Figuratively speaking, a gold mine

By Richard N. Velotta

Sunday, Sept. 14, 2008 | 2 a.m.

Nevada is renowned worldwide as one of the leading producers of gold and silver.

By 2010 it may become known as one of the world’s top producers of a mineral few people know much about and even fewer can pronounce — molybdenum

(mo-LIB-duh-num).

General Moly, a Lakewood, Colo.-based publicly traded mining company, is working to acquire land-use and environmental permits to develop an open-pit mine about 20 miles north of this central Nevada county seat.

If the company succeeds, it could turn this sleepy tourism-dependent town of 500 into a small boomtown with high-paying jobs, giving the county and the state an economic boost.

In addition, the mine would lead to contracts with suppliers, including companies such as Las Vegas-based Cashman Equipment.

Under the expected timetable, General Moly would begin mining and processing molybdenum by late 2010 at Mount Hope, a nearly 9,000-foot, pine-covered peak that overlooks the historic Pony Express route.

The company will hire 500 to 600 workers to build and develop the mine and 390 when the mine opens to dig and process ore.

Although Eureka wouldn’t become the place it was in its late-1870s heyday, when the population climbed to around 10,000, it would see the addition of company-built housing and improvements to the infrastructure and the local school district footed by General Moly.

Jim Evans, Eureka County’s planner and development coordinator, said town officials have no clear sense the town will change with the influx of General Moly workers.

“I think the majority of people who live here would rather not see any significant population increase,” Evans said. “We’re certainly not in a position to sustain a lot of growth, and we’ve developed a fairly comprehensive planning initiative to deal with it.”

The biggest concern, Evans said, is planning for growth that wouldn’t occur. “Our community is very conservative when it comes these issues,” Evans said. “We’ve sustained and associated with boom-and-bust cycles and as a result of our conservative awareness, our community is somewhat hesitant to accept or reject this planning initiative.”

Patrick Rogers, director of environmental and permitting for General Moly’s Elko office, said in the early going, the company expects workers will commute to the mine and the company will provide buses to shuttle employees. But the company knows that if its project is as strong as executives expect it to be, socioeconomic issues will emerge.

The company also has been in discussions with the Eureka School District, the sheriff and other government leaders to assure residents the company cares about the community.

Last month, the company installed stadium lights for the high school’s football field to allow the Eureka High Vandals to have night games.

“County officials are asking all the right questions,” Rogers said. “They asked all the questions I would ask if I lived in Eureka. We’ve talked with the sheriff and the school officials. We understand their needs.”

If General Moly’s projections for the mining operation are accurate, it will become one of the world’s foremost producers of molybdenum, which is known in the industry simply as “moly.” The mine would supply an estimated 8 percent of the world’s output of the mineral, which is used as an agent to harden construction steel and develop stainless steel materials used in oil exploration and pipelines and in the refining of crude oil.

The mine is expected to have a 44-year life, one of the longest in Nevada mining history.

And, as General Moly develops Mount Hope, it is in the preliminary stages of the applying for permits for a second moly mine site, named the Liberty project, north of Tonopah.

One of the unusual characteristics of the Mount Hope site is that most of the high-grade ore is toward the surface and will be relatively easy to get to. It also assures a top-dollar product soon after the mine opens.

The site has a present net value of $1.4 billion and based on conservative estimates, the company’s investment would be recovered in two years.

To minimize risk and engage a long-term customer, General Moly in February signed a joint venture agreement with POS-Minerals Corp., a subsidiary of Korean steel giant POSCO, the world’s third largest steel producer. The deal gives POSCO a 20 percent investment in the company and provides General Moly a source of cash with the Korean company paying $100 million with another $70 million due when the permits are secured.

General Moly also signed a purchase agreement with the world’s leading steel producer, ArcelorMittal S.A., a global company based in Luxembourg, which will generate another $70 million for the company.

It will take another year and a half for General Moly to get all its necessary permits. Because a vast portion of the area surrounding Mount Hope has agricultural uses, the company is collecting data and is doing modeling to determine potential effects on neighboring farmers and ranchers.

Most of the water would be drawn from the nearby Kobeh Valley, and the company’s models show minimal effect on water over the 44-year life of the mine.

The state engineer would monitor the company’s water use, just as the office would review the Southern Nevada Water Authority’s acquisition of water from Lincoln County.

The company has an active reclamation plan in place to restore the land to provide a habitat for wildlife and cattle. It also will put $50 million into a fund to assure that the reclamation plan is carried out.

General Moly has had an impact on the Las Vegas economy.

Cashman Equipment has been contracted to deliver 24 Caterpillar 793 trucks, each capable of hauling 240 tons of material per load. Cashman, the state’s top dealer of the world’s largest manufacturer of construction and mining equipment, would deliver eight of the trucks in 2009 and the rest in 2010 and 2011.

The contract, one of the largest single orders for Cashman, is worth $80 million.

“It’s a great opportunity for the company and the General Moly project is great for the entire state of Nevada,” said Mike Pack, president of Cashman Equipment.

Mark Amodei, who heads the Nevada Mining Association, said General Moly’s presence is important to the state’s mining industry because it provides diversification. And, it will be a large and lengthy operation.

“It’s right up there with the big gold guys, the Barricks, the Newmonts and the Round Mountains of the state,” Amodei said. “When they get going, they’ll be one of the largest operations in Nevada.”

Because General Moly won’t be delivering one of the precious metals, the operation will diversify Nevada’s mining output.

“Historically, gold has been our big ticket,” Amodei said. “But if you can avoid having it all tied to one mineral, it’s a nice thing.”

That’s because the price of gold and the price of molybdenum normally have no connection. There may be high demand for one, but not the other.

About 12,000 to 13,000 people work in the mining industry in the state. But those employees are among the best paid in the state with an average wage of more than $70,000 a year. Located primarily in rural Nevada, mining operations contrast with the urban-centered gaming industry.

Eureka is only the beginning for General Moly.

If Mount Hope is on the front burner, the Liberty project is on the back.

Liberty would have a 33-year mine life with 24 years of mining and nine years of processing. The deposits are smaller, but they’re of similar grade to the Mount Hope moly.

The site has produced copper — a mineral often found in the environs of molybdenum — in the past. But the company hasn’t determined whether it would also mine for copper.

A longer version of this story appeared in In Business Las Vegas, a sister publication of the Sun.