Iron ore shipments tracking higher

In December, Moly Mines shipped the 1,000,000th tonne of iron ore fines from the Spinifex Ridge Iron Ore Mine. The milestone has occurred within 12 months of the mine’s first shipment on 30 December 2010.

December’s shipment of 91,000 tonnes is the 4th shipment for the December 2011 quarter and sets a quarterly record for tonnes shipped from Spinifex Ridge of 348,000 tonnes.

Over the calendar year mining and crushing operations have exceeded budget by 25%, from single shift day operations. Production for 2012 is expected to reach 1.2 million tonnes.

The memorandum of understanding agreement with CDB will see the bank consider providing financial support for projects identified by Moly Mines on similar terms as those in effect under the existing US $454 million syndicated loan deal for the Spinifex Ridge project.

However, at the same time, Moly Mines' board has decided that the Spinifex Ridge project is "sub-economic", citing the continued weakness of global molybdenum prices and the strength of the Australian dollar, factors which are not expected to correct themselves before the expiry of the syndicated facility agreement (SFA) in May 2012.

Consequently, a final investment decision is unlikely to be made within that timeframe, the company said in a statement.

CEO and managing director of Moly Mines, Dr Derek Fisher, said: "Whilst it is disappointing that the economics do not allow us to proceed with the Spinifex Ridge molybdenum/copper mine at this stage, the strategic alliance further cements the excellent rapport we have built with CDB and supports a platform for future growth of the company."

CDB's financial support for new projects is subject to due diligence, internal credit approval and government approvals.

As part of the decision for Spinifex Ridge and for the financing of new projects, CDB has asked Moly Mines to make an initial drawdown of US$210 million under the previously-agreed SFA, which the company intends to repay within one week.

The effect of the drawdown will be to reduce the funding available under the facility to US$244 million. CDB will consider an application by Moly Mines to drawdown these funds for new projects or, if amending the SFA is not appropriate, to enter into further debt facilities as may be required for future projects, the company said.

Derek Fisher: My pleasure.

Moly Mines announced at the end of June that it is borrowing 494 million dollars US from the China Development Bank, and six million dollars US from Hanlong Mining Investment, for the construction of Spinifex Ridge Molybdenum Copper Mine. What are terms of these loans, and when will you be able to draw down on them?

Yes, there are two loans. One is for 454 million. It has an interest rate of 4.2 per cent at the moment. It is variable, and it has a 12-year term. Interestingly the debt repayments on that are backend-loaded, and that is to correlate with the time at which we get into the high-grade portion in the centre of the deposit. It’s an open pit and it takes us probably five years to get into the higher grade.

The second piece of debt is a working capital facility. It’s a one-year piece, which will probably become a revolving debt piece. And it’s at six month libor, plus 290 points, which is about 3.3 per cent; very low cost piece of debt.

The six million dollars is really just a bridge that Hanlong have to put in place to bring it up to 500 million; that’ll be in the form of the shareholder loan.

What do China Development Bank and Hanlong Mining Investment see in the Spinifex Ridge Molybdenum Copper Mine project, Derek?

They see the world’s next major moly mine. The world needs new moly mines. We’re seeing expanding consumption of moly; we haven’t had a new moly mine in approximately 25 years of any size, and this is the most advanced project in the world today. It’s fully permitted, fully engineered, construction-ready. And following the GFC we’ve got new growth developing in molybdenum consumption.

Please would you briefly talk us through the state of reserves and resources at the Spinifex Ridge Molybdenum Copper Mine project?

Yes. The resource is large; just over a billion tonnes. Reserves stand at about 450 million tonnes. The 450 million tonnes is sufficient for 45 years of production at our current planned development rate and processing rate. That’s 10 million tonnes a year. The intent would be to expand it into a bigger operation in the future because the resource is so large.

When do you plan to start construction at the Spinifex Ridge Molybdenum Copper Mine, what is the timetable to completion, and how confident are you that the mine will be delivered on time, and within budget?

We haven’t made the final investment decision as yet. There is a funding gap which we’re in negotiations with respect to filling. This relates mainly to the power station and gas pipeline etc. The debt facility from CDB is available for drawdown up until mid-May next year, so we’ve got about 12 months. We’d like to think we’ll begin construction soon and have all those things finalised. In terms of confidence in on time, on budget, we have a fixed price engineering contract signed, so prices we don’t see as a problem, and we’re confident we can deliver within the timeframe.

