investment in our securities is highly speculative and the price of our
securities has been and will continue to be volatile. Only potential investors
who are experienced investors in high risk investments and who can afford to
lose their entire investment should consider an investment in our
securities.
Our
profitability depends largely on the success of the Mt. Hope Project, the
failure of which would have a material adverse effect on our financial
condition
We
are
focused primarily on the development of the Mt. Hope Project. Accordingly,
our
profitability depends largely upon the successful development and operation
of
this project. We are currently incurring losses and we expect to continue to
incur losses until sometime after molybdenum production begins at the Mt. Hope
Project. We cannot assure you that Eureka Moly will achieve production at the
Mt. Hope Project or that we will ever be profitable even if production is
achieved. The failure to successfully develop the Mt. Hope Project would have
a
material adverse effect on our financial condition, results of operations and
cash flows. Even if Eureka Moly is successful in achieving production, an
interruption in operations at the Mt. Hope Project that prevents Eureka Moly
from extracting ore from the Mt. Hope Project for any reason would have a
material adverse impact on our business.
We
require and may not be able to obtain substantial additional financing in order
to fund our, and Eureka Moly’s operations and if we are successful in raising
additional capital, it may have a dilutive and other adverse effects on our
shareholders
We
will
require substantial additional capital to contribute the required capital to
Eureka Moly to develop the Mt. Hope Project and to construct the mining and
processing facilities at any site chosen for mining. As set forth in the BFS,
following the completion of permitting and engineering at the Mt. Hope Project,
the current initial capital cost estimates for the development of the Mt. Hope
Project are $852 million, including contingencies, but excluding working
capital, reclamation bonding requirements, Advance Royalty Payments, inflation,
interest and other financing costs. Those estimates are likely to change after
the detailed engineering process has been completed. We have limited financial
resources, do not generate operating revenue, and must contribute to the
financing of the Mt. Hope Project development costs by other means. We cannot
assure you that we or Eureka Moly will be able to obtain the necessary financing
for the Mt. Hope Project on favorable terms or at all. Additionally, if the
actual costs to complete the development of the Mt. Hope Project are
significantly higher than we expect, we may not have enough funds to cover
these
costs and we may not be able to obtain other sources of financing. The failure
to obtain all necessary financing would prevent Eureka Moly from achieving
production at the Mt. Hope Project and impede our ability to become
profitable.
We
are
currently reviewing the technical merits of some of our interests in properties
other than the Mt. Hope Project, including the Hall-Tonopah Property. We will
also require significant additional capital to permit and/or commence mining
activities at this or any of our other potential projects. We cannot assure
you
that we will be able to obtain the financing necessary to exercise this option
and we cannot assure you that we will be able to obtain the necessary financing
to commence exploration activities on any of our other properties, should we
decide to do so.
If
additional financing is not available, or available only on terms that are
not
acceptable to us, we may be unable to fund the development and expansion of
our
business, attract qualified personnel, take advantage of business opportunities
or respond to competitive pressures. Any of these events may harm our business.
Also, if we raise funds by issuing additional shares of our common stock,
preferred stock or debt securities convertible into preferred or common stock,
our existing shareholders will experience dilution, which may be significant,
to
their ownership interest in us. If we raise funds by issuing shares of a
different class of stock other than our common stock or by issuing debt, the
holders of such different classes of stock or debt securities may have rights
senior to the rights of the holders of our common stock.
Eureka
Moly’s inability to obtain all required permits and approvals for the Mount Hope
Project by December 31, 2009 will allow our joint venture partner, POS-Minerals,
to reduce or forego scheduled contribution payments to the Eureka Moly joint
venture.
In
the
event Eureka Moly does not obtain all required permits and approvals for the
Mount Hope Project by December 31, 2009, including the BLM’s approval of Eureka
Moly’s Plan of Operations (collectively, the “Third Contribution
Conditions”), our
joint
venture agreement with POS-Minerals provides POS-Minerals the right to elect
to
either (1) not make the required capital contribution due on the Third
Contribution Installment Date of $70.0 million and to reduce its equity
ownership stake in the joint venture to 13.0% or (2) reduce the amount of its
capital contribution due on the Third Contribution Installment Date to $56.0
million with no reduction in ownership. In addition, if commercial production
at
the Mount Hope Project is delayed beyond December 31, 2011 for reasons other
than a force majeure event, the joint venture agreement with POS-Minerals
requires Eureka Moly to make a distribution to POS-Minerals of up to $50.0
million, with no corresponding reduction in POS-Minerals’ ownership interest in
Eureka Moly.
There
can
be no assurance that Eureka Moly will be able to satisfy the required conditions
described above on or before December 31, 2009, or at all. In addition, there
can be no assurance that commercial production at the Mount Hope Project will
commence prior to December 31, 2011, or at all. If
POS-Minerals were able to elect to reduce its capital contributions to Eureka
Moly or if Eureka Moly were required to make a distribution to POS-Minerals,
we
may not be able to provide sufficient funding to Eureka Moly to develop the
Mount Hope Project, which could
have a material adverse effect on our financial condition, results of operations
and cash flows. In addition, in such case we may be required to seek additional
capital which may not be available to us on commercially reasonable terms,
if at
all. Any such additional financing could dilute or otherwise adversely impact
the rights of our existing shareholders.
The
Eureka Moly joint venture agreement gives POS-Minerals the right to approve
certain major decisions regarding the Mount Hope Project.
The
Eureka Moly joint venture agreement requires unanimous approval of the members
for certain major decisions regarding the Mount Hope Project. This effectively
provides either member with a veto right over the specified decisions. These
decisions include:
|
·
|
Approval
of the operations to be conducted and objectives to be accomplished
by the
Mount Hope Project (the “Program”);
|
|
·
|
Approval
of the budget for costs to be incurred by Eureka Moly and the schedule
of
cash capital contributions to be made to Eureka Moly (the “Budget”);
|
|
·
|
Approval
of cost overruns in excess of 15% of an approved Program and Budget;
|
|
·
|
Approval
of an expansion or contraction of the average tons per day planned
of 20%
or more from the relevant tons per day throughput schedule in the
Bankable
Feasibility Study;
|
|
·
|
Approval
of Eureka Moly’s acquisition or disposition of significant real property,
water rights or real estate assets;
|
|
·
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Approval
of the incurrence of indebtedness by Eureka Moly that requires (1)
an
asset of Eureka Moly to be pledged as security, (2) the pledge of
a
membership interest in Eureka Moly or (3) a guaranty by either the
Company
or POS-Minerals, other than in each instance a purchase money security
interest or other security interest in Eureka Moly to finance the
acquisition or lease of equipment; and
|
|
·
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Approval
of the issuance by Eureka Moly of an ownership interest to any person
other than the Company or POS-Minerals.
|
The
requirement that certain decisions be approved by POS-Minerals may make it
more
difficult for our stockholders to benefit from certain decisions or transactions
that we would otherwise cause Eureka Moly to make if they are opposed by
POS-Minerals.
POS-Minerals’
failure to make contributions to Eureka Moly pursuant to the joint venture
agreement could have a material adverse impact on our ability to develop the
Mount Hope Project.
Pursuant
to the Eureka Moly joint venture agreement with POS-Minerals, POS-Minerals
is
scheduled to contribute $50.0 million (the “Second Contribution Installment”) to
Eureka Moly in July 2008 and an additional $70.0 million (the “Third
Contribution Installment”) to Eureka Moly by December 31, 2009 (the “Third
Contribution Date”). In addition, on the Third Contribution Installment Date,
POS-Minerals is required to fund its proportionate share of project capital
and
operating expenses incurred by Eureka Moly from January 1, 2008 through to
the
Third Contribution Installment Date.
If
POS-Minerals fails to make the Second Contribution Installment, it will be
deemed to have resigned as a member of the joint venture and Eureka Moly will
automatically purchase POS-Minerals’ ownership interest in Eureka Moly in
exchange for Eureka Moly’s obligation to pay POS-Minerals’ $12.5 million. If
POS-Minerals fails to make the Third Contribution Installment, other than as
a
result of Eureka Moly’s failure to satisfy the Third Contribution Conditions by
December 31, 2009, POS-Minerals’ ownership interest in Eureka Moly will be
reduced to 10.0% and POS-Minerals will be under no obligation to make the Third
Contribution Installment.
If
POS-Minerals fails to make either the Second Contribution Installment or the
Third Contribution Installment, we may not be able to provide sufficient funding
to Eureka Moly to develop the Mount Hope Project, which could have a material
adverse effect on our financial condition, results of operations and cash flows.
In addition, in such case we may be required to seek additional capital which
may not be available to us on commercially reasonable terms, if at all. Any
such
additional financing could dilute or otherwise adversely impact the rights
of
our existing shareholders.
Fluctuations
in the market price of molybdenum and other metals could adversely affect the
value of our company and our securities
The
profitability of our mining operations will be influenced by the market price
of
the metals we mine. The market prices of specialty, base and precious metals
such as molybdenum, copper, gold and silver fluctuate widely and are affected
by
numerous factors beyond the control of any mining company. These factors include
fluctuations with respect to the rate of inflation, the exchange rates of the
US
dollar and other currencies, interest rates, global or regional political and
economic conditions and banking crises, global and regional demand, production
costs in major molybdenum producing areas and a number of other factors. Any
drop in the price of molybdenum and other metals important to our operations
would adversely impact our revenues, profits and cash flows. In particular,
a
sustained low molybdenum price could:
|
·
|
cause
delay or suspension of our development and, ultimately, mining operations
at our Mt. Hope Project, if such operations become uneconomic at
the
then-prevailing molybdenum price;
|
|
·
|
prevent
us from fulfilling our obligations under our agreements or under
our
permits and licenses which could cause us to lose our interests in,
or be
forced to sell, our properties; and
|
|
·
|
have
a negative effect on the availability of financing to
us.
|
Furthermore,
the need to reassess the feasibility of any of our projects if molybdenum prices
decline could cause substantial delays or might interrupt operations until
the
reassessment can be completed. Mineral reserve calculations and life-of-mine
plans using significantly lower molybdenum prices could result in reduced
estimates of mineral reserves and in material write-downs of our investment
in
mining properties and increased amortization, reclamation and closure
charges.
The
volatility in metals prices is illustrated by the quarterly average price range
from January 2002 through January 2007 for molybdenum: (lb) $2.73 -
$35.37. Average molybdenum prices are quoted in Platt’s
Metals Week.
Our
profitability is subject to demand for molybdenum, and any decrease in that
demand, or increase in the world’s supply, could adversely affect our results of
operations
Molybdenum
is used primarily in the steel industry. The demand for molybdenum from the
steel industry and other industries may decline due to a number of factors.
The
robustness of the expansion in demand for metals such as molybdenum, is
currently fuelled in large part by, and is dependent upon, the growth in Asia.
Sustained low molybdenum demand resulting from any global reduction of
molybdenum consumption, could cause suspension of our mining operations at
our
Mt. Hope Project.
A
sustained significant increase in molybdenum supply could also adversely affect
our results. We estimate that during the next five years a total of
190.5 million annual pounds of production will be added to the supply of
molybdenum (including 38 million of supply from our Mt. Hope Project in
late 2010). In the event demand for molybdenum does not increase to consume
the
additional production, the price for molybdenum may be adversely
affected.
We
may not be able to obtain or renew licenses, rights and permits required to
develop or operate our mines, or we may encounter environmental conditions
or
requirements that would adversely affect our business
In
the
ordinary course of business, mining companies are required to seek governmental
permits for expansion of existing operations or for the commencement of new
operations. In addition to requiring permits for the development of our mines,
we will need to obtain various mining and environmental permits during the
life
of each project. Obtaining and renewing the necessary governmental permits
is a
complex and time-consuming process involving numerous jurisdictions and often
involving public hearings and costly undertakings on our part. The duration
and
success of our efforts to obtain or renew permits will be contingent upon many
variables, some of which are not within our control, including the environmental
conditions at the location of the Mt. Hope Project. Obtaining or renewing
environmental protection permits, including the approval of reclamation plans,
may increase costs and cause delays depending on the nature of the activity
to
be permitted and the interpretation of applicable requirements implemented
by
the permitting authority. Eureka Moly will be required to obtain approval from
the Bureau of Land Management (“BLM”) for the Mt. Hope Project plan of
operation. This approval can be obtained only after successful completion of
the
National Environmental Policy Act process of review and public scrutiny. Eureka
Moly will also need to obtain various state and federal permits including water
protection, air quality, water rights and reclamation permits before Eureka
Moly
can mine and produce molybdenum products at our Mt. Hope Project. There can
be
no assurance that all necessary permits will be obtained and, if obtained,
will
be renewed, or that in each case the costs involved will not exceed those that
we previously estimated. It is possible that the costs and delays associated
with compliance with such standards and regulations could become such that
we
would not proceed with the development or operation of a mine or
mines.
The
development of the Mt. Hope Project may be delayed, which could result in
increased costs or an inability to complete the development of the Mt. Hope
Project
Eureka
Moly may experience delays in developing the Mt. Hope Project. These could
increase its development costs, affect its economic viability, or prevent us
from completing its development. The timing of development of the Mt. Hope
Project depends on many factors, some of which are beyond our and Eureka Moly’s
control, including:
|
·
|
timely
issuance of permits and licenses;
|
|
·
|
procurement
of additional financing;
|
|
·
|
acquisition
of surface land and easement rights required to develop and operate
the
project;
|
|
·
|
completion
of basic engineering; and
|
|
·
|
construction
of the project.
|
In
addition, factors such as fluctuations in the market price of molybdenum and
in
foreign exchange or interest rates, as well as international political unrest,
could adversely affect our ability to obtain adequate financing to fund the
development of the project on a timely basis.
