**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549**

** **

**FORM 10-Q**

 
| **x**                                                       | ** ** | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**  |
|-------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------|
| ** **                                                  | ** ** | ** **                                                                                         |
| **For the quarterly period ended  September 30, 2008** |
| ** **                                                  | ** ** | ** **                                                                                         |
| **o**                                                       | ** ** | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |

 

**For the transition periodfrom             to          **

** **

**Commission File Number:001-32986**

** **

**General Moly, Inc.********(Exact name of registrant as specified in its charter)**

 

| **DELAWARE**                      | ** ** | **91-0232000**      |
|-----------------------------------|------------|---------------------|
| (State or other jurisdiction      |       | (I.R.S. Employer    |
| of incorporation or organization) |       | Identification No.) |

 

**1726 Cole Blvd., Suite 115Lakewood, CO 80401Telephone:  (303) 928-8599**(Address and telephonenumber of principal executive offices)

** **

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for at least the past 90 days.  **YES ****x NO ****o**

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See the definitions of “large accelerated filer,” “acceleratedfiler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
| o | Large accelerated filer                                            | Accelerated filer         | x |
|---|--------------------------------------------------------------------|---------------------------|---|
| o | Non-accelerated filer (Do not check if smaller  reporting company) | Smaller reporting company | o |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  **YES ****o NO ****x**

 

The number of shares outstanding of registrant’scommon stock as of October 27, 2008 was 71,842,646.

 

 

 

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**PART I - FINANCIALINFORMATION**

** **

**ITEM 1.****                                                     FINANCIALSTATEMENTS**

 

**GENERAL MOLY, INC.(A DEVELOPMENT STAGE COMPANY)CONDENSED CONSOLIDATED BALANCE SHEETS**

** **

**(Unaudited - Dollars inthousands except per share amounts)**

 
| ** **                                                                                                                                  | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                                  |       |                         |       |                        |       |
| CURRENT ASSETS                                                                                                                              |       |                         |       |                        |       |
| Cash and cash  equivalents                                                                                                                  |       | $                            | 79,508     |                        | $          | 78,371 |   |
| Restricted cash –  Eureka Moly, LLC                                                                                                    |       | 41,578                       |       | —                      |       |
| Deposits,  prepaid expenses and other current assets                                                                                        |       | 441                          |       | 360                         |       |
| Total Current  Assets                                                                                                                       |       | 121,527                      |       | 78,731                      |       |
| Mining  properties, land and water rights                                                                                                   |       | 63,802                       |       | 29,578                      |       |
| Deposits on  property, plant and equipment                                                                                                  |       | 23,339                       |       | 490                         |       |
| Restricted cash  held for electricity transmission                                                                                          |       | 12,545                       |       | —                      |       |
| Restricted cash  held for reclamation bonds                                                                                                 |       | 1,132                        |       | 777                         |       |
| Property and  equipment, net                                                                                                                |       | 809                          |       | 711                         |       |
| Other assets                                                                                                                                |       | 2,994                        |       | —                      |       |
| TOTAL ASSETS                                                                                                                                |       | $                            | 226,148    |                        | $          | 110,287 |   |
| ** **                                                                                                                                  |       |                         |       |                        |       |
| **LIABILITIES,  MINORITY INTEREST AND STOCKHOLDERS’ EQUITY**                                                                           |       |                         |       |                        |       |
| CURRENT  LIABILITIES                                                                                                                        |       |                         |       |                        |       |
| Accounts payable  and accrued liabilities                                                                                                   |       | $                            | 10,408     |                        | $          | 7,457 |   |
| Provision for  post closure reclamation and remediation costs                                                                               |       | 90                           |       | 90                          |       |
| Current portion  of long term debt                                                                                                          |       | 109                          |       | 62                          |       |
| Total Current  Liabilities                                                                                                                  |       | 10,607                       |       | 7,609                       |       |
| Provision for  post closure reclamation and remediation costs, net of current portion                                                       |       | 641                          |       | 422                         |       |
| Long term debt,  net of current portion                                                                                                     |       | 296                          |       | 151                         |       |
| Total  Liabilities                                                                                                                          |       | 11,544                       |       | 8,182                       |       |
|                                                                                                                                        |       |                         |       |                        |       |
| COMMITMENTS AND  CONTINGENCIES – NOTE 9                                                                                                |       | —                       |       | —                      |       |
|                                                                                                                                        |       |                         |       |                        |       |
| MINORITY  INTEREST                                                                                                                          |       | 100,000                      |       | —                      |       |
|                                                                                                                                        |       |                         |       |                        |       |
| STOCKHOLDERS’  EQUITY                                                                                                                  |       |                         |       |                        |       |
| Preferred stock,  $0.001 par value; 10,000,000 shares authorized, no shares issued  and outstanding                               |       | —                       |       | —                      |       |
| Common stock,  $0.001 par value; 200,000,000 shares authorized, 71,509,313 and  66,131,384 shares issued and outstanding, respectively |       | 72                           |       | 66                          |       |
| Additional  paid-in capital                                                                                                                 |       | 184,147                      |       | 159,828                     |       |
| Accumulated  deficit before exploration stage                                                                                               |       | (213                         | )          | (213                        | )          |
| Accumulated  deficit during exploration and development stage                                                                               |       | (69,402                      | )          | (57,576                     | )          |
| Total  Stockholders’ Equity                                                                                                            |       | 114,604                      |       | 102,105                     |       |
| **TOTAL  LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY**                                                                     |       | $                            | 226,148    |                        | $          | 110,287 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