I understand that you’ve reached a steady state of production at the Spinifex Ridge Iron Ore Mine. Would you talk us through what this means in practical and financial terms, Derek?

Yes. It gives us a very steady and strong cash-flow. We’re mining at a rate at the moment of a million tonnes per annum, and we have a monthly shipment of iron ore going out. And it’s operating on budget, on schedule, and in fact ahead of schedule; we only began production in December last year and we’re already up to our planned production rate. We’re netting about 60 to 70 dollars a tonne of ore shipped, and we’re shipping about 80,000 tonnes a month at the moment.

What strengths are there on increasing iron ore production at Spinifex Ridge?

Iron ore production at Spinifex Ridge – the miners are operating only on a day shift. That’s a 12-hour day shift. By putting a night shift on we can double production. Our big bottleneck at the moment is the port. Our agreement with the port will only allow us to ship 800,000 tonnes per annum. We’re in negotiations with respect to another 200,000 tonnes per annum on top of that. Infrastructure in Australia is a bottleneck. But the mine’s resource will never be much more than maybe 10 million tonnes. So it’s never going to be a big mine.

Please would you talk us through the state of reserves and resources at the Spinifex Ridge Iron Ore Mine, Derek?

Yes. The resource at the moment stands just under eight million tonnes. The reserve portion of that is about four and a half million tonnes. I’m confident we’ll end up mining most of that eight million tonnes, and we’ve got some exploration going on, which will bring some more tonnes in. Ultimately I’m anticipating the resource will max out somewhere around the 10 million tonne level.

Given that Moly Mines is borrowing 500 million dollars US, and has revenue from its iron ore mine, what is the company’s financial situation going forward?

The company’s financial situation is strong. Our cash-flow this year will be about 125 million dollars. That’s revenue before sales costs. And we’re netting, pre-tax, as I said, 60-70 dollars a tonne; approximately 50-60 million dollars pre-tax. So we’re in a strong position with respect to cash-flow. Obviously once we make the investment decision to develop the moly deposit, life will change. We’ll have a much bigger debt facility which we’ll draw down on, and we’ll be in a construction phase. So that’s a different style of financial circumstances.

What is your thinking about how the fluctuating value of the US dollar and Australian dollar could affect the financial performance of Moly Mines?

Yes, the US dollar depreciation against the Australian dollar has had a significant impact on the moly project. Molybdenum as a metal is denominated in US dollars; it’s marketed in US dollars. So in our terms the value of the metal has depreciated significantly, and that has impacted on the finances for the mine. It hasn’t impacted on China Development Bank’s attitude to the mine, which is quite comforting. And we’re anticipating the Australian dollar to come back, and I think most analysts are calling for that in the mid-term, which will be positive for us.

In February, you said that it’s going to be a good year for Moly Mines. What are your thoughts on the next 12 to 18 months, Derek?

Oh, it’s going to be a very good time for us. Hanlong, when they came in and became our major shareholder, said they wanted to use Moly Mines to create an international mining house. Now if you look at the activities of Hanlong in the last 12 months, they’ve come into Moly Mines; they’ve come into another company in the US. They’ve become a 19.5 per cent share holder in Australian-African iron ore company Sundance, and they’ll probably get greater interest in that company. And Moly Mines; they’ve said publicly that it’ll be the vehicle for their Australian expansion. So it’ll be good times for us and for our shareholders.

At the start of May, Moly announced the confirmation that the CDB completed its credit approval process for the revised US$494 million in project finance facilities.

The commitment consists of a US$454 million 12-year syndicated senior loan, and a US$40 million working capital facility.

Moly said that Hanlong Mining Investment, its major shareholder, will also provide a US$6 million junior subordinated loan to fulfill its US$500 million commitment.

"We are extremely proud to have completed these arrangements with CDB which are the culmination of outstanding but difficult work from the Moly Mines and Hanlong teams," said Moly Mines CEO and managing director, Dr Derek Fisher.

"Our partnership with CDB and Hanlong provides a major piece of non-dilutionary capital on terms that are unachievable and unavailable from western banks."

The company said there are a number of conditions that must be met before it draws down the syndicated facility, including verification that the mine is fully funded to positive cash flow.

In January, the company said that the appreciation in the Australian dollar against the US dollar was impacting the Spinifex project's financial model, lowering forecast returns.

Total capital and owners costs are now estimated at US$720 million, excluding working capital and debt service during construction. Construction of the mine and processing facilities will take approximately 24 months, once drawdown of the funds is available.

