Moly Mines puts Spinifex Ridge project on hold, signs preliminary financing deal for new projects

Moly Mines (TSE:MOL)(ASX:MOL) announced Wednesday that it has signed a preliminary deal with China Development Bank (CDB) for a strategic alliance to finance new mining projects, while also deciding to put its Spinifex Ridge molybdenum-copper project in Australia on hold.

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.