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**GENERAL MOLY, INC.(A DEVELOPMENT STAGE COMPANY)CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited - Inthousands, except per share amounts)**

 
| ** **                                                              | ** ** | **Three Months Ended**   | ** ** | **Nine Months Ended**    | ** ** | **January 1, 2002  (Inception of  Exploration  Stage) to** | ** ** |
|-------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                                              | ** ** | **September 30,   2008** | ** ** | **September 30,   2007** | ** ** | **September 30,   2008**                                             | ** ** | **September  30, 2007** | ** ** | **September 30,  2008** | ** ** |
|                                                                    |       |                               |       |                               |       |                                                                           |       |   |   |   |   |
| REVENUES                                                                |       | $                                  | —     |                               | $          | —                                                                         |       | $ | — |   | $ | — |   | $ | — |   |
| OPERATING  EXPENSES:                                                    |       |                               |       |                               |       |                                                                           |       |   |   |   |   |
| Exploration and  evaluation                                             |       | 1,084                              |       | 6,028                              |       | 5,270                                                                          |       | 16,183 |   | 36,305 |   |
| General and  administrative expense                                     |       | 2,204                              |       | 6,374                              |       | 8,119                                                                          |       | 15,306 |   | 36,965 |   |
| TOTAL OPERATING EXPENSES                                           |       | 3,288                              |       | 12,402                             |       | 13,389                                                                         |       | 31,489 |   | 73,270 |   |
| LOSS FROM  OPERATIONS                                                   |       | (3,288                             | )          | (12,402                            | )          | (13,389                                                                        | )          | (31,489 | ) | (73,270 | ) |
| OTHER INCOME                                                            |       |                               |       |                               |       |                                                                           |       |   |   |   |   |
| Interest and  dividend income                                           |       | 530                                |       | 346                                |       | 1,563                                                                          |       | 875 |   | 3,803 |   |
| Realized gains                                                          |       | —                             |       | —                             |       | —                                                                         |       | — |   | 65 |   |
| TOTAL OTHER  INCOME                                                     |       | 530                                |       | 346                                |       | 1,563                                                                          |       | 875 |   | 3,868 |   |
| LOSS BEFORE  TAXES                                                      |       | (2,758                             | )          | (12,056                            | )          | (11,826                                                                        | )          | (30,614 | ) | (69,402 | ) |
| INCOME TAXES                                                            |       | —                             |       | —                             |       | —                                                                         |       | — |   | — |   |
| NET LOSS                                                                |       | $                                  | (2,758     | )                                  | $          | (12,056                                                                        | )          | $ | (11,826 | ) | $ | (30,614 | ) | $ | (69,402 | ) |
| BASIC AND  DILUTED LOSS PER SHARE OF COMMON STOCK                       |       | $                                  | (0.04      | )                                  | $          | (0.22                                                                          | )          | $ | (0.17 | ) | $ | (0.60 | ) |   |   |
| WEIGHTED AVERAGE  NUMBER OF COMMON SHARES OUTSTANDING BASIC AND DILUTED |       | 71,353                             |       | 55,979                             |       | 69,663                                                                         |       | 51,193 |   |   |   |