The company said the funds secured today will go a long way to financing the project, adding to existing cash on hand and future net iron ore revenues; however, additional money will also be required to fully fund the project.

Currently, discussions on how to secure these further funds are underway, with a final decision on the construction of the mine following shortly after.

Last month in a market update, Moly welcomed funds associated with EIG Global Energy Partners to the company's share register, after EIG exercised 19 million warrants.

The warrant holdings were from the US$150 million interim Financing facility entered into in September 2008, with another 4.9 million warrants still outstanding.

The share issue coincided with Moly shareholders re-appointing EIG’s nominee, Andy Zhmurovsky, to the board.

In addition to the molybdenum-copper deposits at Spinifex Ridge, the project also hosts a number of iron ore deposits, and in early March, the company secured export for iron ore to September 2015, with access to the Utah Point facility at Port Hedland.

In light of the molybdenum price volatility, the iron ore export agreement secures cash flows over the medium term for the project, and supplies funding for ongoing exploration and development.

Moly also made a US$10.3m shipment of Spinifex Ridge iron ore fines destined for China at the end of February. It expects the Spinifex Ridge mine production rate to reach 1 million tonnes per annum early in the second quarter.

Moly said the company expects to make the announcement before the market opens tomorrow, Wednesday 29 June.

Last month in a market update, Moly welcomed funds associated with EIG Global Energy Partners to the company's share register, after EIG exercised 19 million warrants.

Moly accordingly issued 19 million fully paid ordinary shares.

The warrant holdings are from the US$150 million Interim Financing facility entered into in September 2008, with another 4.9 million warrants still outstanding.

The share issue coincided with Moly shareholders re-appointing EIG’s nominee, Andy Zhmurovsky, to the board.

Moly also announced at the start of May the confirmation that the China Development Bank (CDB) has completed their credit approval process for a revised US$494 million in project finance facilities to develop Spinifex Ridge.

CDB’s revised commitment is for a US$454 million twelve year project finance facility and an additional US$40 million in working capital facilities.

Moly has accordingly issued 19 million fully paid ordinary shares.

The warrant holdings are from the US$150 million Interim Financing facility entered into in September 2008, with another 4.9 million warrants still outstanding.

The share issue coincides with Moly shareholders re-appointing EIG’s nominee, Andy Zhmurovsky, to the board of Moly at this week’s annual general meeting.

In other Moly news, the company has confirmed that the China Development Bank has completed their credit approval process for a revised US$494 million in project finance facilities to develop the Spinifex Ridge Molybdenum / Copper.

CDB’s revised commitment is for a US$454 million twelve year project finance facility and an additional US$40 million in working capital facilities.

Hanlong has advised that an additional US$6 million will be advanced separately to Moly to meet their commitment to procure US$500 million in project finance facilities.

GR Engineering Services will act as a sub-contractor to CACS, and will be responsible for design, construction and construction management activities under the EPC.

Derek Fisher, chief executive officer for Moly Mines, said “The partnering of a respected and highly experienced Australian engineering company with the leading Chinese engineering contractor in this fixed price arrangement is a great positive for our company and the project.

"It is a structure that we strongly believe will complete the project on time and on budget.”

CACS will be responsible for procurement activities.

Moly Mines said that the EPC contract will not commence until the company has received unconditional financing for the project and the board of the subsidiary Moly Metals Australia makes a final decision to proceed with the project.

The EPC lump sum contract price is estimated at US$608 million.

Moly Mines and Hanlong Mining Investment continue to finalise the structure and documentation of the US$500 million in senior secured finance and working capital facilities that have been approved by China Development Bank for the project.

The completion of the EPC contract with CACS is one of the key project documents that are required as a condition precedent to completion and first utilisation of this financing facility.

In other Moly news, the May shipment of Spinifex Ridge iron ore fines has completed loading at Utah Point.

The ship MV Hui Hong has departed Port Hedland carrying 68,804 wet metric tonnes of iron ore with an estimated value of US$10.5 million.

The vessel, which is carrying 70,202 wet metric tonnes of iron ore grading 60% iron, is destined for China. Final pricing is expected to be in the range of US$160-170/T CFR China.

The company said that shipments for the March 2011 quarter have met forecasts, and ramp up of the mine, which began production late last year, is now complete.

Monthly shipments are scheduled for the remainder of the calendar year, with a budget of 820,000 tonnes targeted.

