BRR - Straight from the source

DR. DEREK FISHER, MANAGING DIRECTOR OF MOLY MINES LIMITED (MOL)

“Excellence in Mining and Exploration Presentation”

http://www.brr.com.au/event/51327

WEDNESDAY, SEPTEMBER 17, 2008, 5:45 PM.

            MOL    Thank you very much. Our story as most people know is a Moly story. There are few other things I will bring out in the talk today, but it really is about Moly and we are the company with the most advanced molybdenum project in the

10                    world today in terms of large scale projects. That’s…might get out of jail free card so I expect you to read that.

                        The question I ask is, Moly, the Metal and Moly, the Company, should you be interested in and I hope today I can convince you that it is worthwhile

15                    checking us out. I know it’s a pretty bad market at the moment. I could use much stronger words than that but it’s one we’re going to have to live through and I think Moly is not a bad place to be live through that market. I hope I can explain my reasoning for that.

20                    Should you be interested? Yes, you should. Moly is a metal which is currently 30 bucks a pound, over 30 bucks a pound, of US$33.50 to US$34 a pound at the moment, that’s in US dollars.  It is a precious metal in many respects. I’m a gray-head, gray-bearded person and I certainly lived through most of my career when silver was 5 bucks an ounce and silver is a precious

25                    metal. So I like to put Moly in the precious metal sphere and that 2 bucks an ounce we have placed with billion pounds of Moly in the ground at the moment….if you take out our copper equivalent and added to it, we go over a billion pound. We have a big resource. We have over $30 billion where the metals sitting in the resources we have.

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                        Why is Moly priced high and why is it of interest? I put up here some slides showing other metal prices and the sort of volatility we’re seeing in other metal prices and I put Moly up there with it and I think you can see that over the last three years, Moly has not suffered the instability and the fluctuations

35                    in prices that our base metals have had. Moly has been on a rise for the last three years and really, on a very positive price curve for the last five years. Moly took off literally the week we listed this company in March 2004. It jumped from $6 to $16 that week and that was the week we went out and picked up Spinifex Ridge.

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                        Why is the Moly priced high? Moly prices high for a variety of reasons. The world Moly economy is changing and changing rapidly and it’s been driven by modern things that’s been driven by things like China, like India, but it’s also being driven by worldwide phenomenon, and just to really summarize those

45                    things briefly before I go into what our company is about, we look at the hydrocarbon industry. The hydrocarbon industry is a major driver of Moly. Moly gets used as an additive in steel for anti-corrosion properties, pipeline steel is all Moly. Moly steel offshore platforms and Moly steel drill rods areMoly steel. The catalysts they use to strip the sulphur out of hydrocarbons are Moly based catalyst. The hydrocarbon industry, we’ve gone over (inaudible) (00:03:41), peak oil, all that sort of stuff, Moly is increasingly being used in the hydrocarbon industry and sour gas, sour oil, our world hydrocarbon economy is becoming more dependent on poor quality

5                      hydrocardons. Poor quality hydrocarbons tend to be corrosive. They require Moly steels. There’s a very close correlation between Moly price and oil price. I could show you graphs and if you look on our website, you’ll see some fascinating stuff there. But it’s not just the hydrocarbon industry, it is the construction industry. We’ve just gone through 9/11. The first towers

10                    have been built from the steel. They are required to use today Moly-based steels, those towers would not have come down. We’re seeing in the construction industry increasing use of Moly steel.

                        Infrastructure, if you go anywhere in the world whether use salt on the

15                    roads, all bridge, all rebar, anything to do with salt environments is now Moly steels, that’s about 50% of China.

                        If you look at cars…cars are increasingly using Moly steels. Moly high tensile steels to reduce to the weight of cars and of course, you might think that the

20                    car industry is stagnant, it’s nothing like stagnant. North America and Europe, it’s stagnant, Australia is stagnant, but if you go into Asia, you go into China…..China’s car industry is rapidly expanding. India’s car industry is rapidly expanding. The African car industry, South America. The car industry is becoming a rapidly increasingly consumer of Moly steels, and of course the

25                    21st issues such as global warming.

                        Global warming, we have a desalination plant in Perth now. We’re about to get a second one, sea water is corrosive, the front end of these desalination plants are now Moly steels. If you go to the Gulf states …that was the only

30                    place you used to see desalination plants. I think it’s something like $20 billion worth of desalination plants going into the gulf states over the next 15 years. California has 30 desalination plants on the drawing boards around the construction at the moment and that’s behind Florida.