 

Theaccompanying notes are an integral part of these condensed consolidatedfinancial statements.

 

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**GENERAL MOLY, INC.(A DEVELOPMENT STAGE COMPANY)CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

 

**(Unaudited – Inthousands)**

 
| ** **                                                                                      | ** ** | **Nine Months Ended** | ** ** | **1-Jan-02  (Inception of  Exploration  Stage) to** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                                      | ** ** | **September 30,  2008**    | ** ** | **September 30,  2007**                                  | ** ** | **September 30,  2008** | ** ** |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                                          |       |                            |       |                                                          |       |   |   |
| Net loss                                                                                        |       | $                               | (11,826    | )                                                             | $          | (30,614 | ) | $ | (69,402 | ) |
| Adjustments to  reconcile net loss to net cash used by operating activities:                    |       |                            |       |                                                          |       |   |   |
| Services and  expenses paid with common stock                                                   |       | —                          |       | 304                                                           |       | 1,990 |   |
| Depreciation and  amortization                                                                  |       | 225                             |       | 129                                                           |       | 483 |   |
| Equity  compensation for employees and directors                                                |       | 2,029                           |       | 5,546                                                         |       | 11,556 |   |
| Decrease  (increase) in deposits, prepaid expenses and other                                    |       | 53                              |       | 49                                                            |       | (349 | ) |
| (Increase) in  restricted cash held for electricity transmission                                |       | (12,545                         | )          | —                                                        |       | (12,545 | ) |
| Increase in  accounts payable and accrued liabilities                                           |       | 2,951                           |       | 7,464                                                         |       | 10,385 |   |
| Increase in post  closure reclamation and remediation costs                                     |       | 219                             |       | 312                                                           |       | 522 |   |
| Net cash used by  operating activities                                                          |       | (18,894                         | )          | (16,810                                                       | )          | (57,360 | ) |
|                                                                                            |       |                            |       |                                                          |       |   |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                                          |       |                            |       |                                                          |       |   |   |
| Payments for the  purchase of equipment                                                         |       | (457                            | )          | (752                                                          | )          | (1,300 | ) |
| Purchase of  securities                                                                         |       | —                          |       | —                                                        |       | (137 | ) |
| Purchase and  development of mining properties, land and water rights                           |       | (32,422                         | )          | (8,675                                                        | )          | (58,787 | ) |
| Deposits on  property, plant and equipment                                                      |       | (22,849                         | )          | —                                                        |       | (23,339 | ) |
| Decrease  (increase) in restricted cash held for reclamation bonds                              |       | (355                            | )          | (50                                                           | )          | (641 | ) |
| Cash provided by  sale of marketable securities                                                 |       | —                          |       | —                                                        |       | 246 |   |
| Net cash used by  investing activities                                                          |       | (56,083                         | )          | (9,477                                                        | )          | (83,958 | ) |
|                                                                                            |       |                            |       |                                                          |       |   |   |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                                          |       |                            |       |                                                          |       |   |   |
| Proceeds from  issuance of stock, net of issuance costs                                         |       | 20,494                          |       | 32,485                                                        |       | 165,024 |   |
| Cash proceeds  from POS-Minerals Corporation                                                    |       | 100,000                         |       | —                                                        |       | 100,000 |   |
| Cash paid to  POS-Minerals Corporation for purchase price adjustment                            |       | (2,994                          | )          | —                                                        |       | (2,994 | ) |
| (Increase) in  restricted cash – Eureka Moly, LLC                                          |       | (41,578                         | )          | —                                                        |       | (41,578 | ) |
| Net increase in  debt                                                                           |       | 192                             |       | 47                                                            |       | 328 |   |
| Net cash  provided by financing activities                                                      |       | 76,114                          |       | 32,532                                                        |       | 220,780 |   |
| Net increase in  cash and cash equivalents                                                      |       | 1,137                           |       | 6,245                                                         |       | 79,462 |   |
| Cash and cash  equivalents, beginning of period                                                 |       | 78,371                          |       | 17,882                                                        |       | 46 |   |
| Cash and cash  equivalents, end of period                                                       |       | $                               | 79,508     |                                                          | $          | 24,127 |   | $ | 79,508 |   |
|                                                                                            |       |                            |       |                                                          |       |   |   |
| NON-CASH  INVESTING AND FINANCING ACTIVITIES:                                                   |       |                            |       |                                                          |       |   |   |
| Equity  compensation capitalized as development                                                 |       | $                               | 1,801      |                                                          | $          | — |   | $ | 3,605 |   |
| Restricted cash  held for reclamation bond acquired in an acquisition                           |       | —                          |       | 491                                                           |       | 491 |   |
| Post closure  reclamation and remediation costs and accounts payable assumed in an  acquisition |       | —                          |       | 263                                                           |       | 263 |   |
| Common stock and  warrants issued for property and equipment                                    |       | —                          |       | 826                                                           |       | 1,586 |   |