Our
mineralization and reserve estimates are uncertain, and any material
inaccuracies in those estimates could adversely affect the value of our mineral
reserves
There
are
numerous uncertainties inherent in estimating mineralization and reserves,
including many factors beyond our control. The estimation of mineralization
and
reserves is a subjective process and the accuracy of any such estimates is
a
function of the quality of available data and of engineering and geological
interpretation and judgment. Results of drilling, metallurgical testing,
production, and the evaluation of mine plans subsequent to the date of any
estimate may justify revision of such estimates. No assurances can be given
that
the volume and grade of mineralization and reserves recovered and rates of
production will not be less than anticipated. Assumptions about prices are
subject to greater uncertainty and metals prices have fluctuated widely in
the
past. Declines in the market price of specialty, base or precious metals also
may render mineralization and reserves containing relatively lower grades of
ore
uneconomic to exploit. Changes in operating and capital costs and other factors
including, but not limited to, short-term operating factors such as the need
for
sequential development of ore bodies and the processing of new or different
ore
grades, may materially and adversely affect mineralization and
reserves.
Any
material inaccuracies in our production estimates could adversely affect our
results of operations
We
have
prepared estimates of future molybdenum production. We cannot assure you that
we
or Eureka Moly will ever achieve these production estimates or any production
at
all. Our production estimates depend on, among other things:
|
·
|
the
accuracy of our mineralization and reserves
estimates;
|
|
·
|
the
accuracy of assumptions regarding ore grades and recovery
rates;
|
|
·
|
ground
conditions and physical characteristics of the mineralization, such
as
hardness and the presence or absence of particular metallurgical
characteristics;
|
|
·
|
the
accuracy of estimated rates and costs of mining and processing;
and
|
|
·
|
the
ability to obtain all permits and construct a processing facility
at Mt.
Hope.
|
Our
actual production may vary from our estimates if any of our assumptions prove
to
be incorrect. With respect to the Mt. Hope Project, we do not have the benefit
of actual mining and production experience in verifying our estimates, which
increases the likelihood that actual production results will vary from the
estimates.
Mining
is inherently dangerous and subject to conditions or events beyond our control,
and any operating hazards could have a material adverse effect on our
business
Mining
at
the Mt. Hope Project will involve various types of risks and hazards, including:
environmental hazards, industrial accidents, metallurgical and other processing
problems, unusual or unexpected rock formations, structure cave-in or slides,
flooding, fires and interruption due to inclement or hazardous weather
conditions.
These
risks could result in damage to, or destruction of, mineral properties,
production facilities or other properties, personal injury or death,
environmental damage, delays in mining, increased production costs, monetary
losses and possible legal liability. We may not be able to obtain insurance
to
cover these risks at economically feasible premiums and some types of insurance
may be unavailable or too expensive to maintain. We may suffer a material
adverse effect on our business and the value of our securities may decline
if we
incur losses related to any significant events that are not covered by our
insurance policies.
Our
operations make us susceptible to environmental liabilities that could have
a
material adverse effect on us
Mining
is
subject to potential risks and liabilities associated with the potential
pollution of the environment and the necessary disposal of mining waste products
occurring as a result of mineral exploration and production. Insurance against
environmental risk (including potential liability for pollution or other hazards
as a result of the disposal of waste products occurring from exploration and
production) is not generally available to us or Eureka Moly (or to other
companies in the minerals industry) at a reasonable price. To the extent that
we
become subject to environmental liabilities, the satisfaction of any such
liabilities would reduce funds otherwise available to us and could have a
material adverse effect on us. Laws and regulations intended to ensure the
protection of the environment are constantly changing, and are generally
becoming more restrictive.
There
is no guarantee that legal title to the properties in which we have an interest
will not be challenged, which could result in the loss of our rights in those
properties
The
ownership and validity, or title, of unpatented mining claims are often
uncertain and may be contested. A successful claim contesting our title or
interest to a property or, in the case of the Mt. Hope Project, the land-owner’s
title or interest to such property could cause us and/or Eureka Moly to lose
the
rights to mine that property. In addition, the success of such a claimant could
result in our not being compensated for our prior expenditures relating to
the
property.
Mineral
exploration and mining activities require compliance with a broad range of
laws
and regulations, and compliance with or violation of these laws and regulations
may be costly
Mining
operations and exploration activities are subject to national and local laws
and
regulations governing prospecting, development, mining, production, exports,
taxes, labor standards, occupational health and safety, waste disposal, toxic
substances, land use, environmental protection, reclamation obligations and
mine
safety. In order to comply with applicable laws and regulations, we may be
required to make capital and operating expenditures or to close an operation
until a particular problem is remedied. In addition, if our activities violate
any such laws and regulations, we may be required to compensate those suffering
loss or damage, and may be fined if convicted of an offense under such
legislation. We may also incur additional expenses and our projects may be
delayed as a result of changes and amendments to such laws and
regulations.
Land
reclamation requirements for exploration properties may be burdensome, may
divert funds from our exploration programs and could have an adverse effect
on
our financial condition
Although
variable, depending on location and the governing authority, land reclamation
requirements are generally imposed on mineral exploration companies, as well
as
companies with mining operations, in order to minimize long term effects of
land
disturbance. Reclamation may include requirements to control dispersion of
potentially deleterious effluents and to reasonably re-establish pre-disturbance
land forms and vegetation. In order to carry out reclamation obligations imposed
on us in connection with our mineral exploration, we and Eureka Moly must
allocate financial resources that might otherwise be spent on further
exploration programs. Such costs could also have an adverse affect on our
financial condition.
Non-compliance
with our Mt. Hope Lease could result in loss of Eureka Moly’s rights to develop
the Mt. Hope Project and may adversely affect our business
Eureka
Moly leases the Mt. Hope Project from Mt. Hope Mines, Inc. under the Mt. Hope
Lease. Failure to comply with the terms of the Mt. Hope Lease (which principally
require us to make prescribed payments on or before certain prescribed dates)
could result in loss of Eureka Moly’s rights to develop the Mt. Hope Project.
Any loss of rights under the Mt. Hope Lease would have a material adverse effect
on us and our ability to generate revenues.
Our
ability to operate our company effectively could be impaired if we lose key
personnel or if we are not able to attract and retain the additional personnel
we will need to develop any of our projects, including the Mt. Hope
Project
We
are a
small company with a limited operating history and relatively few employees.
The
development of any of our proposed projects, including the Mt. Hope Project,
will place substantial demands on us. We depend on the services of key
executives and a small number of personnel, including our Chief Executive
Officer, Chief Financial Officer, Vice President of Engineering and
Construction, Vice President Business Development and Marketing, Vice President
of Project Development and Director of Permitting. We will be required to
recruit additional personnel and to train, motivate and manage these new
employees. The number of persons skilled in the development and operation of
mining properties is limited and significant competition exists for these
individuals. We cannot assure you that we will be able to employ key personnel
or that we will be able to attract and retain qualified personnel in the future.
We do not maintain “key person” life insurance to cover our executive officers.
Due to the relatively small size of our company, the loss of any of our key
employees or our failure to attract and retain key personnel may delay or
otherwise adversely affect the development of the Mt. Hope Project, which would
have a material adverse effect on our business.
Changes
to the General Mining Law of 1872 and related Federal legislation that impact
unpatented mining claims could adversely impact the Mt. Hope
Project
The
Mt.
Hope Project is located substantially on unpatented mining claims administered
by the BLM. Mining on unpatented mining claims is conducted pursuant to the
General Mining Law of 1872 and amendments thereto. Legislation for the amendment
of the mining laws applicable to mining property has been and is being
considered by the United States Congress which may include imposition of a
governmental royalty and new permitting and environmental rules. Amendments
to
the mining laws could cause delays, increase the costs and have an adverse
effect on the returns anticipated from the Mt. Hope Project.
Increased
costs could affect our ability to become profitable
Costs
at
any particular mining location frequently are subject to variation due to a
number of factors, such as changing ore grade, changing metallurgy and revisions
to mine plans in response to the physical shape and location of the ore body.
In
addition, costs are affected by the price of commodities, such as fuel,
electricity and labor. Commodity costs are at times subject to volatile price
movements, including increases that could make production at our projects less
profitable or uneconomic.
We
anticipate significant capital expenditures over the next several years in
connection with the development of the Mt. Hope Project. Costs associated with
capital expenditures have escalated on an industry-wide basis over the last
several years, as a result of major factors beyond our control, including the
prices of oil, steel and other commodities. Increased costs for capital
expenditures have an adverse effect on the returns anticipated from the Mt.
Hope
project.
Shortages
of critical parts, equipment and skilled labor may adversely affect our
development projects
The
industry has been impacted by increased worldwide demand for critical resources
such as input commodities, drilling equipment, tires and skilled labor. These
shortages have caused and may continue to cause unanticipated cost increases
and
delays in delivery times, potentially impacting operating costs, capital
expenditures and production schedules.
Costs
estimates and timing of new projects are uncertain
The
capital expenditures and time required to develop new mines or other projects
are considerable and changes in costs or construction schedules can affect
project economics. There are a number of factors that can affect costs and
construction schedules, including, among others:
|
·
|
availability
of labor, power, transportation, commodities and
infrastructure;
|
|
·
|
increases
in input commodity prices and labor
costs;
|
|
·
|
fluctuations
in exchange rates;
|
|
·
|
availability
of financing;
|
|
·
|
difficulty
of estimating construction costs over a period of years;
and
|
|
·
|
delays
in obtaining environmental or other government
permits.
|
New
legislation, including the Sarbanes-Oxley Act of 2002, may make it difficult
for
us to retain or attract officers and directors and increase the costs of doing
business which could adversely affect our financial position and results of
operations
We
may be
unable to attract and retain qualified officers, directors and members of board
committees required to provide for our effective management as a result of
the
recent changes and currently proposed changes in the rules and regulations
which govern publicly-held companies. The Sarbanes-Oxley Act of 2002 has
resulted in a series of rules and regulations by the SEC that increase
responsibilities and liabilities of directors and executive officers. We are
a
small company with a limited operating history and no revenues or profits,
which
may influence the decisions of potential candidates we may recruit as directors
or officers. The perceived increased personal risk associated with these recent
changes may deter qualified individuals from accepting these roles. In addition,
costs of compliance with such legislation could have a significant impact on
our
financial position and results of operations.
Any
adverse results from evaluation of our internal controls under Section 404
of the Sarbanes-Oxley Act of 2002 could result in a loss of investor confidence
in our financial reports and have an adverse effect on the price of our common
stock
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required on an
annual basis to furnish a report by management on our internal controls over
financial reporting. Such report will contain, among other matters, an
assessment by our senior management of the effectiveness of our internal control
over financial reporting. This assessment must include disclosure of any
material weaknesses in our internal control over financial reporting identified
by our management. Beginning with our annual report for year ended
December 31, 2008, such report must also contain a statement that our
auditors have issued an attestation report on our management’s assessment of
such internal controls. Public Company Accounting Oversight Board Auditing
Standard No. 5 provides the professional standards and related performance
guidance for auditors to attest to, and report on, our management’s assessment
of the effectiveness of internal control over financial reporting under
Section 404.
We
are
required to assemble the system and processing documentation and perform the
evaluation needed to comply with Section 404, which is both costly and
challenging. We cannot be certain that we will be able to complete our
evaluation, testing and any required remediation in a timely fashion. During
the
evaluation and testing process, if we identify one or more material weaknesses
in our internal control over financial reporting, we will be unable to assert
that such internal control is effective. If we are unable to assert that our
internal control over financial reporting is effective as of any future period
(or, if our auditors are unable to attest that our management’s report is fairly
stated or they are unable to express an opinion on the effectiveness of our
internal controls), we could lose investor confidence in the accuracy and
completeness of our financial reports, which would have a material adverse
effect on our stock price.
Failure
to comply with the new rules may also make it more difficult for us to
obtain certain types of insurance, including director and officer liability
insurance, and we may be forced to accept reduced policy limits and coverage
and/or incur substantially higher costs to obtain the same or similar coverage.
The impact of these events could also make it more difficult for us to attract
and retain qualified persons to serve on our board of directors, on committees
of our board of directors, or as executive officers.
Our
common stock has a limited public market, which may adversely affect the market
price of our shares and make it difficult for our shareholders to sell
their shares
Our shares
are currently listed and traded on the American Stock Exchange and the Toronto
Stock Exchange. There is no assurance, however, that we will be able to meet
the
continued listing criteria for either such exchange or that an active and liquid
trading market can be maintained for our common stock. Such a failure may have
a
material adverse impact on the market price of our shares and a
shareholder’s ability to dispose of our common stock in a timely manner or at
all.
We
do not anticipate paying cash dividends in the foreseeable
future
We
do not
plan to pay cash dividends on our common stock in the foreseeable future. The
payment of future cash dividends, if any, will be reviewed periodically by
our
board of directors and will depend upon, among other things, conditions then
existing, including our earnings, financial condition and capital requirements,
restrictions in financing agreements, business opportunities and conditions,
and
other factors.
Provisions
of Delaware law and our charter and bylaws may delay or prevent transactions
that would benefit stockholders
Our
certificate of incorporation and bylaws and the Delaware General Corporation
Law
contain provisions that may have the effect of delaying, deferring or preventing
a change of control of the company. These provisions, among other things,
provide for staggering the terms of directors by dividing the total number
of
directors into three groups, authorize our board of directors to set the terms
of preferred stock, and restrict our ability to engage in transactions with
stockholders with 15% or more of outstanding voting stock.
Because
of these provisions, persons considering unsolicited tender offers or other
unilateral takeover proposals may be more likely to negotiate with our board
of
directors rather than pursue non-negotiated takeover attempts. As a result,
these provisions may make it more difficult for our stockholders to benefit
from
transactions that are opposed by an incumbent board of directors.