35                    Nuclear, we’re all going nuclear again. Nuclear power, one of the features of Moly as a metal is that it has a very high melting point, one of the highest, in fact. So as soon as you get into steels which are used in high temperature environments, you are actually into Moly steels.

40                    Of course, overlying all of what I’ve just said, we’ve got China or in India, it’s all about Chindia. China currently produces 20% of the world’s Moly. However, it also produces plus 25% of the world’s steel and it’s specialty steel industry is rapidly expanding. China, currently, is an exporter of Moly but has introduced export quarters, export licenses for Moly. The Asian steel

45                    industry in the circum-China countries those were…I’m referring to Japan and India and Korea, they traditionally source their Moly out of China. China’s Moly exports is down 20% of what it was this year as to what it was last year because of the export quarters and licensing that have been put in place in China. China’s increasingly consuming its own Moly, to the point where it will become a net importer of Moly, probably within the next five years. India. you can throw India, you can throw Africa, uou can throw the other countries in there; they are all suffering the same thing.

5                      The world Moly industry has been stagnant for the last 25 years. When I say stagnant, I mean the world Moly mining industry. There has not been a new Moly mine of any size since 1982. What happened in the ‘80s and ‘90s when the Moly consumption was expanding, the world copper industry put Moly recovery circuits in at the back end of the copper mines and produced Moly

10                    for virtually nothing and there was no need for new pure Moly mines. Unfortunately now all that capacity is now taken up. There’s virtually no room for expansion in the copper industry with respect to Moly and the world now needs new Moly mines, and of course, over those last 25 years who was interested in Moly? The price was $3 to $5 a pound and the copper guys

15                    were making it for nothing. So the opportunity now is for new Moly mines and we are fortunate that we have the world’s most advanced Moly project, large scale Moly project.

                        We are on the stage 1 development. We are located close to the Asian

20                    market. Our deposit is in the Pilbara. It’s not in the southern Pilbara, it’s in the northeastern Pilbara close to the coast. We are a long life resource. We’ve got one of the largest undeveloped Moly resources in the world and we can provide about 5% to the world’s Moly production for the next 25 plus years.

25                    Let’s talk about the company. That’s a bit of… I can go into the Moly market in some more detail. I put some more slides at the back end of my talk, but I’d rather talk about the company a bit now having set the scene. We’re up in the Pilbara. We’re close to Port Hedland. This is an area where, as you all know, with a large scale mining culture. When I’m in North America, which is really

30                    the centre the world’s Moly industry, I used to refer to Spinifex Ridge being located not 12,000 feet up in the air and this not in the Northern Rockies, we’re about as benign in an environment for building a large scale mine as you could possibly get, and we’re close to the coast, and we’re close to Asia, pretty good location.

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                        The project itself is construction ready. We’ve been working on it now for about five years, really intensely for the last 3 to 4 years. We’ve spent now about $170 million on this project. That may sound a lot, but we are into pre-construction and construction at the moment. The deposit is going to be

40                    mined at 20 million tonnes a year initially, that is the plan. It will be a large open pit. It has a low strip ratio. It’s shown on that slide a 1.3 to 1 strip ratio. Our latest modelling has,,,,, we’ve actually reduced that to 1.1 to 1 strip ratio for the first 10 years and it is a simple mine. It does not have much in the way of technical risk. The resource is large. We haven’t finished drilling it. We’re

45                    not going to do much more drilling. We’ll do that through a grade control, but at the moment, our reserves and I refer to reserves and resources here, the reserves are just under 0.50 billion tonnes. It’s both on Moly resource and a copper resource.

                        The reserves on that slide are a subset of the resource but add them all up together. So, it’s about…. if you throw the Inferred in it’s just over a billion tonnes. Now, the deposit has a history of 100% of our Inferred resource in the past has converted to Reserves or has reconverted to Measured and

5                      Indicated. It’s really a drilling density issue. This is what the deposit looks like, you can see there a 10-year pit. The deposit has a high grade core to a grade decrease as you move out from the high grade core. If you look at a…. that’s about a 30-year pit. Let me just turn the page here, I’m losing track. That pit there is probably a 40-year pit, in fact, and you can see it still has a low strip

10                    ratio.

                        In the early years, we go down inside the deposit, pulled the high grade out and stockpile the lower grade material and the intent is ultimately to, in fact, expand the throughput from 20 million tonnes to more like 30 million tonnes.

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                        Showing on this next slide some NPVs and IRRs based on that 30 million tonnes scenario. At the top you can see there the NPV, this the definitive feasibility study NPV of just under $1 billion dollars. The intent is to put inpit crusher in about year 5 and expand the mill to take about 30 to 33 million

20                    tonnes and treat some of the low grade material that we were stockpiling in the early years using the surface primary crusher.

