General Moly searches for new backers as Hanlong Mining agreement is terminated

The Mt. Hope mine outside Eureka is basically on life support after the Colorado company developing it formally terminated its agreement with the mine’s Chinese backers.

All major ground disturbing construction at the mine has been halted as General Moly, Inc. searches for new backers for what was supposed to be a $665 million molybdenum mine.
General Moly issued a release earlier this month saying its agreement with Hanlong Mining Investment, a Chinese company, has been terminated after the company failed to come through with a bank loan to fund construction that was due Aug. 16.

“While we are disappointed that we will not complete this transaction, it is in our shareholders best interests to terminate the agreements with Hanlong,’’ said Bruce D. Hansen, chief executive officer of General Moly. “We are focusing all our efforts on discussions with other parties that have expressed interest in advancing the full financing for the Mt. Hope project.’’

Hanlong invested $10 million in General Moly in 2010 in an agreement in which it was going to buy 25 percent of the company for $80 million. Half of the money was to be paid when the bank loan to build the mine became available, and Hanlong was expected to finance the mine.

Hanlong remains the company’s biggest shareholder and will have to pay a $10 million breakup fee, which will offset what was paid to the company.

“We believe that the fully permitted and construction ready project is significantly more advanced today than when the Hanlong agreement was reached in 2010 and we are actively engaging with other potential strategic partners both in and outside of China to develop Mt. Hope,’’ Hansen said.

In a related development, General Moly said that legal action taken in federal court by Great Basin Resource Watch and the Western Shoshone Defense Project against the mine has been put on hold by both parties and will be revisited at a time when there is significant ground disturbing activity planned again at the mine.

The plaintiffs had challenged the Bureau of Land Management’s issuance of a permit for Mt. Hope earlier this year.

Hansen said the company believes that the ROD issued by the BLM complies with all federal statutes and rules and very defensible when the time comes to do so.