ITEM
3. |
LEGAL
PROCEEDINGS
|
We
are
not a party to any material legal proceedings and are not aware of any such
proceedings known to be contemplated.
ITEM
4. |
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
At
the
time of the record date for our Annual Meeting, there were
56,172,524 shares of our common stock outstanding. At our Annual Meeting, a
total of 48,692,714, or approximately 86% of our total outstanding shares,
were represented in person or by proxy.
The
results of our Annual Meeting were as follows:
(1) Election
of Seven Members of the Board of Directors
Our
shareholders elected the following seven individuals to serve as our directors:
Name
|
|
Votes
For
|
|
Votes
Withheld
|
|
Bruce
D. Hansen
|
|
|
48,572,297
|
|
|
92,124
|
|
Gene
W. Pierson
|
|
|
46,724,755
|
|
|
1,939,666
|
|
Norman
A. Radford
|
|
|
46,496,170
|
|
|
2,168,251
|
|
R.
David Russell
|
|
|
46,708,655
|
|
|
1,955,766
|
|
Richard
F. Nanna
|
|
|
46,495,970
|
|
|
2,168,451
|
|
Ricardo
M. Campoy
|
|
|
48,464,035
|
|
|
200,386
|
|
Mark
A. Lettes
|
|
|
48,351,079
|
|
|
313,342
|
|
(2) Approval
of Reincorporation of Idaho General into the State of
Delaware
Our
shareholders approved the reincorporation of Idaho General into the State of
Delaware through a merger with and into the Company by the following vote:
For
|
|
|
33,130,638
|
|
Against
|
|
|
2,622,959
|
|
Abstain
|
|
|
28,372
|
|
Broker
Non-Vote
|
|
|
12,882,452
|
|
(3) Approval
of Amendment to the 2006 Plan
Our
shareholders approved an amendment to the Company’s 2006 Plan, to increase, by
1,600,000 shares, the number of shares of our common stock available for
issuance under the 2006 Plan, by the following vote:
For
|
|
|
28,435,756
|
|
Against
|
|
|
6,108,901
|
|
Abstain
|
|
|
1,237,312
|
|
Broker
Non-Vote
|
|
|
12,882,452
|
|
(4) Approval
of an Amendment to Accelerate the Termination of the Shareholders Rights
Plan
Our
shareholders approved an amendment to the Shareholders Rights Agreement dated
as
of September 22, 2005 (as amended from time to time, the “Shareholders Rights
Plan”), to accelerate the termination of the Shareholders Rights Plan, by the
following vote:
For
|
|
|
35,409,932
|
|
Against
|
|
|
247,912
|
|
Abstain
|
|
|
124,125
|
|
Broker
Non-Vote
|
|
|
12,882,452
|
|
PART II
ITEM
5. |
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER OF EQUITY
SECURITIES
|
Market
Information
On
August 16, 2006 our common stock began trading on the American Stock
Exchange under symbol “GMO” and on February 14, 2008 our common stock began
trading on the Toronto Stock Exchange under the symbol “GMO”. From July 26,
2004 to August 16, 2006 our common stock traded on the OTC Bulletin Board
under the symbol “IGMI.”
The
following table sets forth for our common stock, the high and low bid quotations
per share as reported by the OTC Bulletin Board through August 16, 2006 and
the closing price as reported on the American Stock Exchange for periods
subsequent to August 16, 2006.
Year
|
|
Quarter
|
|
|
High
|
|
|
Low
|
|
2005
|
|
First
Quarter
|
|
$ |
1.49
|
|
$ |
0.71
|
|
|
|
Second
Quarter
|
|
$ |
1.88
|
|
$ |
0.98
|
|
|
|
Third
Quarter
|
|
$ |
1.47
|
|
$ |
0.85
|
|
|
|
Fourth
Quarter
|
|
$ |
1.80
|
|
$ |
1.01
|
|
2006
|
|
First
Quarter
|
|
$ |
4.00
|
|
$ |
1.15
|
|
|
|
Second
Quarter
|
|
$ |
4.00
|
|
$ |
2.30
|
|
|
|
Third
Quarter
|
|
$ |
3.27
|
|
$ |
1.92
|
|
|
|
Fourth
Quarter
|
|
$ |
3.35
|
|
$ |
1.99
|
|
2007
|
|
First
Quarter
|
|
$ |
4.34
|
|
$ |
2.26
|
|
|
|
Second
Quarter
|
|
$ |
6.64
|
|
$ |
4.69
|
|
|
|
Third
Quarter
|
|
$ |
8.46
|
|
$ |
5.17
|
|
|
|
Fourth
Quarter
|
|
$ |
12.42
|
|
$ |
6.55
|
|
2008
|
|
First
Quarter (through March 14, 2008)
|
|
$ |
11.85
|
|
$ |
8.72
|
|
Holders
As
of
March 14, 2008, there were approximately 751 holders of record of our common
stock.
Dividends
We
have
never declared or paid dividends on our common stock and we do not anticipate
paying any dividends on our common stock in the foreseeable future. We will
pay
dividends on our common stock only if and when declared by our board of
directors. Our board’s ability to declare a dividend is subject to limits
imposed by Delaware corporate law. In determining whether to declare dividends,
the board will consider these limits, our financial condition, results of
operations, working capital requirements, future prospects and other factors
it
considers relevant.
See
Note
7 to the Financial Statements herein for information relating to our equity
compensation plans.
ITEM
6. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
Overview
The
Company is a development stage company and is currently proceeding with the
development of the Mt. Hope Project. The Company is also conducting exploration
and evaluation activities on its Hall-Tonopah Property. In addition, the Company
has certain other mineral interests in the Western United States that it is
currently evaluating the potential for future development or sale.
On
October 4, 2007, our Board of Directors approved the development of the Mt.
Hope Project as contemplated in the Bankable Feasibility Study. The development
of the Mt. Hope Project has an estimated total capital requirement of
approximately $1.0 billion comprised of initial construction cost in excess
of $850 million (in 2007 dollars); $53.0 million in cash bonding
requirements; $22.0 million in Advance Royalty Payments; and amounts
necessary for financing costs and working capital. The accuracy of the estimate
is considered to be plus or minus 15%. Such capital requirements are based
on
management’s estimates based on the Bankable Feasibility Study and other
available information, and are subject to change, which changes could be
material.
Effective
as of January 1, 2008, we contributed all of our interest in the assets
related to the Mt. Hope Project, including the Company’s lease of the Mt. Hope
property into a newly formed entity, Eureka Moly and entered into a
joint
venture for the development and operation of the Mt. Hope Project with
POS-Minerals. Under the joint venture, POS-Minerals owns a 20% interest and
General Moly, through a subsidiary, owns an 80% interest in Eureka
Moly.
In
February 2008, we entered into a joint venture agreement with POS-Minerals
that
reduced the Company’s required capital by 20% as well as provided
$170 million in capital for use in funding our remaining 80% share. Of the
$170 million in capital committed, $50 million was received in
February 2008, $50 million is to be received in July 2008 and the remaining
$70 million will be received once the Mt. Hope Project receives the
necessary permits to develop and operate the project.
Additional
capital will be required through the commencement of Mt. Hope production
estimated to be in late 2010. Our ability to develop the project on time and
on
budget is dependent on, among other things, our ability to raise the necessary
capital to fund the Mt. Hope Project both in sufficient quantity of capital
and
at the time such capital is needed. Additionally, if the estimated costs of
the
Mt. Hope Project are exceeded we will need to raise additional capital to fund
such overruns.
We
do not
currently have the capital necessary to complete the Mt. Hope Project and,
accordingly, plan to raise the capital on an ongoing basis when needed. The
completion of the POS-Minerals joint venture agreement and existing cash on
hand
should be sufficient to fund our planned operations through the end of 2008.
If
the Company is unable to raise sufficient quantities of capital when needed,
it
will be necessary to develop alternative plans that could delay the development
and completion of the Mt. Hope Project. There is no assurance that we will
be
able to obtain the necessary financing for the Mt. Hope Project on customary
terms, or at all.
We
will
also require additional capital to continue the exploration and evaluation
of
Hall-Tonopah, as well as continue payment of ongoing general, administrative
and
operations costs associated with supporting our planned operations.
Liquidity
and Capital Resources
We
have
limited capital resources and thus have had to rely upon the sale of equity
securities for the cash required for exploration and development purposes,
for
mineral property acquisitions and to fund our general and administration costs.
Since we do not expect to generate any revenues until the Mt. Hope Project
begins production, we will rely on the sale of our equity and debt securities,
bank financing and joint venture arrangements to raise capital. There can be
no
assurance that financing will be available to us in the amount required at
any
particular time or for any period or, if available, that it can be obtained
on
terms satisfactory to us.
Our
cash
balance as at December 31, 2007 was $110.3 million compared to
$17.9 million as of December 31, 2006. Total assets as at
December 31, 2007 were $110.3 million compared to $27.1 million
as of December 31, 2006. These increases were due primarily to receipt of
proceeds from the private placements of our securities that were completed
in
March, April 2007 and November 2007, offset by expenditures for exploration,
evaluation and development of our Mt. Hope Project and continuing exploration
and evaluation of our Hall-Tonopah property plus expenditures for our general
and administrative costs.
During
the years ended December 31, 2007, 2006 and 2005 we completed private
placements of units and exercises of warrants and stock options for net cash
proceeds of $104.8 million, $35.4 million and $2.9 million,
respectively. Our exploration, evaluation, development and general and
administrative activities required the use of $44.3 million,
$17.8 million and $3.4 million, respectively, during these same
periods.
As
discussed above, we received $50.0 million from POS-Minerals in February
2008 to fund a portion of our 80% interest in the Mt. Hope Project and, subject
to satisfaction of certain conditions, we are scheduled to receive an additional
$50.0 million in July 2008 and $70.0 million at the time the Mt. Hope
Project receives its record of decision, which is expected in mid-2009.
Additionally, POS-Minerals will fund approximately $40.0 million upon
Eureka Moly’s receipt of the record of decision, which represents POS-Minerals’
share of the project costs from January 1, 2008 through the anticipated
date of the record of decision.
We
believe the cash on hand at December 31, 2007, the receipt of the
$50.0 million from POS-Minerals, the expected receipt of $50.0 million
from POS-Minerals in July 2008 and expected proceeds from the exercise of
outstanding warrants of $19.3 million by April 2008 will be sufficient to
fund our development, exploration, evaluation and operating activities through
the end of the year ending December 31, 2008.
As
discussed above in the overview section, we will require, and continue to
require additional funds on an ongoing basis until we have completed the
development of the Mt. Hope Project and profitable producing operations are
achieved at the Mt. Hope Project. There is no assurance that we will be able
to
obtain the necessary financing for the Mt. Hope Project on customary terms,
or
at all.
Critical
Accounting Estimates
Estimates
The
process of preparing financial statements in conformity with US GAAP requires
the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses. Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
Provision
for Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to
the
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (“SFAS No. 109”). Under this approach, deferred income taxes are
recorded to reflect the tax consequences in future years of differences between
the tax basis of assets and liabilities and their financial reporting amounts
at
each year-end. A valuation allowance is recorded against the deferred tax asset
if management does not believe we have met the “more likely than not” standard
imposed by SFAS No. 109 to allow recognition of such an asset.
Property
and Equipment
The
Company evaluates its long-lived assets for impairment when events or changes
in
circumstances indicate that the related carrying amount may not be recoverable.
If the sum of estimated future net cash flows on an undiscounted basis is less
than the carrying amount of the related asset grouping, asset impairment is
considered to exist. The related impairment loss is measured by comparing
estimated future net cash flows on a discounted basis to the carrying amount
of
the asset. Changes in significant assumptions underlying future cash flow
estimates may have a material effect on the Company’s financial position and
results of operations. To date no such impairments have been identified.
Property and equipment are being depreciated over useful lives of three to
seven
years using straight-line depreciation.
Share-Based
Compensation
We
account for stock-based compensation in accordance with SFAS No. 123(R),
Share-Based
Payment.
Under
the fair value recognition provisions of this statement, share-based
compensation cost is measured at the grant date based on the value of the award
and is recognized as expense over the vesting period. Determining the fair
value
of share-based awards at the grant date requires judgment, including estimating
expected dividends. In addition, judgment is also required in estimating the
amount of share-based awards that are expected to be forfeited. If actual
results differ significantly from these estimates, stock-based compensation
expense and our results of operations could be materially impacted.
Changes
in Accounting Policies
We
did
not change our accounting policies during fiscal 2005, 2006 or
2007.
ITEM
7. |
FINANCIAL
STATEMENTS
|
GENERAL
MOLY, INC.