 

The accompanyingnotes are an integral part of these condensed consolidated financialstatements.

 

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**GENERAL MOLY, INC.(A DEVELOPMENT STAGE COMPANY)**

 

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE1 — DESCRIPTION OF BUSINESS**

 

GeneralMoly, Inc. (“we,” “us,” “our,” “the Company,” or “General Moly”) is aDelaware corporation originally incorporated as General Mines Corporation on November 23,1925.  In 1966, the Company amended itsarticles of incorporation to change its name to Idaho General Petroleum andMines Corporation, and amended its articles again in 1967, changing its name toIdaho General Mines, Inc. On October 5, 2007, we reincorporated inthe State of Delaware (the “Reincorporation”) through a merger involving IdahoGeneral Mines, Inc. and General Moly, Inc., a Delaware corporationthat was a wholly owned subsidiary of Idaho General Mines, Inc. TheReincorporation was effected by merging Idaho General Mines, Inc. with andinto General Moly, with General Moly being the surviving entity.  For purposes of the Company’s reportingstatus with the U.S. Securities and Exchange Commission, General Moly is deemeda successor to Idaho General Mines, Inc.

 

Wewere in the exploration stage until October 4, 2007 when our Board ofDirectors (the “Board”) approved the development of the Mt. Hopemolybdenum property (the “Mt. Hope Project”) in Eureka County,Nevada.  The Company is now in thedevelopment stage and is currently proceeding with the development of theMt. Hope Project.  We are alsoconducting exploration and evaluation activities on our Liberty molybdenumproperty (the “Liberty Property” formerly referred to as the “Hall-TonopahProperty”) in Nye County, Nevada.

 

Effectiveas of January 1, 2008, we contributed all of our interest in the assetsrelated to the Mt. Hope Project, including our lease of the Mt. HopeProject, into a newly formed entity, Eureka Moly, LLC, a Delaware limitedliability company (“Eureka Moly”), and in February 2008 (the “Closing Date”)entered into a joint venture for the development and operation of theMt. Hope Project (the “Joint Venture”) with POS-Minerals Corporation (“POS-Minerals”)an affiliate of POSCO, a large Korean steel company.  Under the Joint Venture, POS-Minerals owns a20% interest in Eureka Moly and General Moly, through a wholly ownedsubsidiary, owns an 80% interest.

