Moly Mines Needs a Secure Financing Partner to Fund Project

Wellington West analyst Catherine Gignac cut her price target on Moly Mines Ltd. (MYMNF.PK) by more than half on Monday due to financing uncertainty at its Spinifex Ridge mine in Australia.

Ms. Gignac reduced her target from C$2 to C$0.75 and maintained her "speculative buy" rating, telling clients in a note that Moly Mines will likely need to secure an operating and/or financial partner in order to fund Spinifex, which now fully permitted, requires an estimated capital financing of $1.35-billion.

As a result of plummeting molybdenum prices, the analyst said an equity financing at present would be priced at C$0.25 per share, down from her previous estimate of C$1.50 per share, resulting in a highly-dilutive 1.7-billion shares outstanding.

She noted:

The potential dilution at the current share price level is excessive, thus we believe it is more likely the company will sell an interest in the project to an operating company with financial strength.

Commenting more directly on molybdenum prices, which fell to $10.25 per pound in late 2008 from an average of $30.57 per pound in 2007, Ms. Gignac said:

Further mine cutbacks will be required with lower global demand, but as demand rises, supply shortages should drive molybdenum prices higher.