The company's iron ore deposits are located on the same tenements as the Spinifex Ridge molybdenum project.

The company said a ship with 64,472 wet metric tonnes grading about 59% iron has set sail for China.  It is one of the first shipments from the Pilbara region in Western Australia, where the Spinifex project is located, since a cyclone forced closure of the ports earlier this week.  

 
Despite disruptions caused by the bad weather, the company said the project’s production rate is now expected to reach 1 million tonnes per annum in early second quarter.  The production rate increase was originally planned for July of this year.  

For 2011, the company said total iron ore production is budgeted at 0.82 million tonnes at an average free on board cost of A$60-70 per tonne, before freight costs and government royalties.

Moly Mines also said it has resumed talks to secure the second half of a $466 million loan facility from China Export and Import Bank.  As part of the loan facility, it received a loan commitment last month of up to $250 million from the China Development Bank.

Besides iron ore, the Spinifex Ridge project also contains molybdenum and copper resources.

The company expects to receive the remaining half of the financing facility  from the China Export and Import Bank after in Feburary.

Under the terms of the financing facility, the loan will have a 12 year term and a variable interest rate.   It will be fully secured by Moly Mines with credit support provided by the Sichuan Hanlong Group, the owner of Moly Mines major shareholder, Hanlong Mining Investment.

Hanlong has also confirmed it will also provide another $34 million in subordinated loans to meet a previously announced $500 million funding commitment.  The funding commitment is part of the subscription agreement Hanlong entered into with Moly Mines in October 2009.  

Although, Moly Mines said it will most likely need to look for alternative funding for the Spinifex Ridge project as $500 million may not be enough. 

As part of the the subscription agreement, Moly Mines’ board has agreed to issue to Hanlong 35.5 million project finance options, subject to approval from Moly Mines’ shareholders.  The options are exercisable at CAD$1.00 per share expiring 3 years from the date they vest.

They have also extended the financing deadline for Hanlong from January 31, 2011 to December 31, 2011.

According to Moly Mine’s 2009 technical report, the Spinifex Ridge  molybdenum and copper project, located in Pilbara region of Western Australia,  contains about 652 million tonnes of mineral resource. 

As of 11:29 am EST, the company’s shares have rallied 6% to trade at $1.21.

The company said the project finance facility documentation and approvals will not be completed to the point that it is available for drawdown by 31 January 2011 from Hanlong Mining Investment.

The non-Hanlong directors of Moly have sought corporate and legal advice as they consider an extension to the deadline, the company said in a statement.

An announcement on this will be made before 31 January 2011, as the company awaits receipt of the term sheets from the banking syndicate for the US$466 million bank loans.

However, Moly said that the completion of the Spinifex Ridge project financing process will likely be dependent on an improvement in both the foreign exchange outlook and molybdenum prices above current levels, as the project has been negatively impacted by the appreciation of the Australian dollar against the US dollar.

Though in some very positive news for the company, the port of Qingdao, China, has received the maiden Spinifex Ridge iron ore shipment containing 54,500 wet tonnes of iron ore fines.

The final sales price will be around US$150 per dry metric tonne, with the next shipment forecast for mid-February. Moly will aim to ramp up production from Spinifex Ridge so regular monthly iron shipments can be made.

Moly said the project finance facility documentation and approvals will not be completed to the point that it is available for drawdown by 31 January 2011, from Hanlong Mining Investment.

The non-Hanlong directors of Moly have sought corporate and legal advice as they consider an extension to the deadline.

Moly said an announcement on this will be advised before 31 January 2011, as the company awaits receipt of the term sheets from the banking syndicate for the US$466 million bank loans.

In some very positive news for the company, the port of Qingdao, China, has received the maiden Spinifex Ridge iron ore shipment containing 54,500 wet tonnes of iron ore fines.

The final sales price will be around US$150 per dry metric tonne, with the next shipment forecast for mid-February.

As Moly ramps up production from Spinifex Ridge, regular monthly iron shipments will be made to China.

The MV Father Neptune sailed with 54,500 tonnes of iron ore from the company’s Spinifex Ridge Iron Ore Project.
“The vessel is carrying iron ore cargo to the value of approximately US$7.9 million at today's iron ore prices,” Moly Mines noted to shareholders.

The ore has already been sold to Hanlong Metals under a iron ore sales agreement that was approved in November.