(A
Development Stage Company)
CONSOLIDATED
FINANCIAL STATEMENTS
December 31,
2007
CONTENTS
Report
of Independent Registered Public Accounting Firm
|
|
|
34
|
|
Financial
Statements:
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2007 and December 31,
2006
|
|
|
35
|
|
Consolidated
Statements of Operations for the twelve months ended December 31,
2007, December 31, 2006 and December 31, 2005 and for the period
from inception of Exploration Stage until December 31,
2007
|
|
|
36
|
|
Consolidated
Statements of Cash Flows for the twelve months ended December 31,
2007, December 31, 2006 and December 31, 2005 and for the period
from inception of Exploration Stage until December 31,
2007
|
|
|
37
|
|
Consolidated
Statement of Stockholders’ Equity as of December 31, 2007,
December 31, 2006, December 31, 2005, December 31, 2004,
December 31, 2003, and December 31, 2002
|
|
|
38
|
|
Notes
to Consolidated Financial Statements
|
|
|
41
|
|
Report
of Independent Registered Public Accounting Firm
To
the
Board of Directors and Shareholders of General Moly, Inc.:
In
our
opinion, the accompanying consolidated balance sheets and
the
related consolidated statements of operations, cash flows and stockholders’
equity present fairly, in all material respects, the financial position of
General Moly, Inc. and its subsidiaries (a development stage company) at
December 31, 2007 and 2006, and the results of its operations and of its
cash flows for each of the three years in the period ended December 31,
2007 and, cumulatively, for the period from January 1, 2002 (date
of
inception) to
December 31, 2007 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that
we plan and perform the audit to obtain reasonable assurance about whether
the
financial statements are free of material misstatement. An audit of financial
statements includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
/s/
PricewaterhouseCoopers LLP
Denver,
Colorado
March
21,
2008
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS
(Dollars
in thousands except per share amounts)
|
|
December 31,
2007
|
|
December 31,
2006
|
|
ASSETS:
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
78,371
|
|
$
|
17,882
|
|
Deposits,
prepaid expenses and other current assets
|
|
|
360
|
|
|
193
|
|
Total
Current Assets
|
|
|
78,731
|
|
|
18,075
|
|
Mining
properties, land and water rights
|
|
|
29,578
|
|
|
8,598
|
|
Deposits
on long lead items
|
|
|
490
|
|
|
—
|
|
Restricted
cash held for reclamation bonds
|
|
|
777
|
|
|
—
|
|
Property
and equipment, net
|
|
|
711
|
|
|
431
|
|
TOTAL
ASSETS
|
|
$
|
110,287
|
|
$
|
27,104
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
$
|
7,457
|
|
$
|
1,076
|
|
Provision
for post closure reclamation and remediation costs
|
|
|
90
|
|
|
—
|
|
Current
portion of long term debt
|
|
|
62
|
|
|
19
|
|
Total
Current Liabilities
|
|
|
7,609
|
|
|
1,095
|
|
Provision
for post closure reclamation and remediation costs, net of current
portion
|
|
|
422
|
|
|
—
|
|
Long
term debt, net of current portion
|
|
|
151
|
|
|
58
|
|
Total
Liabilities
|
|
|
8,182
|
|
|
1,153
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES - NOTE 9
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
Preferred
stock, Series A, $0.001 par value; 10,000,000 shares authorized,
no shares issued and outstanding
|
|
|
—
|
|
|
—
|
|
Common
stock, $0.001 par value; 200,000,000 shares authorized, 66,131,384
and 43,397,540 shares issued and outstanding,
respectively
|
|
|
66
|
|
|
43
|
|
Additional
paid-in capital
|
|
|
159,828
|
|
|
46,017
|
|
Accumulated
deficit before exploration stage
|
|
|
(213
|
)
|
|
(213
|
)
|
Accumulated
deficit during exploration and development stage
|
|
|
(57,576
|
)
|
|
(19,896
|
)
|
Total
Stockholders’ Equity
|
|
|
102,105
|
|
|
25,951
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
110,287
|
|
$
|
27,104
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In
thousands, except per share amounts)
|
|
|
Year
Ended
|
|
|
January 1, 2002
(Inception of
Exploration Stage)
to
|
|
|
|
|
December 31,
2007
|
|
|
December 31,
2006
|
|
|
December 31,
2005
|
|
|
December 31,
2007
|
|
REVENUES
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
and evaluation
|
|
|
20,660
|
|
|
6,146
|
|
|
2,384
|
|
|
31,035
|
|
General
and administrative expense
|
|
|
18,325
|
|
|
7,075
|
|
|
2,120
|
|
|
28,846
|
|
TOTAL
OPERATING EXPENSES
|
|
|
38,985
|
|
|
13,221
|
|
|
4,504
|
|
|
59,881
|
|
LOSS
FROM OPERATIONS
|
|
|
(38,985
|
)
|
|
(13,221
|
)
|
|
(4,504
|
)
|
|
(59,881
|
)
|
OTHER
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income
|
|
|
1,305
|
|
|
916
|
|
|
7
|
|
|
2,240
|
|
Other
income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
65
|
|
TOTAL
OTHER INCOME
|
|
|
1,305
|
|
|
916
|
|
|
7
|
|
|
2,305
|
|
LOSS
BEFORE TAXES
|
|
|
(37,680
|
)
|
|
(12,305
|
)
|
|
(4,497
|
)
|
|
(57,576
|
)
|
INCOME
TAXES
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
NET
LOSS
|
|
$
|
(37,680
|
)
|
$
|
(12,305
|
)
|
$
|
(4,497
|
)
|
$
|
(57,576
|
)
|
BASIC
AND DILUTED NET LOSS PER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARE
OF COMMON STOCK
|
|
$
|
(0.71
|
)
|
$
|
(0.33
|
)
|
$
|
(0.31
|
)
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING—BASIC AND
DILUTED
|
|
|
53,331
|
|
|
37,303
|
|
|
14,508
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
Ended
|
|
1-Jan-02
(Inception of
Exploration
Stage) to
|
|
|
|
December 31,
2007
|
|
December 31,
2006
|
|
December 31,
2005
|
|
December 31,
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(37,680
|
)
|
$
|
(12,305
|
)
|
$
|
(4,497
|
)
|
$
|
(57,576
|
)
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
and expenses paid with common stock
|
|
|
304
|
|
|
331
|
|
|
143
|
|
|
1,990
|
|
Depreciation
and amortization
|
|
|
185
|
|
|
58
|
|
|
11
|
|
|
258
|
|
Equity
compensation for management and directors
|
|
|
6,217
|
|
|
2,105
|
|
|
279
|
|
|
9,527
|
|
Decrease
(increase) in deposits, prepaid expenses and other
|
|
|
(167
|
)
|
|
(188
|
)
|
|
(43
|
)
|
|
(402
|
)
|
Increase
(decrease) in accounts payable and accrued liabilities
|
|
|
6,328
|
|
|
290
|
|
|
776
|
|
|
7,434
|
|
(Decrease)
increase in post closure reclamation and remediation costs
|
|
|
303
|
|
|
—
|
|
|
—
|
|
|
303
|
|
Net
cash used by operating activities
|
|
|
(24,510
|
)
|
|
(9,709
|
)
|
|
(3,331
|
)
|
|
(38,466
|
)
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
for the purchase of equipment
|
|
|
(465
|
)
|
|
(320
|
)
|
|
(13
|
)
|
|
(843
|
)
|
Purchase
of securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(137
|
)
|
Purchase
of mining properties, land and water rights
|
|
|
(18,578
|
)
|
|
(7,747
|
)
|
|
(16
|
)
|
|
(26,365
|
)
|
Deposits
on long lead items
|
|
|
(490
|
)
|
|
—
|
|
|
—
|
|
|
(490
|
)
|
Decrease
(increase) in restricted cash
|
|
|
(286
|
)
|
|
—
|
|
|
—
|
|
|
(286
|
)
|
Cash
provided by sale of marketable securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
246
|
|
Net
cash provided (used) by investing activities
|
|
|
(19,819
|
)
|
|
(8,067
|
)
|
|
(29
|
)
|
|
(27,875
|
)
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of stock, net of issuance costs
|
|
|
104,682
|
|
|
35,401
|
|
|
2,916
|
|
|
144,530
|
|
Net
increase in debt
|
|
|
136
|
|
|
—
|
|
|
—
|
|
|
136
|
|
Net
cash provided by financing activities:
|
|
|
104,818
|
|
|
35,401
|
|
|
2,916
|
|
|
144,666
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
60,489
|
|
|
17,625
|
|
|
(444
|
)
|
|
78,325
|
|
Cash
and cash equivalents, beginning of period
|
|
|
17,882
|
|
|
257
|
|
|
701
|
|
|
46
|
|
Cash
and cash equivalents, end of period
|
|
$
|
78,371
|
|
$
|
17,882
|
|
$
|
257
|
|
$
|
78,371
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation capitalized as development
|
|
$
|
1,804
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,804
|
|
Restricted
cash held for reclamation bond acquired in an acquisition
|
|
|
491
|
|
|
—
|
|
|
—
|
|
|
491
|
|
Post
closure reclamation and remediation costs and accounts payable
assumed in
an acquisition
|
|
|
263
|
|
|
—
|
|
|
—
|
|
|
263
|
|
Common
stock and warrants issued for property and equipment
|
|
|
826
|
|
|
—
|
|
|
11
|
|
|
1,586
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars
in thousands except per share amounts)
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
|
|
Balance,
January 1, 2002
|
|
|
3,140,469
|
|
$
|
4
|
|
$
|
442
|
|
$
|
(2
|
)
|
$
|
(213
|
)
|
$
|
231
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
directors’ fees
|
|
|
285,000
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
18
|
|
Unrealized
Losses on marketable securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
Net
loss for the year ended December 31, 2002
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
(20
|
)
|
Balance,
December 31, 2002
|
|
|
3,425,469
|
|
$
|
4
|
|
$
|
460
|
|
$
|
(9
|
)
|
$
|
(233
|
)
|
$
|
222
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
directors’ fees
|
|
|
80,000
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
Issuance
of Common Stock purchase options for management and administrative
fees
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Unrealized
gains on marketable securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
Net
loss for the year ended December 31, 2003
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(69
|
)
|
|
(69
|
)
|
Balance,
December 31, 2003
|
|
|
3,505,469
|
|
$
|
4
|
|
$
|
479
|
|
$
|
11
|
|
$
|
(302
|
)
|
$
|
192
|
|
Issuance
of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
directors’ fees at $0.50 to 0.62 per share
|
|
|
95,000
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
53
|
|
for
services and expenses at between $0.11 and $0.85 per share
|
|
|
617,818
|
|
|
—
|
|
|
343
|
|
|
—
|
|
|
—
|
|
|
343
|
|
Issuance
of Units of Common Stock and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
property at $1.46 per unit
|
|
|
525,000
|
|
|
1
|
|
|
767
|
|
|
—
|
|
|
—
|
|
|
768
|
|
for
expenses at between $0.40 and $1.44 per unit
|
|
|
875,000
|
|
|
1
|
|
|
868
|
|
|
—
|
|
|
—
|
|
|
869
|
|
for
cash at between $0.15 and $0.40 per unit
|
|
|
5,610,555
|
|
|
5
|
|
|
1,497
|
|
|
—
|
|
|
—
|
|
|
1,502
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
for cash at $0.11 per share
|
|
|
260,000
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
29
|
|
Stock
based compensation
|
|
|
—
|
|
|
—
|
|
|
834
|
|
|
—
|
|
|
—
|
|
|
834
|
|
Unrealized
Losses on marketable securities
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
(11
|
)
|
Net
loss for year ended December 31, 2004
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,005
|
)
|
|
(3,005
|
)
|
Balances,
December 31, 2004
|
|
|
11,488,842
|
|
|
11
|
|
|
4,870
|
|
|
—
|
|
|
(3,307
|
)
|
|
1,574
|
|
Issuance
of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
administration between $0.95 and $1.25 per share
|
|
|
20,000
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
23
|
|
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS’ EQUITY (Continued)
(Dollars
in thousands except per share amounts)
|
|
Shares
|
|
Amount
|
|
Additional
Paid-In Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Accumulated
Deficit
|
|
Total
|
|
exploration
expense at $0.75 per share
|
|
|
30,000
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
office
furniture at $0.72 and $1.13 per share
|
|
|
15,000
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
for
services between $0.72 and $1.13 per share
|
|
|
89,611
|
|
|
—
|
|
|
91
|
|
|
—
|
|
|
—
|
|
|
91
|
|
for
exercise of warrants for cash
|
|
|
435,000
|
|
|
—
|
|
|
348
|
|
|
—
|
|
|
—
|
|
|
348
|
|
Issuance
of Units of Common Stock and Warrants for cash between $0.75 and
$1.10 per unit
|
|
|
3,418,932
|
|
|
4
|
|
|
2,564
|
|
|
—
|
|
|
—
|
|
|
2,568
|
|
Stock
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
between $0.165 and $0.70 per share
|
|
|
988,630
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock
based compensation
|
|
|
—
|
|
|
—
|
|
|
280
|
|
|
—
|
|
|
—
|
|
|
280
|
|
Net
loss for the year ended December 31, 2005
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,497
|
)
|
|
(4,497
|
)
|
Balances,
December 31, 2005
|
|
|
16,486,015
|
|
$
|
16
|
|
$
|
8,214
|
|
$
|
—
|
|
$
|
(7,804
|
)
|
$
|
426
|
|
Issuance
of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
for
services between $1.10 and $3.66 per share
|
|
|
50,000
|
|
|
—
|
|
|
113
|
|
|
—
|
|
|
—
|
|
|
113
|
|
Issuance
of Units of Common Stock and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
for cash between $1.10 and $2.00 per unit
|
|
|
18,021,936
|
|
|
18
|
|
|
33,306
|
|
|
—
|
|
|
—
|
|
|
33,324
|
|
Units
for finders fee
|
|
|
170,550
|
|
|
—
|
|
|
307
|
|
|
—
|
|
|
—
|
|
|
307
|
|
Warrants
for finders fee
|
|
|
|
|
|
|
|
|
1,735
|
|
|
—
|
|
|
—
|
|
|
1,735
|
|
Cost
of offerings including cash costs of $2,282,699
|
|
|
—
|
|
|
—
|
|
|
(4,315
|
)
|
|
—
|
|
|
—
|
|
|
(4,315
|
)
|
Stock
Warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
for services at $1.07 per warrant
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80
|
|
Exercised
between $0.40 and $1.00 per share
|
|
|
5,838,055
|
|
|
6
|
|
|
4,471
|
|
|
—
|
|
|
—
|
|
|
4,477
|
|
Cashless
exercise of warrants
|
|
|
1,482,147
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
between $0.11 and $0.75 per share
|
|
|
340,000
|
|
|
1
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
61
|
|
Cashless
exercise of stock options
|
|
|
1,008,837
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock
based compensation
|
|
|
—
|
|
|
—
|
|
|
2,048
|
|
|
—
|
|
|
—
|
|
|
2,048
|
|
Net
loss for the year ended December 31, 2006
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,305
|
)
|
|
(12,305
|
)
|
Balances,
December 31, 2006
|
|
|
43,397,540
|
|
$
|
43
|
|
$
|
46,017
|
|
$
|
—
|
|
$
|
(20,109
|
)
|
$
|
25,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of Common Stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
cash at $8.50 per share
|
|
|
8,256,699
|
|
|
8
|
|
|
70,174
|
|
|
—
|
|
|
—
|
|
|
70,182
|
|
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDERS’ EQUITY (Continued)
(Dollars
in thousands except per share amounts)
For
mineral and water rights between $2.80 and $6.15 per share
|
|
|
304,950
|
|
|
—
|
|
|
1,130
|
|
|
—
|
|
|
—
|
|
|
1,130
|
|
Issuance
of Units of Common Stock and Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
for cash at $3.40 per unit
|
|
|
7,352,942
|
|
|
7
|
|
|
24,993
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
Cash
cost of offering
|
|
|
|
|
|
|
|
|
(1,500
|
)
|
|
—
|
|
|
—
|
|
|
(1,500
|
)
|
Stock
Warrants:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
between $0.80 and $3.75 per share
|
|
|
4,261,689
|
|
|
4
|
|
|
9,299
|
|
|
—
|
|
|
—
|
|
|
9,303
|
|
Cashless
exercise of warrants
|
|
|
369,715
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Additional
paid in capital from shareholder
|
|
|
—
|
|
|
—
|
|
|
499
|
|
|
—
|
|
|
—
|
|
|
499
|
|
Stock
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
between $0.11 and $2.74 per share
|
|
|
1,450,833
|
|
|
1
|
|
|
1,198
|
|
|
—
|
|
|
—
|
|
|
1,199
|
|
Cashless
exercise of stock options
|
|
|
361,014
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Issued
pursuant to stock awards
|
|
|
415,000
|
|
|
1
|
|
|
32
|
|
|
—
|
|
|
—
|
|
|
33
|
|
Returned
due to pricing errors on stock option exercise
|
|
|
(38,998
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock
based compensation
|
|
|
—
|
|
|
—
|
|
|
7,988
|
|
|
—
|
|
|
—
|
|
|
7,988
|
|
Net
loss for the year ended December 31, 2007
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(37,680
|
)
|
|
(37,680
|
)
|
Balances,
December 31, 2007
|
|
|
66,131,384
|
|
$
|
66
|
|
$
|
159,828
|
|
$
|
—
|
|
$
|
(57,789
|
)
|
$
|
102,105
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
GENERAL
MOLY, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 — DESCRIPTION OF BUSINESS AND SUBSEQUENT EVENT
General
Moly, Inc. (“we”, “us”, “our”, “the Company”, or “General Moly”) is a Delaware
corporation originally incorporated as General Mines Corporation on
November 23, 1925. In 1966, the Company amended its articles of
incorporation to change its name to Idaho General Petroleum and Mines
Corporation, and amended its articles again in 1967 changing its name to Idaho
General Mines, Inc. On October 5, 2007, we reincorporated in the State of
Delaware (the “Reincorporation”) through a merger involving Idaho General Mines,
Inc. and General Moly, Inc., a Delaware corporation that was a wholly owned
subsidiary of Idaho General Mines, Inc. The Reincorporation was effected by
merging Idaho General Mines, Inc. with and into General Moly, with General
Moly
being the surviving entity. For purposes of the Company’s reporting status with
the Securities and Exchange Commission, General Moly is deemed a successor
to
Idaho General Mines, Inc.
