General Moly Letter to Shareholders Reviews Milestones;
Annual Meeting Set for June 8
General Moly's Annual Meeting for Stockholders will be held at 9 a.m. local time on June 8, 2016. Stockholders are invited to attend the meeting at the Denver West Office Park - 1726 Cole Boulevard, Building 22 - Room 130, in Lakewood, Colorado. Regardless of your attendance, please return your completed Proxy Card or take advantage of the phone and internet voting today. Further details of the meeting are described in the Proxy Statement, which can be found at the Company's website.
General Moly issued a letter to shareholders from CEO Bruce D. Hansen in its Annual Report for 2015. The letter reviews recent milestones, its significant partnership with the Company's largest shareholder and its ability to fund current business activities into early 2018.
Letter to shareholders:
Your Company entered 2016 with a long-term strategic partnership with one of China's largest private multinational firms and well positioned with the financial liquidity to fund our business activities and working capital needs into early 2018.
We endured a difficult 2015 as General Moly's stock price was adversely affected by declining molybdenum prices and the broader weakening in the commodities sector from a slowing of economic growth in China and around the world.
We faced the onslaught of macroeconomic forces beyond our control, and remain standing, leaner and focused on maintaining our foundation for future value creation in 2016 and beyond.
Partnership for Mutual Benefit
Moving forward, our Company has commenced a new chapter through our alliance with strategic Chinese partner, Amer International Group. Amer is now the Company's largest shareholder with a 12% ownership interest from a $4.0 million Tranche 1 private placement in November 2015. We look forward to completing the Tranche 2 and 3 equity investments totaling $16.0 million by Amer, contingent on certain conditions, under an amended Investment and Securities Purchase Agreement.
Together with Amer, we expect to ultimately procure a Bank Loan of approximately $700.0 million from major Chinese banks for the future development of our flagship Mt. Hope Project in central Nevada when there is a sustained improvement in the molybdenum market and we have resolved challenges to our water rights. Amer has agreed to guarantee the Bank Loan subject to customary covenants and security arrangements.
Significantly, our two companies are collaborating on pursuing value-accretive acquisition opportunities, concentrating on base metal prospects in North America. In the current weak metals markets, we believe there are good opportunities for our Company and Amer, associated with recapitalizing distressed and undervalued assets.
Amer is a non-ferrous metals and downstream industrial company that is ranked the 247th largest enterprise by revenues in the world according to the Fortune Global 500. Amer's founder and chairman Wang Wenyin is one of the top 10 billionaires in China as ranked by Forbes.
2015 Milestones
Against a difficult macroeconomic environment, we implemented further measures to reduce our costs while preserving the underlying value of the Company through this market trough to emerge a stronger and more flexible Company.
We reduced our workforce by 25%; closed two offices; decreased the base cash compensation for senior executives by 15-25%; and consolidated line functions. All told, we lowered the quarterly cash burn rate for Corporate and Liberty Project costs by one-third from the previous two years' average to an estimated $1.7 million per quarter or $6.8 million for the full year 2016.
In addition to our cash and cash equivalents of approximately $13.0 million at year-end 2015, our Company is underpinned by considerable tangible asset value inherent in our 80% share of approximately $85.7 million in the Mt. Hope Project assets. Our Company has an additional $21.1 million in the cost basis for land, water rights and our Liberty Project.
It is imperative that we maintain the Mt. Hope Project ready to begin construction, subject to reinstatement of water permits and project financing, upon a sustained market improvement. To that end, in January 2015, our Company and our 20% partner, POS-Minerals, dedicated a reserve cash account to self-fund the Mt. Hope Project through 2020, covering care and maintenance expenses.
During 2015, we also terminated a third-party power provider's power transmission contracts for the Mt Hope Project, resulting in the return of a cash deposit of approximately $7.9 million, net of termination fees. This amount was subsequently disbursed pro-rata with $6.3 million to our Company and $1.6 million to POS-Minerals.
Furthermore in late 2015, the U.S. Bureau of Land Management reduced the reclamation financial guarantee obligation for the Mt. Hope Project to reflect current limited disturbance, returning to the Mt. Hope Project approximately $4.3 million in February 2016.
Business Strength
The foundation of our business strength remains with:
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Mt. Hope, which we believe is the best undeveloped, large, high-grade molybdenum deposit in the Western world.
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The wholly owned Liberty Project which is poised to follow the Mt. Hope Project.
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Both projects being located in the mining-friendly jurisdiction of Nevada, accessible to nearby infrastructure for labor, power, highways and water.
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Our international strategic partnership with Amer and off-take sales agreements with several of the world's largest steel companies and a major metals trading company.
Molybdenum Market Poised for Rebound
During 2015, the molybdenum market continued its decline into single digits from the fourth quarter of 2014. The molybdenum price reached a 12-year low of $4.64 in November 2015. To date in 2016, the current molybdenum market appears to be slowly recovering and the current price at $5.55 per pound is up 20% from the November low.
Based on two international metals econometric firms' price projections as well as our own analysis, we look toward the improving long-term demand fundamentals, coupled with more reductions in supply. With increasing demand and limited supply, the market projections reflect that the molybdenum price is more likely to continue to rise than to decline. This translates into an opportunity to develop Mt. Hope and produce molybdenum profitably in the medium term.
2016 Priorities
Our priorities for 2016 are the building blocks for the future are to:
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Prudently manage financial flexibility to sustain the Company over the medium term and to fund current business activities into early 2018, excluding further investments by Amer;
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Continue to diligently manage our expenses and corporate liquidity;
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Work jointly with Amer to identify value-accretive acquisition opportunities with a focus on base metal prospects;
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Effect reinstatement of permits for water rights at the Mt. Hope Project, which would lead to the Tranche 2 investment of $6.0 million by Amer, contingent on a higher molybdenum price; and
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Maintain existing federal and state permits for the Mt. Hope Project.
As we progress throughout the year, we will provide updates on our performance against our 2016 goals. We invite you to keep up with our progress by signing up for our Email Alerts at the bottom of the Investors page of our website.
We thank our shareholders and local communities in Nevada for their continuing support. We also recognize our employees and Board of Directors for their unwavering efforts to build our Company.
Sincerely,
Bruce D. Hansen
Chief Executive Officer
General Moly, Inc.
April 15, 2016