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November 25, 2008 Dear Friend, We have completed detailed updates on Mercator Minerals and General Moly, Inc., and will be reviewing some of the "largest declining share price stocks" in our coverage over the coming weeks. It is possible that the period before year-end experiences the worst of investor withdrawals, fund liquidations or tax selling. It is possible that the real economy recovers or improves, the US dollar weakens, mines shut or other changes improve outlooks. We modeled Mercator Minerals at $2.00 copper and $15 moly for 2009, $2.50 copper and $15 moly for 2010 and $3.25 moly and $20 moly thereafter. This was a robust scenario in which earnings averaged $2.93 per share in 2012-20 and no external fundings were needed though we estimated June 2009 cash balances at just $5.9 mm. However, we "stress tested" it at $1.50 copper and $5 moly indefinitely, which would require about $2.25 mm per month of management salaries, moly trader fees or other supplier payments "in common stock" and a 2012 debt refinancing. General Moly, Inc. requires at least $700 mm more in external financings to complete its Mt. Hope project. It is possible that counter parties do not honor "offtake agreements" at $15 moly or that Posco does not advance the final $70 mm after permitting. However, GMO's $121 mm in September 30, 2008 cash balances afford it the opportunity to "change colors" to pursue a less capital-intensive project, which is not the company's intent. It has $228 mm in equipment purchase commitments, which is hopes to "stretch out." We will host a Holiday Party at the 21 Club, 21 West 52nd Street, between 6 and 8 pm on Monday December 15th in Manhattan. We hope you can bring a friend and join us. Faithfully, John C. Tumazos |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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