The cash generated from the shipment will be used towards paying back capital and development costs of the mine.

Managing Director and CEO Dr Derek Fisher said "The maiden shipment is a memorable event and signifies the beginning of a new era for the Company. This first export of Spinifex Ridge product has been achieved on time as targeted by the Company which is a credit to the hard work of our strong management team and excellent technical staff."

Shipment sizes are expected to increase as the mine production rate continues to ramp-up and the mine settles into a standard production regime.

Fisher acquired 520,000 shares at $0.40 by exercising options, and sold 220,000 shares at $1.10 to fund the options.

Therefore Fisher sold $242,000 of stock and spent $208,000 on the options.

Fisher now holds 1,403,600 shares, which includes 973,600 through Trillium Investments Pty Ltd, 130,000 through Regans Ford Estate and 300,000 through Cytra Services Pty Ltd.

Based on the last Moly traded price of $1.04, this stake is valued at around $1.46 million.

Fisher also holds 780,000 unlisted options exercisable at A$1.40 per share, vesting 30 June 2009, expiring 31 December 2010.

Earlier in the month, Moly began iron ore production at Spinifex Ridge, which is located 50 kilometres northeast of Marble Bar in the Pilbara region of Western Australia.

Hanlong’s immediate parent entity, Sichuan Hanlong High Technology Development Co, sought and has now received NDRC approval to support the commitment of Hanlong, with Hanlong committed to arranging US$500 million in project financing for the construction of the project by 31 January 2011.

The approval is for an amount of US$466 million, to be provided in the form of Chinese bank loans, with Hanlong currently sourcing the balance.

Derek Fisher, managing director and CEO of Moly, said the NDRC approval was the critical government approval required for any major overseas investment by a Chinese organization.

"It now allows our banking syndicate to finalise the negotiation of the term sheet for the financing of the molybdenum/copper project."

The approval comes a week ahead of a scheduled visit of a senior delegation from the China Development Bank and senior executives of the Hanlong Group to Perth, at which time further negotiations will take place for the financing facilities.

Moly Mines said it anticipates completion of the term sheets later this month, before proceeding with full form loan documentation.

This important milestone caps a big week for the company, during which Moly commenced production of iron ore at Spinifex Ridge, with the first shipment of iron ore forecast in the first fortnight of December 2010.

Mining at Spinifex Ridge is at an annualised rate of 1 million tonnes of iron ore per annum, with approximately 18,000 tonnes of ore stockpiled ready to be crushed.

Commissioning of the crushing and screening processing plant has been successfully completed and commercial production is now underway, the company said.

The plant is now operating on one shift per day and is ramping-up to the designed through-put rate of 3,000 tonnes per day, equivalent to 1 million tonnes per year.

The trucking of iron ore product into Port Hedland has also begun, added Moly Mines, with approximately 5,000 tonnes of material already transported into the Utah Point port facility.

"Considering the parlous state of the company in 2008 during the GFC, the rapid commercialization of our small, but potentially very profitable, iron ore deposit is a great complement to the skill and dedication of our technical team and management," said CEO Derek Fisher.

The company said it is targeting a smaller, first shipment of 50,000 to 60,000 tonnes to test the systems both at Port Hedland and in China, which is expected to occur in December.

Moly Mines has also began studies for how to increase the project production rates from 1 million tonnes per year, and exploration activities are as well ongoing to expand the existing iron ore resource base

Commissioning of the crushing and screening processing plant has been successfully completed and commercial production is now underway, the company said.

The plant is now operating on one shift per day and is ramping-up to the designed through-put rate of 3,000 tonnes per day, equivalent to 1 million tonnes per year.

The trucking of iron ore product into Port Hedland has also begun, added Moly Mines, with approximately 5,000 tonnes of material already transported into the Utah Point port facility.

"Considering the parlous state of the company in 2008 during the GFC, the rapid commercialization of our small, but potentially very profitable, iron ore deposit is a great complement to the skill and dedication of our technical team and management," said CEO Derek Fisher.

The company said it is targeting a smaller, first shipment of 50,000 to 60,000 tonnes to test the systems both at Port Hedland and in China, which is expected to occur in December.

Moly Mines has also began studies for how to increase the project production rates from 1 million tonnes per year, and exploration activities are as well ongoing to expand the existing iron ore resource base.

The company said mining has commenced at an annualized rate of 1 million tonnes of iron ore per year, with approximately 18,000 tonnes of ore stockpiled "ready to be crushed".

