news

Hanlong Mining, Moly Mines' Chinese backer, has moved to reaffirm its support for its flagship molybdenum project in the wake of warnings it could be scuppered by the strong Australian dollar.

A day after Moly said it might struggle to secure finance without a weakening in the dollar and a higher molybdenum price, Hanlong said it remained committed to seeing Spinifex Ridge in the Pilbara developed.

"Hanlong Group is financially strong," Hanlong managing director Steven Xiao said in a statement.

"Our group assets have been accepted as security by the lending syndicate to guarantee the project finance facility. Senior banking executives of the lending syndicate in China have expressed their support for funding this project.

"We are in no doubt that the project funding is coming. The economics for this project are better now for Hanlong than when we originally invested in Moly Mines. Molybdenum prices then were US$12/lb and they are now US$17/lb."

Shares in Moly, which fell sharply yesterday, were a further 9?, or 8.18 per cent, weaker to $1.01 at 9am.

When China's Hanlong Mining struck a deal in 2009 for a controlling stake in Moly, it agreed to help the junior secure project finance for Spinifex Ridge.

However the process has been held up by regulatory delays.

Moly said yesterday the strong rise of the Australian dollar against the US dollar had reduced Spinifex Ridge's projected revenue by 25 per cent and may present "challenging economic hurdles for the project".

"The ability of the company to complete the Spinifex Ridge molybdenum-copper project financing process will likely be dependent on an improvement in both the foreign exchange outlook and molybdenum prices above current levels," Moly said.

Compounding the impact of the dollar, prices for molybdenum, a steel-hardening ingredient, have not risen as fast as prices for commodities such as iron ore and gold.