We
were
in the exploration stage until October 4, 2007 when our Board of Directors
approved the development of the Mt. Hope molybdenum property (the “Mt. Hope
Project”) in Eureka County, Nevada. The Company is now in the development stage
and is currently proceeding with the development of the Mt. Hope Project. We
are
also conducting exploration and evaluation activities on our Hall-Tonopah
molybdenum property (the “Hall-Tonopah Property”) in Nye County, Nevada. In
addition, we have certain other, non-core, mineral interests in the Western
United States that we are currently evaluating for potential development or
sale.
Effective
as of January 1, 2008, we contributed all of the our interest in the assets
related to the Mt. Hope Project, including the our lease of the Mt. Hope Project
into a newly formed entity, Eureka Moly, LLC, a Delaware limited liability
company (“Eureka Moly”), and entered into a
joint
venture for the development and operation of the Mt. Hope Project with
POS-Minerals Corporation (POS-Minerals) an affiliate of POSCO, a large Korean
steel company. Under the joint venture, POS-Minerals owns a 20% interest in
Eureka Moly and General Moly, through a wholly-owned subsidiary, owns an 80%
interest.
NOTE
2 — LIQUIDITY AND CAPITAL REQUIREMENTS
On
October 4, 2007, our Board of Directors approved the development of the Mt.
Hope Project as contemplated in the Bankable Feasibility Study (as hereinafter
defined). The development of the Mt. Hope Project has an estimated total capital
requirement of approximately $1.0 billion comprised of initial construction
cost in excess of $850 million (in 2007 dollars); $53 million in cash
bonding requirements; $22 million in Advance Royalty Payments (as
hereinafter defined); and amounts necessary for financing costs and working
capital. The accuracy of the estimate is considered to be plus or minus 15%.
Such capital requirements are based on management’s estimates based on the
Bankable Feasibility Study and other available information, and are subject
to
change, which changes could be material.
In
February 2008, we entered into a joint venture agreement with POS-Minerals
which
reduced our capital requirements for the Mt. Hope Project by 20% and will
provide $170 million in capital for use in funding our remaining 80% share.
Of the $170 million in capital committed, $50 million was received in
February 2008, $50 million is to be received in July 2008 and the remaining
$70 million will be received once the Mount Hope Project receives the
necessary permits to develop and operate the project.
Additional
capital will be required through the commencement of Mt. Hope production
estimated to be in late 2010. Our ability to develop the project on time and
on
budget is dependent on, among other things, our ability to raise the necessary
capital to fund the Mt. Hope Project both in sufficient quantity of capital
and
at the time such capital is needed. Additionally, if the estimated costs of
the
Mt. Hope Project are exceeded we will need to raise additional capital to fund
such overruns.
We
do not
currently have the capital necessary to complete the Mt. Hope Project and,
accordingly, plan to raise the capital on an ongoing basis when needed. The
completion of the POS-Minerals joint venture agreement and existing cash on
hand
should be sufficient to fund our planned operations through the end of 2008.
If
we are unable to raise sufficient quantities of capital when needed, it will
be
necessary to develop alternative plans that could delay the development and
completion of the Mt. Hope Project. There is no assurance that we will be able
to obtain the necessary financing for the Mt. Hope Project on customary terms,
or at all.
We
will
also require additional capital to continue the exploration and evaluation
of
the Hall-Tonopah Property, as well as continue payment of ongoing general,
administrative and operations costs associated with supporting our planned
operations.
NOTE
3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This
summary of significant accounting policies is presented to assist in
understanding the financial statements. The financial statements and notes
are
representations of the Company’s management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America and have been
consistently applied in the preparation of the financial statements. Certain
amounts for the years ending December 31, 2006 and 2005 have been
reclassified to conform to the 2007 presentation.
Accounting
Method
Our
financial statements are prepared using the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States
of
America. At December 31, 2007, all of our subsidiaries are wholly owned and
are consolidated in these financial statements.
Accounting
Pronouncements—Recent
In
December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests
in Consolidated Financial Statements- an amendment of ARB No. 51” (“SFAS No.
160”), which establishes accounting and reporting standards pertaining to
ownership interests in subsidiaries held by parties other than the parent,
the
amount of net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest, and the valuation of any
retained noncontrolling equity investment when a subsidiary is deconsolidated.
SFAS No. 160 also establishes disclosure requirements that clearly identify
and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS No. 160 is effective for our fiscal year beginning
January 1, 2009. We do not expect the adoption of SFAS 160 to have a material
impact on our consolidated financial statements.
In
February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits
entities to choose to measure many financial instruments and certain other
items
at fair value, with the objective of improving financial reporting by mitigating
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. The provisions of SFAS 159 are effective for our fiscal year
beginning January 1, 2008. We do not expect the adoption of SFAS 159 to have
a
material impact on our consolidated financial statements.
In
September 2006, the FASB issued FASB Statement No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. The provisions of SFAS 157
are effective for our fiscal year beginning January 1, 2008. We do not expect
the adoption of SFAS 157 to have a material impact on our consolidated financial
statements.
Cash
and Cash Equivalents
For
the
purposes of the statement of cash flows, we consider all highly liquid
investments with original maturities of three months or less to be cash
equivalents.
Investments
We
account for our investments in debt and equity securities in accordance with
the
provisions of Statement of Financial Accounting Standards No. 115,
“Accounting for Certain Investments in Debt and Equity Securities,” and reports
our investments in available for sale securities at their fair value, with
unrealized gains and losses excluded from income or loss and included in other
comprehensive income or loss.
Estimates
The
process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.
Exploration
and Development Stage Activities
We
were
in the exploration stage from January 2002 until October 4, 2007. On
October 4, 2007, our Board of Directors approved the development of the Mt.
Hope Project as contemplated in the Bankable Feasibility Study and we then
entered into the Development Stage. We have not realized any revenue from
operations. We will be primarily engaged in development of the Mt. Hope Project
and exploration and evaluation of the Hall-Tonopah Property until we enter
the
production stage.
Fair
Value of Financial Instruments
Our
financial instruments as defined by Statement of Financial Accounting Standards
No. 107, “Disclosures about Fair Value of Financial Instruments,” include
cash, accounts payable and accrued liabilities. All instruments are accounted
for on a historical cost basis, which, due to the short maturity of these
financial instruments, approximates fair value at December 31, 2007, 2006
and 2005.
Basic
and Diluted Net Loss Per Share
Net
loss
per share was computed by dividing the net loss by the weighted average number
of shares outstanding during the period. The weighted average number of shares
was calculated by taking the number of shares outstanding and weighting them
by
the amount of time that they were outstanding. Diluted net loss per share for
us
is the same as basic net loss per share, as the inclusion of common stock
equivalents would be antidilutive.
Mineral
Exploration and Development Costs
All
exploration expenditures are expensed as incurred. Significant property
acquisition payments for active exploration properties are capitalized. If
no
economic ore body is discovered, previously capitalized costs are expensed
in
the period the property is abandoned. Expenditures to develop new mines, to
define further mineralization in existing ore bodies, and to expand the capacity
of operating mines, are capitalized and amortized on a units-of-production
basis
over proven and probable reserves.
Should
a
property be abandoned, its capitalized costs are charged to operations. The
Company charges to the consolidated statement of operations the allocable
portion of capitalized costs attributable to properties sold. Capitalized costs
are allocated to properties sold based on the proportion of claims sold to
the
claims remaining within the project area.
Mining
Properties, Land and Water Rights
Costs
of
acquiring and developing mining properties, land and water rights are
capitalized as appropriate by project area. Exploration and related costs and
costs to maintain mining properties, land and water rights are expensed as
incurred while the property is in the exploration and evaluation stage.
Development and related costs and costs to maintain mining properties, land
and
water rights are capitalized as incurred while the property is in the
development. When a property reaches the production stage, the related
capitalized costs are amortized using the units-of-production basis over proven
and probable reserves. Mining properties, land and water rights are periodically
assessed for impairment of value, and any subsequent losses are charged to
operations at the time of impairment. If a property is abandoned or sold, a
gain
or loss is recognized and included in the consolidated statement of
operations.
Provision
for Taxes
Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes” (hereinafter “SFAS No. 109”). Under this approach, deferred income
taxes are recorded to reflect the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end. A valuation allowance is recorded against
the deferred tax asset if management does not believe the Company has met the
“more likely than not” standard imposed by SFAS No. 109 to allow
recognition of such an asset.
Reclamation
and Remediation
Expenditures
for ongoing compliance with environmental regulations that relate to current
operations are expensed or capitalized as appropriate. Expenditures resulting
from the remediation of existing conditions caused by past operations that
do
not contribute to future revenue generations are expensed. Liabilities are
recognized when environmental assessments indicate that remediation efforts
are
probable and the costs can be reasonably estimated.
Estimates
of such liabilities are based upon currently available facts, existing
technology and presently enacted laws and regulations taking into consideration
the likely effects of inflation and other societal and economic factors, and
include estimates of associated legal costs. These amounts also reflect prior
experience in remediating contaminated sites, other companies’ clean-up
experience and data released by The Environmental Protection Agency or other
organizations. Such estimates are by their nature imprecise and can be expected
to be revised over time because of changes in government regulations,
operations, technology and inflation. Recoveries are evaluated separately from
the liability and, when recovery is assured, the Company records and reports
an
asset separately from the associated liability.
NOTE
4 — MINING PROPERTIES, LAND AND WATER RIGHTS
We
currently have interests in two mining properties that are the primary focus
of
our operations. The Mt. Hope Project is currently in the development stage
and
the Hall-Tonopah Property is in the exploration and evaluation stage. We also
have certain other, non-core, mining properties that are being evaluated for
future evaluation or sale.
