This Monday, American CuMo (TSXV:MLY, OTCPINK:MLYCF) announced it had inked a memorandum of understanding (MOU) with a major Chinese partner to bring its CuMo molybdenum-copper–silver deposit into development.
Located near Boise, Idaho, the CuMo deposit is the largest un-mined molybdenum deposit in the world. It also contains significant amounts of copper, and is one of the world’s top 25 silver deposits.
Under the terms of the MOU, Ping Shan Resource Holdings and Hong Kong based commodities group MCC8, will arrange US$700 million in financing for the CuMo project. In return, Ping Shan and MCC8 will receive an 80 percent net proceeds interest in the project.
“The main player is MCC8, which is a large multi-billion dollar company,” said American CuMo President and CEO Shaun Dykes in an emailed statement. “They have the ability to arrange 70 to 80 percent of the total project financing as a loan, so the project can readily obtain the billions needed to place it into production. This makes it a huge win for the shareholders.”
Dykes stated that funding would be a combination of project loan financing from major Chinese institutions as well as direct cash investments. Both parties are to negotiate a binding, definitive project financing agreement following the MOU. American CuMo expects that this will take four to six months to complete, with all due diligence and required approvals considered.
The market reacted positively to the news on Monday. Shares of American CuMo spiked as much as 44 percent during morning trading hours, finishing up 26.32 percent at $0.12. 1.73 million shares of the company traded hands, relative to a daily average of 139,588 million.
Dykes added that shareholders were “excited to see a major hurdle overcome” for the project.
“This is a major announcement for the development of the CuMo project. To obtain a funding partner given the current depressed state of the metals market is a huge event, and allows the project to proceed despite depressed metal prices such that it will be able to take full advantage of the start of the upcoming metal cycle.”
Indeed, some market watchers are already hailing the start of a bull market for metals and commodities. Bloomberg reported on Monday that its commodity index is up 20 percent since hitting a low on January 20th, and as the news agency points out, that meets the common definition of a bull market.
Moving forward, American CuMo will work to obtain US$25 million in new capital in order to kick off an exclusivity period for its Chinese partners, as per the MOU. The partners will use this time to perform due diligence, obtain all required approvals and secure funding to complete the proposed transaction.
Meanwhile, American CuMo will use the US$25 million to complete work required to produce a pre-feasibility study for the project. “The work will involve drilling, metallurgy, ore-sorting and environmental baseline work,” Dykes stated.
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Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: American CuMo is a client of the Investing News Network. This article is not paid for content.