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| GMO > SEC Filings for GMO > Form 10-Q on 7-May-2008 | All Recent SEC Filings |
7-May-2008
Quarterly Report
References made in this Quarterly Report of Form 10-Q to "we," "our," "us," the "Company," or "GMI" refer to General Moly, Inc.
The following discussion and analysis of our financial condition and results of operations constitutes management's review of the factors that affected our financial and operating performance for the three months ended March 31, 2008 and 2007. This discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report and in our Annual Report on Form 10-KSB, for the year ended December 31, 2007.
Overview
We are a development stage company and are currently proceeding with the development of the Mt. Hope Project. We are also conducting exploration and evaluation activities on our Liberty Property.
On October 4, 2007, our Board of Directors approved the development of the Mt. Hope Project as contemplated in the Bankable Feasibility Study. The development of the Mt. Hope Project has an estimated total capital requirement of approximately $1.0 billion comprised of initial construction cost in excess of $850.0 million (in 2007 dollars); $53.0 million in cash bonding requirements; $22.0 million in Advance Royalty Payments; and amounts necessary for financing costs and working capital. The accuracy of the estimate is considered to be plus or minus 15%. Such capital requirements are based on management's estimates based on the Bankable Feasibility Study and other available information, and are subject to change, which changes could be material.
Effective as of January 1, 2008, we contributed all of our interest in the assets related to the Mt. Hope Project, including the Mt. Hope Lease, to Eureka Moly and in February 2008 (the "Closing Date") entered into the Mt. Hope Project joint venture with POS-Minerals (the "Joint Venture"). Under the terms of the Joint Venture, POS-Minerals owns a 20% interest in Eureka Moly and General Moly, through a subsidiary, owns an 80% interest. While these ownership interests and/or required contributions can change based on the failure of GMI to satisfy certain specified conditions, including the receipt of the necessary permits to develop and operate the Mt. Hope Project by December 31, 2009, failure to achieve production by December 31, 2011 for reasons other than force majeure, or non-payment of amounts due under the Joint Venture by either party, we expect the interests to remain as they are now through the life of the project and the contributions to be received in the amounts that follow.
Pursuant to the terms of the Joint Venture, POS-Minerals agreed to make cash contributions to The Joint Venture in the aggregate amount of $170.0 million in exchange for their 20% interest, of which $50.0 million was received in February 2008, $50.0 million is to be received in July 2008 (the "February 2008 and the July 2008 Contributions"), and the remaining $70.0 million is to be received once the Mt. Hope Project receives the necessary permits to develop and operate the project (the "POS-Minerals Third Contribution Date"). These initial funds are available to fund the Mt. Hope Project development costs incurred subsequent to the Closing Date. Additionally, in May 2008, GMI will pay to POS-Minerals an estimated $2.8 million as a final purchase price adjustment based on the terms of the Joint Venture related to the difference in the budgeted versus actual expenditures of the Mt. Hope Project prior to the Closing Date.
We are required, pursuant to the Joint Venture, to advance funds in excess of the February 2008 and July 2008 Contributions required for the development of the Mt. Hope Project until the POS-Minerals Third Contribution Date at which point POS-Minerals is required to reimburse us for their 20% share of all development costs incurred from the Closing Date through the POS-Minerals Third Contribution Date. All amounts incurred subsequent to the POS-Minerals Third Contribution Date will be allocated and funded pro rata based on each party's ownership interest.
Additional capital will be required through the commencement of Mt. Hope production estimated to be in late 2010. Our ability to develop the project on time and on budget is dependent on, among other things, our ability to raise the necessary capital to fund the Mt. Hope Project both in sufficient quantity of capital and at the time such capital is needed. Additionally, if the estimated costs of the Mt. Hope Project are exceeded we will need to raise additional capital to fund such overruns.
We do not currently have the capital necessary to complete the Mt. Hope Project and, accordingly, plan to raise the capital on an ongoing basis when needed. The receipt of the $50.0 million Joint Venture capital contribution by POS-Minerals in July 2008, existing cash on hand at March 31, 2008, and $8.4 million received in April 2008 from the exercise of outstanding warrants should be sufficient to fund planned operations for the Mt. Hope Project, as well as our other planned operations, through the end of 2008. If we are unable to raise sufficient quantities of capital when needed, it will be necessary to develop alternative plans that could delay the development and completion of the Mt. Hope Project. There is no assurance that we will be able to obtain the necessary financing for the Mt. Hope Project on customary or favorable terms, or at all.