The
Mt. Hope Project. We
are
currently in the process of developing the Mt. Hope Project. From November
2004
to January 2008, we owned the rights to 100% of the Mt. Hope Project. In
February 2008, the Company completed a joint venture agreement with POS-Minerals
and whereby the Company now owns 80% of the Mt. Hope Project and POS-Minerals
owns the remaining 20%.
In
November 2004, we entered into an option to lease all property and assets of
the
Mt. Hope Molybdenum Property from Mt. Hope Mines, Inc. and in October 2005
exercised its rights under the option. The lease was further amended in November
2007. The renewable lease allows us to proceed for the next 30 years with
permitting, developing and mining the deposit and for so long thereafter as
we
maintain an active operation. In 2004, we paid $.5 million and issued
500,000 shares of common stock with warrants to purchase
500,000 shares of common stock for the Mt. Hope option.
Pursuant
to the terms of the lease, as amended, the underlying total royalty on
production payable to Mt. Hope Mines, Inc., less certain deductions, is three
and one-half percent for a molybdenum price up to $12 per pound, four
and one-half percent for a molybdenum price up to $15 per pound, and
five percent for a molybdenum price above $15 per pound (the
“Production Royalties”). Eureka Moly is subject to certain periodic payments as
set forth in Note 9 “Commitments and Contingencies.” Additionally, Eureka
Moly is obligated to pay Exxon Mineral Company a one percent net smelter
royalty on all production.
During
the year ended December 31, 2006, we purchased deeded land which included
certain BLM grazing rights, certain water rights and various other assets.
The
primary purpose for these purchases was to acquire land and water rights for
use
by the Mt. Hope Project. We paid $2.3 million cash for these
purchases.
During
the year ended December 31, 2007, we purchased land, water rights and
various personal property for cash of $4.6 million and 67,000 shares
of common stock valued at $0.4 million. The primary purpose of these
purchases was to acquire additional land and water rights for the Mt. Hope
Project.
In
August
2007, the Company completed a Bankable Feasibility Study on the Mt. Hope Project
(the “Bankable Feasibility Study”), which provided data on the viability and
expected economics of the project. Based on the findings in the study, on a
100%
basis, we reported 1.31 billion pounds of contained (1.1 billion
pounds recoverable) molybdenum in Proven and Probable Reserves.
In
October 2007, our Board of Directors approved the transition of the Mt. Hope
Project into the development phase and authorized management to proceed with
the
execution of the project as outlined in the Bankable Feasibility Study.
Accordingly, we have commenced placing long-lead equipment orders and we
anticipate receiving the required permits in mid-2009.
Hall-Tonopah.
We
are
currently in the process of exploration and evaluation of the Hall-Tonopah
Property.
In
March
2006 we purchased a portion of the Hall-Tonopah Property, an approximately
ten
square mile property in Nye County, Nevada, including water rights, mineral
and
surface rights, buildings and certain equipment from High Desert Winds LLC
(“High Desert”) pursuant to a purchase agreement. At closing, we paid High
Desert a cash payment of $4.5 million for the portion of the Hall-Tonopah
Property that we purchased and made an additional payment of $1.0 million
in November of 2006 for the purchase of the remaining portion of High Desert’s
interest in this property for the total purchase price of $5.5 million
including buildings and equipment at the Hall-Tonopah site. The primary purpose
of the Hall-Tonopah purchase was to further the Company’s strategy of exploring
and developing potential molybdenum properties.
At
December 31, 2006, the Hall-Tonopah Property was subject to a
12 percent royalty payable with respect to the net revenues generated from
molybdenum or copper minerals removed from the properties purchased. In
January 2007, we completed the acquisition of all of the issued and
outstanding shares of the corporation that held the 12 percent net
smelter royalty interest in the mineral rights of the Hall-Tonopah Property
and,
as a result of this purchase, we now own the Hall-Tonopah Property and all
associated mineral rights without future royalty obligations. We paid
approximately $3.7 million in cash at closing, net of cash acquired of
$1.2 million. At first commercial production of the property, we have
agreed to pay an additional $6.0 million. Because we cannot determine
beyond a reasonable doubt that the mine will attain commercial production,
the
Company has not recognized the $6.0 million liability in its financial
statements. In connection with the acquisition, we also received restricted
cash
totaling $0.5 million and assumed reclamation and remediation costs,
accounts payable and accrued liabilities of $0.3 million.
During
the year ended December 31, 2007, we purchased a patented lode mining claim
adjacent to the Hall-Tonopah Property for $0.2 million cash and completed
the purchase of certain patented lode mining claims referred to as the Liberty
Claims on property adjacent to the Hall-Tonopah Property for cash of
$0.1 million and 150,000 shares of common stock valued at
$0.4 million. These two acquisitions of mining claims were completed to
control additional mineral rights needed for the development of the Hall-Tonopah
Property. We currently believe that we have all the mineral, water and surface
rights necessary to develop the Hall-Tonopah Property.
Other
Properties. We
also
have mining claims and land purchased prior to 2006 which consist in part of
(a) approximately 107 acres of fee simple land in the Little Pine
Creek area of Shoshone County, Idaho, (b) six patented mining claims known
as Chicago-London group, located near the town of Murray in Shoshone County,
Idaho, (c) 265 acres of private land with three unpatented claims in
Josephine County, Oregon, known as the Turner Gold project.
Summary.
The
following is a summary of mining properties, land and water rights at
December 31, 2007 and 2006 (in thousands):
|
|
At
December 31, 2007
|
|
At
December 31, 2006
|
|
Mt.
Hope Project:
|
|
|
|
|
|
Development
costs
|
|
$
|
7,989
|
|
$
|
—
|
|
Mineral,
land and water rights
|
|
|
9,792
|
|
|
2,292
|
|
Advance
Royalties
|
|
|
1,100
|
|
|
—
|
|
Total
Mt. Hope Project
|
|
|
18,881
|
|
|
2,292
|
|
Total
Hall-Tonopah Property
|
|
|
9,808
|
|
|
5,417
|
|
Other
Properties
|
|
|
889
|
|
|
889
|
|
Total
|
|
$
|
29,578
|
|
$
|
8,598
|
|
NOTE
5 — COMMON STOCK UNITS, COMMON STOCK AND COMMON STOCK
WARRANTS
Year
ended December 31, 2007
During
the year ended December 31, 2007 we completed the private placement of
units for gross proceeds of $25.0 million less placement agent and finder’s
fees of $1.5 million. In the aggregate, we issued 7,352,942 units at a
price of $3.40 per unit. Each unit consisted of one share of common stock
and a warrant to purchase one half of one share of common stock. Each warrant
will be exercisable at a price of $5.20 per whole share for a period of one
year from the date of closing. The units were offered and sold pursuant to
exemptions from registration under Regulation S of the Securities Act of 1933,
as amended (the “Securities Act”), for offers and sales occurring outside the
United States, and Rule 506 of Regulation D and
Section 4(2) of the Securities Act, as a transaction not involving any
public offering.
In
November 2007, we entered into a Securities Purchase Agreement with an affiliate
of ArcelorMittal S.A. (“ArcelorMittal”) whereby we sold to ArcelorMittal
8,256,699 previously un-issued shares of our Common Stock for $8.50 per
share. In connection with the Securities Purchase Agreement, we also entered
into a molybdenum supply agreement that provides for ArcelorMittal to purchase
6.5 million pounds per year, plus or minus 10% once the Mt. Hope Project
commences commercial operations. The agreement provides for a floor price along
with a discount for spot prices above the floor price and expires five years
after the commencement of commercial production. In connection with the
arranging the relationship with ArcelorMittal, Coghill Capital Management,
LLC
and CCM Master Qualified Fund, Ltd., entities under common control, and combined
are our largest shareholders, received warrants to purchase
1.0 million shares of our common stock at an exercise price of
$10.00 per share. The warrants will be exercisable once we have received
the financing necessary for the commencement of commercial production at the
Mt.
Hope Project and will expire one year from such date. These warrants were valued
at $4.7 million and were recorded as issuance costs.
Also,
during the year ended December 31, 2007, we had the following issuances of
common stock. We issued 369,715 shares of common stock upon the cashless
exercise of warrants and 361,014 shares of common stock upon the cashless
exercise of stock options. Warrants and options in the amount of 4,261,689
and
1,450,833 were exercised for cash in the amount of $9.3 million and
$1.2 million, respectively. We also issued 304,950 shares of common
stock with a total value of $1.1 million as consideration for land and
water rights for the Mt. Hope Project and the Hall-Tonopah Properties and
services received. During the year ended December 31, 2007, shareholders
returned to the Company 38,998 shares of common stock due to a stock option
exercise pricing error in 2006.
Year
ended December 31, 2006
During
the year ended December 31, 2006 we had two private placements of Common
Stock Units. In the first private placement, we sold 3,021,936 common stock
units for $1.10 per unit. We received cash of $3.3 million less cash
placement agent and finder’s fees of $0.2 million and issued 170,550 Common
Stock Units for finder’s fees valued at $1.80 per unit for a total value of
$0.3 million. Each unit consisted of one of share of common stock with
warrants to purchase one-half share of common stock at a price of $1.75 for
each
whole share for a period of two years. In the second private placement, we
sold
15,000,000 common stock units for $2.00 per unit. Each unit consisted of one
of
share of common stock with warrants to purchase one-half share of common stock
at a price of $3.75 for each whole share for a period of five years. We received
cash of $30.0 million less cash placement agent and finder’s fees of
$2.1 million and issued 800,000 warrants to purchase shares of common
stock at a price of $3.75 for each whole share for a period of five years for
finder’s fees valued at $2.17 per warrant for a total value of
$1.7 million.
Also
in
the year ended December 31, 2006, we issued 1,482,147 shares of common
stock for the cashless exercise of warrants and 1,008,837 shares of common
stock for the cashless exercise of stock options. Warrants and options in the
amount of 5,838,055 and 340,000 were exercised for cash in the amount of
$4.5 million and $0.1 million respectively, less combined brokerage
fees of $0.2 million. We issued 50,000 shares of common stock for
services valued at $0.1 million. We issued 75,000 warrants to
purchase shares of common stock at a price of $2.10 for a period of two
years in exchange for services valued at $1.07 per warrant for a total value
of
$0.1 million.
Year
ended December 31, 2005
During
the year ended December 31, 2005 we had two private placements of Common
Stock Units. In the first private placement, we sold 2,998,932 common stock
units for $0.75 per unit. Each unit consisted of one share of common stock
with
warrants to purchase one share of common stock at a price of $1.00 per share
for
a period of two years. We received cash of $2.2 million less cash placement
agent and finder’s fees of $0.1 million. In the second private placement,
we sold 420,000 common stock units for $1.10 per unit. Each unit consisted
of
one of share of common stock with warrants to purchase one-half share of common
stock at a price of $1.75 for each whole share for a period of two years. We
received cash of $0.5 million.
Additionally,
during the year ended December 31, 2005, warrants to purchase
435,000 shares of common stock were exercised for cash of
$0.3 million. We also issued 154,611 shares of common stock for
services and property valued at $0.2 million in total. Additionally, upon
the cashless exercise of options, we issued 988,630 shares of common stock.
The
following is a summary of common stock warrant activity for each of the three
years ended December 31, 2007:
|
|
Number
of Shares Under Warrants
|
|
Exercise
Price
|
|
Balance
at December 31, 2004
|
|
|
7,010,555
|
|
$
|
0.40
to $0.80
|
|
Issued
in connection with private placements
|
|
|
3,208,932
|
|
$
|
1.00
to $1.75
|
|
Exercised
for cash
|
|
|
(435,000
|
)
|
$
|
0.80
to $1.00
|
|
Balance
at December 31, 2005
|
|
|
9,784,487
|
|
$
|
0.40
to $1.75
|
|
Issued
in connection with private placements and other
|
|
|
9,971,243
|
|
$
|
1.00
to $1.75
|
|
Exercised
for cash
|
|
|
(5,838,055
|
)
|
$
|
0.40
to $1.00
|
|
Exercised
in cashless exchange
|
|
|
(1,700,000
|
)
|
$
|
0.40
|
|
Balance
at December 31, 2006
|
|
|
12,217,675
|
|
$
|
0.80
to $3.75
|
|
Issued
in connection with a private placement
|
|
|
3,676,471
|
|
$
|
5.20
|
|
Issued
as finders fee
|
|
|
1,000,000
|
|
$
|
10.00
|
|
Exercised
for cash
|
|
|
(4,261,689
|
)
|
$
|
0.80
to $3.75
|
|
Exercised
in cashless exchange
|
|
|
(542,000
|
)
|
$
|
1.00
to $3.75
|
|
Expired
|
|
|
(10,000
|
)
|
$
|
1.00
|
|
Balance
at December 31, 2007
|
|
|
12,080,457
|
|
$
|
0.80
to $10.00
|
|
Weighted
average exercise price
|
|
$
|
4.56
|
|
|
|
|
Of
the
warrants outstanding at December 31, 2007, 6,748,667 are exercisable at
$3.75 per warrant and expire February 2011; 3,676,471 are exercisable at $5.20
per share and expire through April 2008; 1,000,000 are expected to expire in
2010 and the remaining 655,319 are exercisable at prices ranging from $.80
to
$2.10 and expire through November 2011.
Pursuant
to our Certificate of Incorporation, we are authorized to issue
200,000,000 shares of common stock. All shares have equal voting
rights, are non-assessable and have one vote per share. Voting rights are not
cumulative and therefore, the holders of more than 50% of the common stock
could, if they choose to do so, elect all of the directors of the
Company.
NOTE
6 — PREFERRED STOCK
Pursuant
to our Certificate of Incorporation we are authorized to issue
10,000,000 shares of $.001 per share par value preferred stock. The
authorized but unissued shares of preferred stock may be issued in
designated series from time to time by one or more resolutions adopted by the
board of directors. The directors have the power to determine the preferences,
limitations and relative rights of each series of preferred stock. At
December 31, 2006 and 2007, no shares of preferred stock were issued
or outstanding.