CEO Derek Fisher said that the start of mining operations was acheived within 20 months of first drilling, and at current prices, he expects the project will be cashflow positive immediately.

Moly Mines said it anticipates shipping the first iron ore fines in mid December. Iron ore prices currently remain strong, with 62% Fe CFR China prices trading above US$160/t.

The company's export schedule was based on the anticipated completion of its ore stockpile facilities at the Utah Point export facility at Port Hedland, which are now ready to receive Spinifex Ridge ore.

Construction of the processing plant and associated infrastructure is substantially complete and plant commissioning has already begun, said the company.

Moly Mines added that though some rectification work is required to the conveyor on the stacking system, it is not expected to affect project schedule.

The company has also begun studies on ways to increase the project production rates from 1 million tonnes per year, with exploration activities ongoing to expand the existing iron ore resource base.

At 30 June 2010, Moly Mines had cash of A$57.8 million, with no debt other than the 10 year, US$60 million Shareholder Loan.

Approximately 70,000 tonnes of Atlas Iron’s ore was shipped on the bulk panamax vessel, the Bergen Max.

Dr Derek Fisher CEO of Moly Mines said this was a significant milestone for the company and for new iron ore miners of the Pilbara and for Western Australia.

Moly Mines has announced that it has awarded the final significant operations contract for the 1 million
tonne per annum Spinifex Ridge Iron Ore Project, Bullbuck Pty Ltd for the transport of the iron ore product from the mine site to the Utah Point port facilities at Port Hedland.

The primary crusher has been delivered to site while the secondary crushers, screens and slewing stockpile conveyor will be completed by the second week in October for commissioning and production by the end of October.

Mining equipment began arriving on site early in September and mining operations will commence by the end of this month.

Ore haulage to Moly Mines’ stockpile area at the Utah Point facility will commence on or around 6 November 2010. The stockpile will be built up over the course of November for first shipment of Spinifex Ridge ore in early December.  Sales contracts will be concluded in the near term.

Spinifex Ridge Financing Facility

In relation to the US$500 million financing facility, Hanlong has advised the Company that they now anticipate finalizing term sheets for the Project Finance Facility for the Spinifex Ridge project in mid October 2010 with full loan documents expected to be executed during the period December 2010 to January 2011.

This is subject to the completion of the EPC arrangements and iron ore and molybdenum marketing agreements with Hanlong that will be put to minority Moly Mines shareholders for approval before the end of 2010.

Although significant progress on the Project Finance Facility has been made, terms and conditions for the Project Finance Facility are still being negotiated with the proposed Chinese financers and the level of interest and feedback gives Moly Mines confidence that the funding will be forthcoming.

The Subscription Agreement dated 19 October 2009 between Moly Mines and Hanlong Mining Investment Pty required Hanlong to use best endeavours to procure a US$500 million Project Finance Facility  for the Spinifex Ridge Molybdenum Project on or before 30 September 2010.

Hanlong’s parent entity Sichuan Hanlong (Group) Co Ltd agreed to provide, from itself or a related body corporate, a guarantee in favour of the proposed financiers.

Moly Mines has reported that strong progress has been made toward completing the Project Finance Facility. Hanlong are actively engaged with the proposed financiers and regulatory authorities both at the Sichuan provincial and at the state level in Beijing.

China Development Bank and China Exim Bank have participated in Perth office and Spinifex Ridge site due diligence over the last 8 weeks. In July, a comprehensive engineering study was completed by a major Chinese engineering group as part of the banking process for the 10 million tonne per annum Molybdenum Project.

In August the Sichuan branch of the National Development Reform Commission concluded that the Molybdenum Project complied with overseas investment policies and the project has now been submitted to the Beijing office of the NDRC.

The proposed financiers have requested the completion of an Engineering Procurement and Construction contract that describes the scope, cost and schedule for construction of the Molybdenum Project as a core condition precedent to the financing.

Moly Mines is currently preparing these arrangements with suitable contractors. In consideration for the additional security, beyond the parent company guarantees, being offered by Hanlong that will strengthen the terms of the Project Finance Facility, Moly Mines has agreed to grant Hanlong additional time to procure the Project Finance Facility by amending the cut-off date in relation to the Financial Penalty to 31 January 2011.

The Financial Penalty described in the Subscription Agreement will now apply on this new date. That is, if the Project Financing Facility is not available in accordance with the Subscription Agreement by 31 January 2011 approximately US$45 million of the Shareholder Loan will be forgiven and US$15 million will become immediately repayable.