We will also require additional capital to continue the exploration and evaluation of the Liberty Property, as well as continue payment of ongoing general, administrative and operations costs associated with supporting our planned operations.
Liquidity and Capital Resources
We have limited capital resources and thus have had to rely upon the sale of equity securities and the formation of a joint venture for the cash required for exploration and development purposes, for mineral property acquisitions and to fund our general and administration costs. Since we do not expect to generate any revenues until the Mt. Hope Project begins production, we will rely on the sale of our equity and debt securities, bank financing and joint venture arrangements to raise capital. There can be no assurance that financing will be available to us in the amount required at any particular time or for any period or, if available, that it can be obtained on terms satisfactory to us.
Our cash balance at March 31, 2008 was $79.3 million compared to $78.4 million at December 31, 2007. Additionally we have $39.5 million of funds from POS-Minerals' initial contribution in February that have not yet been spent in the continuing development of the Mt. Hope Project and are shown as restricted cash. The restricted cash is available for the continuing development of the Mt. Hope Project.
Total assets as at March 31, 2008 were $168.6 million compared to $110.3 million as of December 31, 2007. These increases were due primarily to the receipt of $50.0 million from POS-Minerals in February 2008 pursuant to the Joint Venture, and proceeds from exercises of warrants and options totaling $11.6 million offset by expenditures for continuing exploration and evaluation of our Liberty Property, plus expenditures for our general and administrative costs.
As discussed above, in addition to the $50.0 million we received from POS-Minerals in February 2008, we are scheduled to receive an additional $50.0 million in July 2008, and $70.0 million at the time Eureka Moly receives the necessary permits to develop and operate the Mt. Hope Project (including the record of decision for the Mt. Hope Project), which is expected in mid-2009. Additionally, POS-Minerals will fund approximately $65.0 million on the POS-Minerals Third Contribution Date, which represents POS-Minerals' share of the anticipated project costs from January 1, 2008 through the POS-Minerals Third Contribution Date.
We believe the cash on hand at March 31, 2008 (including the cash restricted for use in the Joint Venture), the expected receipt of $50.0 million from POS-Minerals in July 2008, and $8.4 million received in April 2008 from the exercise of outstanding warrants will be sufficient to fund our joint venture development, exploration, evaluation and operating activities, as well as our other planned operations, through the end of the year ending December 31, 2008.
As discussed above in the overview section, we will require, and continue to require additional funds on an ongoing basis until we have completed the development of the Mt. Hope Project and profitable producing operations are achieved at the Mt. Hope Project. There is no assurance that we will be able to obtain the necessary financing for the Mt. Hope Project on customary terms, or at all.
Results of Operations
For the three months ended March 31, 2008 we had a net loss of $5.2 million compared with a net loss of $9.1 million in the same period for 2007.
For the three months ended March 31, 2008 and March 31, 2007, exploration and evaluation expenses were $2.5 million and $3.8 million, respectively. During the three months ended March 31, 2007 both our Mt. Hope Project and our Liberty Property were in the exploration and evaluation stage. In October 2007 the Mt. Hope Project advanced to the development stage. For the three months ended March 31, 2008 exploration and evaluation costs were incurred on the Liberty Property as we progressed to the completion of a pre-feasibility study on the Liberty Property that was completed in April 2008.
For the three months ended March 31, 2008 and March 31, 2007, general and administration expenses were $3.2 million and $5.4 million, respectively. During the three months ended March 31, 2008 and March 31, 2007 we incurred $.9 million and $3.1 million, respectively, in non-cash equity compensation for management and directors. The amounts in 2007 were significantly higher than in 2008 as a greater amount of equity compensation was incurred during the first quarter of 2007 as we added new Officers and Directors as part of a reorganization and expansion of the executive team compared with the same period in 2008. The cash portion of our general and administrative expense was approximately the same in both periods.
Interest income was $.5 million for the three months ended March 31, 2008 compared with $.2 million for the same period in 2007 as a result of higher cash balances in 2008.
Changes in Accounting Policies
We did not change our accounting policies during the three months ended March 31, 2008.
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