Tiny company plans big molybdenum mine

At the end of 2004, Idaho General Mines Inc.

employed exactly seven people, all of them at its headquarters in Spokane.

The company owned a grab bag of mineral leases around the West, but didn't post any revenues for the year maintaining a streak that had lasted two decades.

The slumbering little outfit looks to awaken quickly and in a big way as it announced plans last week to spend about $400 million to develop a molybdenum mine in Eureka County.

Idaho General Mines' plans to develop the Mount Hope mine reflects the surging price of molybdenum, a mineral that's used to create metal alloys that can handle high heat and stress.

Molybdenum prices, which have dipped as low as a $2.25 a pound in the past five years, recently stood at about $32 a pound.

Drilling by Idaho General Mines indicates the Mount Hope property 23 miles northwest of Eureka might produce as much as 700 million pounds of molybdenum during a 30-year mine life.

And even if prices drop substantially, the company thinks the mine will remain a money-maker.

It estimates the cash costs of production at $3.40 a pound.

"The return on investment, including capital recovery, is very robust at $6.50 per pound.

We would be very happy with a long-range price of one third the present molybdenum price," said Robert L.Russell, president of Idaho General Mines.

At the $6.50 price, the deposit that Idaho General believes it's found is worth $4.55 billion.

At the current high prices, it's worth more than $22 billion.

But the company faces some hurdles between last week's announcement and its planned start of operations in late 2008.

For one, it needs to clear a number of regulatory hurdles, a process that the company estimates will last 20 months.

Idaho General Mines needs to win permits from local and state officials as well as the U.S.

Bureau of Land Management.

Russell said some of the data that will be required for the permits already has been generated during five months of feasibility studies.

And he said environmental considerations are high on the company's priorities.

"Our plan is to be a good citizen," he said.

"We can and will plan for a 21st century facility which is sensitive to this environment and the local communities."

An equally big issue will be money.

In its annual report at the end of 2004, the company said its assets totaled $1.22 million about $700,000 of it in cash and it reported a loss of $2.4 million for the year.

And the company cautioned in its annual report that it doesn't know whether it will be able to get acceptable financing to develop any of its properties.

The company last week didn't provide any further information about how it proposes to finance the Mount Hope project.

The $400 million investment planned by the company includes the costs of developing an open-pit mine and building processing facilities.

Construction is projected to take 20 months.

A third issue may be staffing.

Matt Russell, the company's vice president of operations, last week estimated that hundreds of workers ultimately may be employed at Mount Hope.

But the labor force already is stretched thin across eastern Nevada as gold mines boom.

Eureka County, for instance,most recently reported that exactly 29 people in the entire county were looking for work.

Matt Russell said Idaho General Mines pins its hopes on the willingness of mining personnel around North America to gravitate to places where they can find work.

Mount Hope, initially targeted as a zincproducing region, has been the subject of exploratory drilling several times in the past two decades but hasn't been mined.

Idaho General Mines holds an option to lease the Mount Hope property for 30 years.

The tiny company's stock, which trades on the Over the Counter Bulletin Board system, rose in the past year from 5 cents a share to a high of nearly $1.49.

It was trading last week at $1.10.