General Moly announced an agreement with POS-Minerals Corporation, which owns a 20 percent interest in the Mt. Hope Project, to use restricted cash of up to $36 million held in a reserve account for the benefit of the Mt. Hope Project. The Company, through its wholly owned subsidiary, Nevada Moly, LLC and POS-Minerals, as the members of Eureka Moly, LLC (EMLLC), will use the restricted cash to fund the Mt. Hope Project’s financial requirements until exhausted or the Company’s full financing for construction of the Mt. Hope Mine is achieved. Any remaining balance of restricted cash at the time of financing will be returned to the Company.
In December 2012, the Company and POS-Minerals, as the members of EMLLC, agreed to hold, as restricted cash, $36 million due to the Company, of the approximately $100 million received from POS-Minerals’ December 2012 capital contributions. These funds were to be held in a reserve account until the Company arranged full project financing for its 80 percent share of Mt. Hope Project construction cost, or until the EMLLC management committee agreed to release the funds.
The jointly developed revised long-term budget to maintain the Mt. Hope Project in its permitted, construction-ready status will be entirely funded by the reserve account, until at least through 2020, covering anticipated operating expenses, and committed equipment purchase obligations unless the Company’s full financing is obtained.
Bruce D. Hansen, Chief Executive Officer, said, “This agreement, combined with the recently announced $8.5 million private placement financing that closed in December 2014, provides the Company with a significantly improved project and corporate liquidity profile as we bridge to a project financing for Mt. Hope, while at the same time minimizing the dilution to our shareholders. We want to thank POS-Minerals for their continued financial support and partnership.”
Hansen continued, “We remain confident in the progress being made toward full Mt. Hope Project financing. Negotiations on investment agreement terms, sponsorship requirements, and indicative loan terms associated with a $700 to $750 million debt and equity package, are continuing to advance. We have strong interest from multiple private Chinese industrial companies and a large Chinese bank in advancing the fully permitted, construction-ready project.”
Hansen concluded, “We are pleased with recent advancements in our financing efforts, and the use of reserve account restricted cash to provide the funding necessary to maintain our permits at the Mt. Hope site and other care and maintenance needs. Access to the reserve account substantially enhances the Company’s ability to support the Mt. Hope Project and manage market uncertainty while preserving the ability to rapidly restart construction activities when full financing for Mt. Hope is achieved.”
The reserve account held by EMLLC will initially fund a reimbursement of contributions made by the members during the 4th quarter of 2014, inclusive of $0.7 million to POS-Minerals and $2.7 million to General Moly. Combined with cash already on hand, and the proceeds from the December 2014 private placement financing, the Company has augmented its unrestricted cash balance, used for funding non-Mt. Hope related spending, to over $15 million as of mid-January 2015.
With the agreement, the members of the EMLLC also agreed to a fixed date for POS-Minerals’ contractual right to receive a $36 million return on previous capital contribution to the Project, as a result of Commercial Production, as defined by the EMLLC Agreement, being delayed beyond Dec. 31, 2011. Under the new agreement, the members fixed a date of Dec. 31, 2020, subject to the members’ ability to further extend payment, for EMLLC to return $36 million of POS-Minerals’ previous capital contributions to EMLLC. Previously, the EMLLC Agreement provided that the return of capital contribution was tied to achievement of Commercial Production at the Mt. Hope Project. The Company is obligated to fund the return of capital contribution when paid or alternatively to permit a corresponding dilution of its membership interest, as permitted by the EMLLC Agreement currently estimated in the range of 4 to 5 percent of the joint venture.