* Hanlong to make $80 mln equity investment in co
* Says adopts stockholder rights plan
* Q4 loss/shr $0.03 vs yr-ago loss $0.04/shr
* Shares jump 53 percent (Adds details, analyst’s comments, updates share movement)
By Ashutosh Joshi
BANGALORE, March 5 (Reuters) - General Moly Inc (GMO.TO) posted a narrower fourth-quarter loss and said it secured investment from a major Chinese mining group to fully fund its Mt. Hope molybdenum project in central Nevada, sending its shares up 53 percent to a 17-month high.
General Moly entered into an investment deal with Hanlong (USA) Mining Investment Inc, a unit of privately held Sichuan Hanlong Group.
Hanlong, which last year announced a deal to acquire majority stake in Australian base minerals explorer Moly Mines Ltd MOL.AX MOL.TO, will also guarantee a senior secured term loan of $665 million to be procured from a Prime Chinese Bank.
The Chinese company will also make an equity investment of $80 million in General Moly by buying 25 percent of the miner’s shares, partially tied to the completion of the bank loan.
China, the world’s largest molybdenum producer, has seen a surge in demand for the stainless steel material in last five years, mainly due to its infrastructure development program. The country now is the biggest molybdenum consumer. “It looks like a pretty smart transaction,” Scotia Capital analyst Lawrence Smith said by phone.
“In my view, demand is going to grow relatively high in the next decade and I am sure Hanlong is looking at this as a very long term investment,” the analyst said.
Hanlong will provide a $20 million bridge loan to General Moly, which owns 80 percent of the Mt. Hope project. The bridge loan is repayable from the proceeds of the bank loan.
The Mt Hope project in Eureka County, Nevada, has 1.3 billion pounds of proven and probable molybdenum reserves. Once in operation, the project is expected to produce about 40 million pounds annually for the first five years, as per company website.
“It appears to be very high quality project in terms of the reserve base and cost structure, and will be significant in the molybdenum market going forward,” analyst Smith said.
General Moly said its joint venture partner at Mt. Hope, South Korea’s POSCO (005490.KS), the world’s fourth-biggest steelmaker, has committed to retain its 20 percent equity interest.
The company has executed off-take agreements with ArcelorMittal ISPA.AS, SeAH Besteel (001430.KS) and Sojitz (2768.T) for about 15.5 million pounds of annual molybdenum production for the first five years of the project’s operation.
General Moly adopted a stockholder rights plan, making it difficult for a potential suitor to make an unsolicited offer.
For the fourth quarter, the company posted a loss of about $2.2 million, or 3 cents a share, compared with a loss of $2.6 million, or 4 cents a share, a year earlier.
General Moly’s consolidated cash balance at the end of the fourth quarter was about $49 million.
Shares of the company were up 44 percent, or C$1.18, at C$3.85 in midday trade Friday on the Toronto Stock Exchange. They hit a high of C$4.09 earlier. (Additional reporting by Koustav Samanta in Bangalore; Editing by Ratul Ray Chaudhuri)