Further Moly Mines will, subject to shareholder approval being received at the November 2010 Annual General Meeting, issue Hanlong 35.5 million Project Finance Options to replace the options issued under the Subscription Agreement which will lapse on 30 September 2010. If full binding documents for the Project Finance Facility are not executed by 31 January 2011, the New Options will be cancelled.

The contract award was celebrated today at a signing ceremony attended by representatives of the Njamal people, Moly Mines Managing Director Dr Derek Fisher and the Chairman of the Hanlong Group Mr Liu Han.

ESS Pantarlangu, a joint venture between Pantarlangu Pty Ltd (40%) and Compass Group (60%), was the successful bidder for the contract to provide accommodation management services at Spinifex Ridge, 45km north east of Marble Bar.

The agreement is the first contract to be awarded to a Njamal-related entity under Moly Mines’ Land Access Agreement with the traditional owners.

The joint venture contract, which extends for the life of the project, supports indigenous participation in the supply of accommodation management services including catering, cleaning, ground maintenance and other aspects of maintaining the village.

The contract is scheduled to commence in mid-October 2010.

Dr Fisher said the contract would guarantee indigenous involvement at the 1Mtpa iron ore mine and participation in a significant operations’ contract.

The mine is expected to ship its first ore from Port Hedland in December this year.

The contract award was celebrated today at a signing ceremony attended by representatives of the Njamal people, Moly Mines Managing Director Dr Derek Fisher and the Chairman of the Hanlong Group Mr Liu Han.

ESS Pantarlangu, a joint venture between Pantarlangu Pty Ltd (40%) and Compass Group (60%), was the successful bidder for the contract to provide accommodation management services at Spinifex Ridge, 45km north east of Marble Bar.

The agreement is the first contract to be awarded to a Njamal-related entity under Moly Mines’ Land Access Agreement with the traditional owners.

The joint venture contract, which extends for the life of the project, supports indigenous participation in the supply of accommodation management services including catering, cleaning, ground maintenance and other aspects of maintaining the village.

The contract is scheduled to commence in mid-October 2010.

Dr Fisher said the contract would guarantee indigenous involvement at the 1Mtpa iron ore mine and participation in a significant operations’ contract.

The mine is expected to ship its first ore from Port Hedland in December this year.

The iron ore mining contract award follows on from last week`s announcement that Perth based Rapid Crushing and Screening had been awarded the contract to build a 1.3 million tonnes per annum crushing and screening circuit.

The Toronto and Sydney listed company is currently building two mines at Spinifex Ridge, an open pit iron ore operation due to commence in the fourth quarter and a significantly larger molybdenum mine. Spinifex Ridge is located 170km east of Port Hedland, Western Australia.

Moly Mines gained China based Sichuan Hanlong Group as the company’s controlling shareholder in April following the settlement of the US$200 million equity and debt funding package, which gave Hanlong a 55% equity stake in the company.

The RC&S circuit has the capacity to expand throughput to 1.3 million tonnes per annum with no additional capital.

The plant is due to commence crushing in the second half of October. Construction of a 30km water pipeline from the De-Grey borefield is complete, while construction of the haulage road from the iron ore deposits to the run-of-mine pad at the crushing facilities is near complete. Ground preparation for the crushing facilities is now underway.

Mining and haulage tender packages are expected to be awarded by the end of this month and mining is expected to commence in September 2010. Ore haulage to the Utah Point facility at Port Hedland is due to start in the first week of November this year.

Regarding Moly Mines` $500 million project finance loan facility for its Spinifex Ridge Molybdenum / Copper Project, it has been advised that the Sichuan Province Development and Reform Commission has accepted that the project is compliant with China's overseas investment policies. The company has progressed the approval process to the next stage and submitted its recommendations to the National Development and Reform Commission in Beijing.

While the ongoing financing process continues, Moly Mines expects that the 30 September 2010 deadline in relation to the loan facility is unlikely to be met, it said. Accordingly, the company is in talks to extend this deadline.

Moly Mines is a company focused on the development of base metals projects including the Spinifex Ridge Molybdenum - Copper Project, 170km east of Port Hedland, Western Australia.The project is ready for immediate construction pending the completion of its financing.

Last April, Hanlong became Moly`s controlling shareholder with a 55% stake, following the settlement of a US$200 million equity and debt funding package.