NOTE
7 — COMMON STOCK OPTIONS
During
2006, our board of directors and shareholders adopted the Company 2006 Equity
Incentive Plan (the “2006 Plan”). In October 2007, our shareholders approved an
amendment to the 2006 Plan increasing the amount of shares that may be issued
under the 2006 Plan from 3,500,000 to 5,100,000. During 2004, our board of
directors and shareholders adopted the Company 2003 Stock Option Plan (the
“2003
Plan” and together with the 2006 Plan, the “Plans”). The purpose of the Plans is
to give us greater ability to attract, retain, and motivate our officers and
key
employees. The Plans are intended to provide us with ability to provide
incentives more directly linked to the success of our business and increases
in
shareholder value.
Under
the
2006 Plan, our board of directors is authorized to grant incentive stock options
(“ISOs”) to employees (pursuant to Internal Revenue Code 422), non-statutory
stock options, restricted stock awards, restricted stock units and stock
appreciation rights. The aggregate number of shares of common stock that may
be
issued pursuant to awards granted under the 2006 Plan will not exceed 5,100,000
plus the number of shares that are ungranted and those that are subject to
reversion under the 2003 Plan. As of December 31, 2007, the maximum number
of shares available for issuance under the 2003 Plan was 360,000 shares.
Shares under the 2003 Plan that become eligible for awards under the 2006 Plan
may not be granted again under the 2003 Plan.
During
the year ended December 31, 2007, we issued 2,730,000 options under the
2006 Plan with an exercise price ranging from $2.41 to $10.66 with vesting
at
various dates through 2009. These options were granted to members of our board
of directors, officers, and employees. The fair value of each option is
estimated on the issue date using the Black-Scholes Option Price Calculation.
The following assumptions were made in estimating the fair value: risk free
interest of 4.10% to 4.96%; volatility of 76% to 93%; dividend rate of 0%;
and
expected life of from 2.0 to 2.8 years. The total value of options awarded
during the year was calculated at $7.6 million. Expense was recorded of
$4.3 million and $0.5 million was capitalized as part of development
costs for the options which were earned during the year.
During
the year ended December 31, 2006, we granted 1,665,000 non-qualified stock
options outside of the Plans with an exercise price ranging from $2.25 to $3.68
with vesting at various dates through 2008. These options were granted to
members of our board of directors, officers, and employees. No options or stock
grants were made under the 2006 Plan during the year ended December 31,
2006. The Company issued 60,000 of ISOs within the 2003 Plan with an exercise
price of $2.10 with vesting at various dates through 2008. The fair value of
each option is estimated on the issue date using the Black-Scholes Option Price
Calculation. The following assumptions were made in estimating the fair value:
risk free interest of 5%; volatility of 101%; dividend rate of 0% and expected
life of 2.0 to 2.8 years. The total value of options awarded during 2006
was calculated at $3.3 million. Expense was recorded of $2.0 million
for the options which vested in 2006.
During
the year ended December 31, 2005, we granted 950,000 incentive stock
options under the 2003 Plan with an exercise price of $0.72 and vesting at
various dates through 2007 with expirations at various dates through 2012.
These
options were granted to officers and employees. The fair value of each option
is
estimated on the issue date using the Black-Scholes Option Price Calculation.
The following assumptions were made in estimating fair value: risk free interest
of 4%; volatility of 73%; dividend rate of 0%; and expected life of
2 years. The total value was calculated at $0.3. Expense was recorded of
$0.3 for the options that vested in the year 2005.
The
following is a summary of our stock option plans as of December 31,
2007:
|
|
|
Number of
Securities to be
Issued Upon
Exercise of
Outstanding Options
|
|
|
Weighted Average
Exercise Price of
Outstanding Options
|
|
|
Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
1,307,500
|
|
$
|
1.31
|
|
|
n/a
|
|
|
Equity
compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
2006
Plan
|
|
|
2,670,000
|
|
|
5.26
|
|
|
1,420,000
|
|
(1)
|
2003
Plan
|
|
|
90,000
|
|
|
1.55
|
|
|
360,000
|
|
|
Total
|
|
|
4,067,500
|
|
$
|
3.91
|
|
|
1,780,000
|
|
|
(1) |
The
aggregate number of shares of common stock that may be issued pursuant
to
awards granted under the 2006 Equity Incentive Plan will not exceed
5,100,000 plus the number of shares that are ungranted and those
that are
subject to reversion under 2003 Stock Plan. Shares under the 2003
Plan
that become eligible for awards under the 2006 Plan may not be granted
again under the 2003 Plan.
|
The
following is a summary of stock option activity in 2005, 2006 and
2007:
|
|
|
Number of Shares
Under Options
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding
January 1, 2005
|
|
|
4,285,000
|
|
$
|
0.32
|
|
Granted
|
|
|
950,000
|
|
|
0.72
|
|
Exercised
|
|
|
(1,215,000
|
)
|
|
0.25
|
|
Forfeited
|
|
|
—
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
—
|
|
Outstanding
at December 31, 2005
|
|
|
4,020,000
|
|
$
|
0.44
|
|
Options
exercisable at December 31, 2005
|
|
|
3,030,000
|
|
|
|
|
Weighted
average fair value of options granted during 2005
|
|
$
|
0.32
|
|
|
|
|
Outstanding
January 1, 2006
|
|
|
4,020,000
|
|
$
|
0.44
|
|
Granted
|
|
|
1,725,000
|
|
|
3.02
|
|
Exercised
|
|
|
(1,615,000
|
)
|
|
0.49
|
|
Forfeited
|
|
|
(480,000
|
)
|
|
1.57
|
|
Expired
|
|
|
—
|
|
|
|
|
Outstanding
December 31, 2006
|
|
|
3,650,000
|
|
$
|
1.49
|
|
Exercisable
at December 31, 2006
|
|
|
2,705,000
|
|
|
|
|
Weighted
Average Fair Value Granted During 2006
|
|
$
|
3.10
|
|
|
|
|
Outstanding
January 1, 2007
|
|
|
3,650,000
|
|
$
|
1.48
|
|
Granted
|
|
|
2,730,000
|
|
|
5.21
|
|
Exercised
|
|
|
(2,170,833
|
)
|
|
1.54
|
|
Forfeited
|
|
|
(91,667
|
)
|
|
2.56
|
|
Expired
|
|
|
(50,000
|
)
|
|
3.20
|
|
Outstanding
December 31, 2007
|
|
|
4,067,500
|
|
$
|
3.91
|
|
Exercisable
at December 31, 2007
|
|
|
2,350,832
|
|
$
|
2.38
|
|
Weighted
Average Fair Value Granted During 2007
|
|
$
|
2.77
|
|
|
|
|
Stock
Awards Under the 2006 Plan
During
the year ended December 31, 2007, we issued 250,000 shares of common
stock to an officer of the Company that were earned based on achieving
certain performance based milestones established.
Additionally,
during the year ended December 31, 2007, we reserved for issuance an
additional 535,000 shares of non-vested common stock for officers and
employees of the Company that will vest and be issued based on the achievement
of certain performance based milestones established for each
person.
Also,
we
issued 160,000 shares to directors that will vest over one and two year
periods and 5,000 shares to a retiring board member in exchange for
services rendered and to be rendered as board members. The total value of the
stock awards granted and expensed during the year ended December 31, 2007
was $3.2 million of which $1.9 million was expensed and
$1.3 million was capitalized as part of development costs.
NOTE
8 — INCOME TAXES
At
December 31, 2007, 2006 and 2005 we had deferred tax assets principally
arising from the net operating loss carry forwards for income tax purposes
multiplied by an expected rate of 35%. As management of the Company cannot
determine that it is more likely than not that we will realize the benefit
of
the deferred tax assets, a valuation allowance equal to the deferred tax asset
has be established at December 31, 2007 and December 31, 2006. The
significant components of the deferred tax asset at December 31, 2007 and
2006 were as follows (in thousands):
|
|
December 31,
2007
|
|
December 31,
2006
|
|
Operating
loss carry forward
|
|
$
|
39,755
|
|
$
|
14,092
|
|
Unamortized
exploration expense
|
|
|
8,268
|
|
|
2,672
|
|
Deductible
stock based compensation
|
|
|
1,914
|
|
|
—
|
|
Net
operating loss carry forward
|
|
$
|
49,936
|
|
$
|
16,764
|
|
Deferred
tax asset
|
|
$
|
17,478
|
|
$
|
5,868
|
|
Deferred
tax asset valuation allowance
|
|
$
|
(17,478
|
)
|
$
|
(5,868
|
)
|
Net
deferred tax asset
|
|
$
|
—
|
|
$
|
—
|
|
At
December 31, 2007 and 2006 we had a net operating loss carry forwards of
approximately $49.9 million and $16.8 million, respectively, which
expire in the years 2022 through 2027. The change in the allowance account
from
December 31, 2006 to December 31, 2007 was $11.6 million and the
change between December 31, 2006 and December 31, 2005 was
$4.8 million.
NOTE
9—COMMITMENTS AND CONTINGENCIES
Mt.
Hope Project
The
Mt.
Hope Lease may be terminated upon the expiration of its 30-year term, earlier
at
the election of Eureka Moly, or upon our material breach and failure to cure
such breach. If Eureka Moly terminates the lease, termination is effective
30
days after receipt by MHMI of written notice to terminate the Mt. Hope Lease
and
no further payments would be due to MHMI. In order to maintain the lease, Eureka
Moly must pay certain deferral fees and advance royalties as discussed
below.
The
Mt.
Hope Lease Agreement requires a royalty advance (the “Construction Royalty
Advance”) of the greater of $2.5 million or 3% of the construction capital
cost estimate upon the earliest of the Eureka Moly securing project financing
in
sufficient amounts to develop and put into operation the Mt. Hope property
at a
production level of at least 10 million pounds of annual production or
October 19, 2008.
Eureka
Moly has the right to defer the Construction Royalty Advance for one or two
years by payment of a deferral fee (the “Deferral Fee”) in the amount of
$0.4 million on or before October 19, 2008 and October 19, 2009
in the event project financing for the project has not been secured by each
of
the dates. By October 19, 2010, Eureka Moly must pay at a minimum
$2.5 million of the Construction Royalty Advance with the remainder due
upon securing project financing or 50% of the remainder on October 19, 2011
and the other 50% due on October 19, 2012.
Once
the
Construction Royalty Advance has been paid in full, Eureka Moly is obligated
to
pay an advance royalty (the “Annual Advance Royalty”) each October 19
thereafter in the amount of $0.5 million per year. The Construction
Royalty Advance and the Annual Advance Royalty are collectively referred to
as
the “Advance Royalties”. All Advance Royalties are credited against the
Production Royalties (see note 4) once the mine has achieved commercial
production. The Deferral Fees are not recoverable against Production
Royalties.
Eureka
Moly is obligated to pay the Construction Royalty Advance each time capital
is
raised for the Mt. Hope Project. Based on the current estimate of raising
capital and developing and operating the mine, we believe Eureka Moly’s
contractual obligations under the Mt. Hope Lease Agreement will be as shown
in
the following table (in thousands). This estimate is based on our current
estimates of the timing of securing project financing and construction capital
costs. The amounts shown are the total amounts under the contracts to Eureka
Moly of which GMI will be obligated to pay its 80% share.
Year
|
|
Deferral
Fees
|
|
Advance
Royalties
|
|
Total
|
|
2008
|
|
$
|
350
|
|
$
|
2,200
|
|
$
|
2,550
|
|
2009
|
|
|
—
|
|
|
18,200
|
|
|
18,200
|
|
2010
|
|
|
—
|
|
|
500
|
|
|
500
|
|
2011
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Thereafter
(1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
350
|
|
$
|
20,900
|
|
$
|
21,250
|
|
(1)
|
After
the first full year of production the Eureka Moly estimates that
the
Production Royalties will be in excess of the Annual Advance
Royalties for
the life of the project and, further, the Construction Royalty
Advance
will be fully recovered (credited against MHMI Production Royalties)
by
the end of 2012.
|
Long
lead items (including subsequent events)
As
a
continuing part of the development of the Mt. Hope Project, Eureka Moly has
begun to place orders for mining and milling equipment that must be built to
the
mine’s specifications and requires a long lead time for engineering and
manufacturing. Contractual commitments for long lead items require progress
payments during the engineering and construction of the equipment and have
cancellation penalties in the event the Company cancels the
contract.
In
September and October 2007 the Company entered into three contracts to purchase
a primary crusher, a semi-autogenous mill, two ball mills and various motors
for
the mills. Additionally, in February 2008 the Company entered into a contract
to
purchase two electric shovels. At December 31, 2007 we have paid
$0.5 million under the contracts and have committed to the following
additional amounts under the contracts by year (in thousands). The amounts
shown
are the total amounts under the contracts to Eureka Moly of which GMI will
be
obligated to pay its 80% share.
Year
|
|
Total
|
|
2008
|
|
$
|
31,133
|
|
2009
|
|
|
55,215
|
|
2010
|
|
|
1,009
|
|
Total
|
|
$
|
87,357
|
|
Environmental
Considerations
Our
mineral property holdings in Shoshone County, Idaho include lands contained
in
mining districts that have been designated as “Superfund” sites pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act. This
“Superfund Site” was established to investigate and remediate primarily the
Bunker Hill properties of Smelterville, Idaho, a small portion of Shoshone
County where a large smelter was located. However, because of the extent of
environmental impact caused by this large smelter, the Superfund Site covers
the
majority of Shoshone County including our Chicago-London and Little Pine Creek
properties (which are distant from the original smelter location) as well as
many small towns located in Northern Idaho. We have conducted a property
environmental investigation of these properties which revealed no evidence
of
material adverse environmental effects at either property. We are unaware of
any
pending action or proceeding relating to any regulatory matters that would
affect our financial position due to these inactive mining claims in Shoshone
County.
