Korean steelmaker to take stake in Eureka-area mine

The Colorado company that's planning a big molybdenum mine near Eureka has taken another step toward nailing down its financing.

General Moly Inc. signed a letter of intent with POSCO, a Korean company that's the world's third largest steel producer, under which POSCO will acquire a 20 percent stake in the Mount Hope project.

POSCO will pay $170 million for its interest in the project $50 million when final documents are signed, $50 million on July 1 and the final $70 million when permits are in place to allow construction of the mine.

The Korean company also will pay 20 percent of the costs of building and operating the mine and will get 20 percent of its output.

Construction is expected to begin in the first quarter of 2009, with production scheduled to begin the second half of 2010.

The deal with POSCO comes a few weeks after the world's largest steelmaker, ArcelorMittal, bought a 12.7 percent interest in General Moly for about $70 million.

Steelmakers are interested in the General Moly project because molybdenum is used in stainless steel and other steel alloys. The Mount Hope project is believed to be one of the largest deposits of molybdenum in the world, and a study this summer estimated the mine's reserves are worth $1.4 billion. The property is projected to produce more than 38 million pounds of molybdenum annually during its first five years.

The Mount Hope project is about 20 miles north of Eureka, two miles west of Highway 278.

Bruce Hansen, chief executive officer of General Moly, said the deal with POSCO "dramatically reduces our credit risk."

He said the company is working with other potential partners and hopes to nail down fixed-price deals to cover about 10 million pounds of production a year during the mine's first five years.

General Moly also is exploring a molybdenum prospect north of Tonopah. The company, which changed its named from Idaho General Mines this year, is headquartered at Lakewood, Colo.