General Moly has two significant primary molybdenum assets located in central Nevada: the Mt. Hope project and the Liberty project. When both these properties are in production, General Moly expects to be producing an estimated 50 million pounds of moly annually. With expected production costs well below many other projected primary moly mines, General Moly is positioned to become the world's largest primary moly producer.
Mt. Hope
The Mount Hope project, located in Eureka County, Nevada, is General Moly's primary moly property. The site contains 1.3 billion pounds of proven and probable molybdenum reserves.
Based on a Bankable Feasibility Study (BFS) completed in August 2007 and subsequent updates, planned production from Mt. Hope will average approximately 40 million pounds annually for the first five years. Total mine life is projected at 44 years, with 32 years of open pit mining and processing, followed by 12 years of processing lower grade stockpiled ore. For the first five years, processed ore grades are expected to average 0.103% molybdenum. At approximately $80 per barrel oil-equivalent energy costs, direct operating costs at Mt. Hope are anticipated to be $5.29 per pound. At those energy costs and utilizing a flat $15 per pound moly price, the Company's levered after-tax Net Present Value (NPV) of the Mt. Hope project, discounted at 8%, is approximately $1.2 billion.
Permitting work for the Mt. Hope project is ongoing, and we currently expect permits to be received in the first half of 2011. We have ordered much of the required long-lead time capital equipment. Following receipt of permits and the delivery of the Hanlong-sourced bank loan, we will initiate construction at Mt. Hope. The Company estimates that production at Mt. Hope can begin approximately 20 months following the initiation of construction and the completion of financing.
General Moly owns an 80% interest in Mt. Hope, following the finalization of a joint venture agreement with POSCO, a Korean steel company and the world's fourth largest steel producer, in February 2008. Persuant to the joint venture, POSCO will pay General Moly $156 million for its 20% interest as well as 20% of the project's $1.2 billion capital requirement. Once Mt. Hope is in production, POSCO will take a 20% share of production and fund 20% of the mine's operating costs.
Hanlong is a privately-owned Chinese company and will become a major investor in General Moly. Announced in March 2010, Hanlong will purchase 25% of General Moly for $80 million and procure from a Chinese bank a $665 million loan. The total funding from the Hanlong transaction is anticipated to fund all remaining capital requirements for Mt. Hope.
We have also signed off-take agreements with four major moly industry participants and have pre-sold 100% of Mt. Hope's future production for the first five years of operations. These agreements commence once Mt. Hope begins production and provide General Moly with ready customers and moly price protection in the form of hard floor prices between $12.50 and $13.50 per pound.
Liberty Project
The Liberty project, formerly named Hall-Tonopah, is located in Nye County, Nevada. The property is wholly owned by General Moly. The Company purchased all outstanding royalties in February 2007. Liberty contains a previously-mined molybdenum and copper deposit, and includes a pit that is open and accessible.
Based on a Pre-Feasibility Study completed in April 2008, life-of-mine production is projected to be 503 million pounds of molybdenum. Production of moly for the first five years is anticipated at 19 million pounds per year, with average ore grades of 0.091%. In addition, the site will produce 18 million pounds of copper annually over the first five years. The 33-year projected mine life includes 24 years of primary production followed by 10 years of low-grade stockpile production.
Project economics include an after-tax Net Present Value (NPV) of $514 million discounted at 8% ($356 million discounted at 10%) and an Internal Rate of Return (IRR) of 22%, with capital payback of 3.5 years from initial production, based on the pre-feasibility completed in April 2007.
The Liberty project is expected to become our second molybdenum operation, after the completion of the Mt. Hope project, with initial production dependant on market conditions.