ITEM
8. |
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
Not
applicable.
ITEM
8A. |
CONTROLS
AND PROCEDURES
|
An
evaluation was performed under the supervision and with the participation of
our
management, including our principal executive officer and principal financial
officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934) as of the end of the period covered by this Annual Report on
Form 10-KSB. Based on the foregoing, our management concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission rules and forms
and
such information is accumulated and communicated to our management, including
our principal executive officer and principal financial officer, to allow timely
decisions regarding required disclosure.
There
was
no change in our internal control over financial reporting that occurred during
the quarter ended December 31, 2007 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
REPORT
OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. Internal control over
financial reporting is a process to provide reasonable assurance regarding
the
reliability of our financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles
generally accepted in the United States of America. Internal control over
financial reporting includes maintaining records that in reasonable detail
accurately and fairly reflect the Company’s transactions; providing reasonable
assurance that transactions are recorded as necessary for preparation of the
Company’s financial statements; providing reasonable assurance that receipts and
expenditures of the Company’s assets are made in accordance with management’s
authorization; and providing reasonable assurance that unauthorized acquisition,
use or disposition of the Company’s assets that could have a material effect on
the financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting
is not intended to provide absolute assurance that a misstatement of the
Company’s financial statements would be prevented or detected.
Management
conducted its evaluation of the effectiveness of the Company’s internal controls
over financial reporting based on the framework in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of
the
Treadway Commission. Based on this evaluation, management concluded that the
Company’s internal control over financial reporting was effective as of
December 31, 2007.
This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
ITEM
8B. |
OTHER
INFORMATION
|
None.
PART
III
ITEM
9. |
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
|
Information
regarding directors and executive officers of registrant is presented under
the
heading “Directors and Executive Officers” in our definitive proxy statement for
use in connection with the 2008 Annual Meeting of Stockholders (the “2008 Proxy
Statement”) to be filed within 120 days after our fiscal year ended
December 31, 2007, and is incorporated herein by this reference
thereto.
Information
regarding Section 16(a) beneficial ownership reporting compliance report is
presented under the heading “Section 16(a) Beneficial Ownership Reporting
Compliance” in our 2008 Proxy Statement, and is incorporated herein by this
reference thereto. Information regarding our code of ethics is presented under
the heading “Code of Business Conduct and Ethics” in our 2008 Proxy Statement,
and is incorporated herein by reference thereto. Information regarding our
Audit
and Finance Committee and our Nominating Committee is presented under the
heading “The Board of Directors, Board Committees and Director Independence” in
our 2008 Proxy Statement, and is incorporated herein by reference thereto.
ITEM
10. |
EXECUTIVE
COMPENSATION
|
Information
regarding executive compensation is presented under the heading “Executive
Compensation” in our 2008 Proxy Statement, and is incorporated herein by this
reference thereto.
ITEM
11. |
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
|
Information
regarding certain information with respect to our equity compensation plans
as
of December 31, 2007 is set forth under the heading “Equity Compensation
Plan Information” in our 2008 Proxy Statement, and is incorporated herein by
this reference thereto.
Information
regarding security ownership of certain beneficial owners and management is
set
forth under the heading “Voting Securities and Principal Holders” in our 2008
Proxy Statement, and is incorporated herein by this reference
thereto.
ITEM
12. |
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE
|
Information
regarding certain relationships and related transactions is presented under
the
heading “Certain Relationships and Related Transactions” in our 2008 Proxy
Statement, and is incorporated herein by this reference thereto.
Exhibit
Number
|
|
Description
of Exhibit
|
2.1†
|
|
Agreement
and Plan of Merger, dated October 5, 2007 (Filed as Exhibit 99.1
to our
Current Report on Form 8-K filed on October 5, 2007.)
|
|
|
|
3.1†
|
|
Certificate
of Incorporation (Filed as Exhibit 3.1 to our Current Report on Form
8-K
filed on October 5, 2007.)
|
|
|
|
3.2†
|
|
Bylaws
(Filed as Exhibit 3.2 to our Current Report on Form 8-K filed on
October
5, 2007.)
|
|
|
|
4.1†
|
|
Form of
Security Purchase Agreement in connection with the private placement
completed February 15, 2006 (Filed as Exhibit 4.1 to our Current
Report on Form 8-K filed on February 17,
2006.)
|
|
|
|
4.2†
|
|
Form of
Common Stock Purchase Warrant in connection with the private placement
completed February 15, 2006 (Filed as Exhibit 4.2 to our Current
Report on Form 8-K filed on February 17,
2006.)
|
|
|
|
4.3†
|
|
Form of
Common Stock Warrant Issued Pursuant to Placement Agent Agreement
in
connection with the private placement completed February 15, 2006
(Filed as Exhibit 4.3 to our Current Report on Form 8-K filed on
February 17, 2006.)
|
|
|
|
4.4†
|
|
Form of
Common Stock Purchase Warrant in connection with the private placement
completed January 10, 2006 (Filed as Exhibit 4.3 to our Current
Report on Form 8-K filed on January 17,
2006.)
|
Exhibit
Number
|
|
Description
of Exhibit
|
4.5†
|
|
Letter
#1 to Investors regarding Registration Rights dated January 6, 2006
in connection with the private placement completed January 10, 2006
(Filed as Exhibit 4.4 to our Current Report on Form 8-K filed on
January 17, 2006.)
|
|
|
|
4.6†
|
|
Letter
#2 to Investors regarding Registration Rights dated January 6, 2006
in connection with the private placement completed January 10, 2006
(Filed as Exhibit 4.5 to our Current Report on Form 8-K filed on
January 17, 2006.)
|
|
|
|
4.7†
|
|
Securities
Purchase Agreement, dated March 28, 2007, for the private placement
completed in April 2007 (Filed as Exhibit 4.5 to our Registration
Statement on Form S-3 filed on May 14, 2007.)
|
|
|
|
4.8†
|
|
Form
of Warrant Agreement for the private placement completed in April
2007
(Filed as Exhibit 4.6 to our Registration Statement on Form S-3 filed
on
May 14, 2007.)
|
|
|
|
10.1†
|
|
Lease
Agreement, dated October 17, 2005, between the Company and Mount Hope
Mines, Inc. (Filed as Exhibit 10.1 to our Current Report on
Form 8-K filed on January 23, 2006.)
|
|
|
|
10.2†
|
|
Modification
to Mount Hope Mines Lease Agreement, dated January 26, 2006 (Filed as
Exhibit 10.11 to our Annual Report on Form 10-KSB filed on
March 31, 2006.)
|
|
|
|
10.3
|
|
Amendment
to Lease Agreement, made effective as of November 20, 2007, between
the
Company and Mount Hope Mines, Inc. (Filed herewith)
|
|
|
|
10.4†
|
|
Option
to Lease, dated November 12, 2004, between the Company and Mount Hope
Mines, Inc. (Filed
as Exhibit 10.1 to our Annual
Report on Form 10-KSB filed on April 6,
2005.)
|
|
|
|
10.5†
|
|
Stock
Purchase Agreement, dated December 11, 2006, between the Company and
Equatorial Mining Limited (Filed as Exhibit 10.17 to our Annual Report
on
Form 10-KSB filed on April 3, 2007.)
|
|
|
|
10.6
|
|
Securities
Purchase Agreement, dated as of November 19, 2007, between the Company
and
ArcelorMittal S.A. (Filed herewith)
|
|
|
|
10.7†
|
|
Amended
and Restated Employment Agreement, dated September 13, 2007, between
the
Company and Bruce D. Hansen (Filed as Exhibit 99.1 to our Current
Report
on Form 8-K filed on September 18, 2007.)
|
|
|
|
10.8†
|
|
Employment
Agreement, dated as of April 25, 2007, between the Company and David
Chaput (Filed as Exhibit 99.1 to our Current Report on Form 8-K filed
on April 27, 2007.)
|
|
|
|
10.9†
|
|
Form
of Indemnification Agreement (Filed as Exhibit 10.18 to our Current
Report
on Form 8-K filed on October 5, 2007.)
|
|
|
|
10.10
|
|
General
Release and Settlement Agreement between the Company and Robert L.
Russell
entered into on October 1, 2007 (Filed herewith)
|
|
|
|
10.11
|
|
Consulting
and Advisory Agreement between the Company and Robert L. Russell
entered
into on October 1, 2007 (Filed herewith)
|
|
|
|
10.12†
|
|
2003
Stock Option Plan of the Company (Filed as Exhibit 4.1 to our General
Form for Registration of Securities of Small Business Issuers on
Form 10-SB/A filed on May 14, 2004)
|
|
|
|
10.13†
|
|
Form of
Stock Option Agreement under 2003 Stock Option Plan of the Company
(Filed
as Exhibit 4.2 to our General Form for Registration of Securities of
Small Business Issuers on Form 10-SB/A filed on May 14,
2004)
|
|
|
|
10.14†
|
|
2006
Equity Incentive Plan of the Company, as amended (Filed as Exhibit
99.1 to
our Registration Statement on Form S-8 filed on February 13,
2008.)
|
|
|
|
10.15†
|
|
Form of
Stock Option Grant Notice and Agreement under 2006 Equity Incentive
Plan
of the Company (Filed as Exhibit 10.13 to our Annual Report on
Form 10-KSB filed on April 3, 2007.)
|
|
|
|
10.16†
|
|
Form of
Restricted Stock Agreement under 2006 Equity Incentive Plan of the
Company
(Filed as Exhibit 10.14 to our Annual Report on Form 10-KSB filed on
April 3, 2007.)
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10.17†
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Form of
Non-Employee Option Award Agreement (Filed as Exhibit 99.1 to our
Registration Statement on Form S-8 filed on January 12,
2007.)
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Exhibit
Number
|
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Description
of Exhibit
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10.18†
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Form of
Employee Stock Option Agreement (Filed as Exhibit 99.2 to our Registration
Statement on Form S-8 filed on January 12,
2007.)
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10.19*
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Molybdenum
Supply Agreement between General Moly and ArcelorMittal Purchasing
SAS,
dated as of December 28, 2007 (Filed herewith)
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14.1†
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Code
of Conduct and Ethics of Idaho General Mines, Inc. adopted
June 30, 2006 (Filed as Exhibit 14.1 to our Current Report on
Form 8-K filed on July 7, 2006.)
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16.1†
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Letter
from Williams
& Webster, P.S. dated August 22, 2007 (Filed
as Exhibit 16.1 to our Current Report on Form 8-K filed on August 23,
2007.)
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21.1
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Subsidiaries
of General Moly, Inc. (Filed
herewith)
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23.1
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Consent
of PricewaterhouseCoopers LLP (Filed
herewith)
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23.2
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Consent
of M3 Engineering & Technology Corporation (Filed
herewith)
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23.3
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Consent
of Independent Mining Consultants, Inc. (Filed
herewith)
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31.1
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Certification
of CEO pursuant to Rule 13a-14(a)/15d-14(a) (Filed
herewith)
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31.2
|
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Certification
of CFO pursuant to Rule 13a-14(a)/15d-14(a) (Filed
herewith)
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32.1
|
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Certification
of CEO pursuant to Section 1350 (Filed
herewith)
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32.2
|
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Certification
of CFO pursuant to Section 1350 (Filed
herewith)
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†
Previously filed as indicated and incorporated herein by reference.
*
Confidential treatment has been requested for certain portions of this exhibit,
and such confidential portions have been separately filed with the Securities
Exchange Commission.
ITEM
14. |
PRINCIPAL
ACCOUNTANT FEES AND
SERVICES
|
Information
regarding principal accounting fees and services is presented under the headings
“Audit Fees”, “Audit-Related Fees”, “Tax Fees”, and “All Other Fees” in our 2008
Proxy Statement, and is incorporated herein by this reference
thereto.
SIGNATURES
In
accordance with the requirements of the Section 13 or 15(d) of the
Exchange Act, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized in Lakewood, Colorado
on
March 21, 2008.
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GENERAL
MOLY, INC.
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By: |
/s/
Bruce D. Hansen |
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Name:
Bruce
D. Hansen |
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Title:
Chief
Executive Officer
(Principal
Executive Officer)
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In
accordance with the Exchange Act, this report has been signed on March 21,
2008, by the following persons, on behalf of the Registrant, and in the
capacities indicated below.
/s/
Bruce D. Hansen
|
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Chief
Executive Officer and Director
|
Bruce
D. Hansen
|
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(Principal
Executive Officer)
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|
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/s/
David A. Chaput
|
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Chief
Financial Officer
|
David
A. Chaput
|
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(Principal
Financial Officer)
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|
|
|
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|
|
/s/
Daniel G. Zang
|
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Controller
and Treasurer
|
Daniel
G. Zang
|
|
(Principal
Accounting Officer)
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|
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|
|
|
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/s/
Ricardo M. Campoy
|
|
Director
|
Ricardo
M. Campoy
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/s/
Mark A. Lettes
|
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Director
|
Mark
A. Lettes
|
|
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|
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/s/
Jean-Pierre M. Ergas
|
|
|
Jean-Pierre
M. Ergas
|
|
Director
|
|
|
|
/s/
Gary A. Loving
|
|
Director
|
Gary
A. Loving
|
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/s/
R. David Russell
|
|
Director
|
R.
David Russell
|
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/s/
Richard F. Nanna
|
|
Director
|
Richard
F. Nanna
|
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|