                        Project execution. I said we are ready for construction. All our mining leases are granted. You can see the ticks down there, I won’t go through them all.

25                    The most recent thing we got was two weeks ago the Mines Department ticked it off, ticked off mining to start on the project. We can actually be in there with excavators today if we had the finance beside us. We have offtake with ThyssenKrupp in Germany. Thyssen will take all our Moly production either for their own use or to market into the specialty steel industry in

30                    Europe and it’s going to be based on spot prices. Our long lead items are also on the manufacture, they have been…we stuck our neck out eighteen months ago or was about six months before we completed the feasibility study in placed in order for $100 million, again with ThyssenKrupp for the ball mills, for the primary crusher, and for the tertiary crushers. At that time it had

35                    24-months delivery. With the current turmoil in the finance markets, we’ve been able to go back to Thyssen and delay them for six months. We don’t need equipment as quickly as we thought we would but we are… this project is under construction in those terms.

40                    Is that five minutes?

            A          Yes.

            MOL    Just project execution, there’s a bar chart there…a lot of this stuff is on our

45                    website. We had the complete….we have the senior management team for the project in place. There are over 65 people in my office in Perth. We got an engineering group with Worley Parsons, both in Perth and in Beijing, with over 250 people working on the project at the moment.

                        In terms of finance, finance is the major problem we face at the moment. We appointed Morgan Stanley and JP Morgan about eight months, nine months ago to assist us in financing. The project, obviously, we’ve run into very negative markets and at what we’re doing at the moment in terms of

5                      financing, intent at that time was to go for a high yield bond style of financing. We’re now looking at bringing an equity partner into the project and we’re in advanced negotiation with respect to that. We have two different parties we’re talking to at the moment. In the meantime, we’ve announced that we’re putting US$150 million interim bridge financing in place and that is imminent.

10                    I can’t talk too much about it but watch this space. We’ll have something to say about that in the next 2 to 3 weeks.

                        These are some slides which I won’t go through too much. This is because…just a little bit of flow sheet for the project. What Moly, its end

15                    users….. it is a diversified metal. It is mainly used in the steel industry and it’s in specialty steels. I think the message to take home is that its consumption is rapidly expanding, it’s accelerating consumption. Few Moly prices, you can see what the 3-year average is. You can see the 5-year average there and a long term estimate. We’ve spent over $300 on Moly

20                    market studies primarily because it’s quite an opaque metal, difficult one to understand, difficult one to get any information on.

                        This next slide probably tells a lot of why you got to believe in Moly? If you see the area between the green and the red line, it tells you there’s a

25                    shortage of Moly developing. There just isn’t the deposit out there at the moment to fill that supply.

                        Are we going to get high Moly prices into the future? You bet, yes.

30                    Just very briefly, I think I’ll probably run out of time, but very briefly, strangely we actually have iron ore on this property. We have a few things on this property which we don’t talk too much about. That Ridge cutting through, which is the Spinifex Ridge and iron formation, it’s the same iron formation that hosts the BHP’s Yarrie Mine just 30 km to the north of us. It’s

35                    (inaudible) (00:17:22) is where the iron formation. It is the (inaudible) (00:17:25)( iron formation and we’ve been pulling some… recently doing a little bit of drilling. Now, this is not 10 km down the ridge, it is down at the corner, away from us. Virtually, 500 m from the edge of the planned pit and we’re pulling intersections. You can see some of these fairly spectacular

40                    intersections of massive high grade hematites sitting right there beside it. The only other thing that’s into the deposit which is highlighted here, which we’re probably have Australia’s largest tungsten deposit. It’s very low grade, but it’s somewhere…. we don’t know how big it’s going to be probably 25 to 50 million tonnes of somewhere around 0.05% tungsten. However, it’s in the

45                    pit and it’s in our new pit design. It will get mined as waste. The mining cost will be attributed to the Moly and it will get processed. At those grades, it’s worth about half the value of Moly, but it is something we’re now putting sometime into.

                        Just to finalize my talk, there’s our capital structure. We are a little bit unusual for Australian companies in that we don’t have much paper on issued, fully diluted but just over 100 million shares. We’ve raised over $170 million into this company over the past five years, our major shareholders are

5                      there. We are dual listed between Australia and Canada and we have a significant shareholder base in New York.

                        Thank you very much. I hope you get the message.

INTERVIEW CONCLUDED

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