 

Theinterim Condensed Consolidated Financial Statements of the Company areunaudited.  In the opinion of management,all adjustments and disclosures necessary for a fair presentation of theseinterim statements have been included. All such adjustments are, in the opinion of management, of a normalrecurring nature.  The results reportedin these interim Condensed Consolidated Financial Statements are notnecessarily indicative of the results that may be reported for the entire year.  These interim Condensed ConsolidatedFinancial Statements should be read in conjunction with the ConsolidatedFinancial Statements included in our Annual Report on Form 10-KSB for theyear ended December 31, 2007.

 

Certainamounts for the three and nine months ended September 30, 2007 have beenreclassified to conform to the 2008 presentation.

 

**NOTE2 — LIQUIDITY AND CAPITAL REQUIREMENTS**

 

On October 4,2007, the Board approved the development of the Mt. Hope Project ascontemplated in our Bankable Feasibility Study (the “Bankable Feasibility Study”).  The Company has completed basic engineeringof the Mt. Hope Project and has updated its Bankable Feasibility Study basedupon having completed 25% of the engineering.

 

The development of theMt. Hope Project has an estimated total capital requirement ranging fromapproximately $1.1 billion to $1.2 billion, comprised of initialdevelopment costs of approximately $1,040.0 million (in 2008 dollars);$65.0 million in cash bonding requirements; $26.0 million in AdvanceRoyalty Payments (as hereinafter defined); $16.0 million in pre-payments andamounts necessary for working capital. Depending on the ultimate capital structure to finance the project,additional costs may be incurred related to financing.  Through September 30, 2008, Eureka Molyhas placed approximately $228.5 million in equipment orders and has pre-paid$12.6 million into an escrow arrangement for electricity transmissionservices.  The original estimated totalcapital 

 

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requirement wasapproximately $1.0 billion, comprised of initial development costs in excess of$850.0 million (in 2007 dollars); $53.0 million in cash bonding requirements;$22.0 million in Advance Royalty Payments; and amounts necessary for workingcapital.  The total increase in theestimated initial development costs compared with the August 2007 BankableFeasibility Study amount was primarily a result of increases to constructionlabor rates, commodity prices (primarily fuel costs), indirect constructioncosts, increase in quantity for construction materials and Company salary andwages.

 

In February 2008,we entered into the Joint Venture, the terms of which reduced our fundingrequirements for the Mt. Hope Project by up to 20%.  Under the terms of the Joint Venture,POS-Minerals is required to provide up to $170.0 million and 20% of thecosts incurred after January 1, 2008. Of the $170.0 million, $50.0 million was received in February 2008,$50.0 million was received in June 2008, and the remaining$70.0 million and 20% of the costs incurred after the Closing Date (the “ThirdContribution Amount”) is to be received once the Mt. Hope Project receivesthe necessary permits to develop and operate the Mt. Hope Project (the “POS-MineralsThird Contribution Date”).  Until thePOS-Minerals Third Contribution Date, we are required to fund development costsof the Mt. Hope Project that in the aggregate exceed previous POS-Mineralscontributions.  The obligations ofPOS-Minerals to contribute the Third Contribution Amount may be reduced or eliminatedif the necessary permits to develop and operate the Mt. Hope project are notreceived by December 31, 2009.

 

Additionalcapital will be required through the commencement of Mt. Hope processingwhich is estimated to begin in late 2010. Our ability to develop the project on time and on budget is dependenton, among other things, the permitting process and our ability to raise thenecessary capital to fund the Mt. Hope Project both in sufficient amountand in a timely manner.  Additionally, ifthe currently estimated costs of the Mt. Hope Project are exceeded we willneed to raise additional capital to fund such overruns.

 

We donot currently have the capital necessary to complete the Mt. Hope Projectand, accordingly, plan to raise the capital on an ongoing basis whenneeded.  We currently estimate needingbetween $600-$700 million to fully finance the Mt. Hope project.  The Company is currently, and will on anongoing basis be, pursuing the most efficient sources of funding for theproject including, but not limited to, the equity markets, the bank projectfinance markets and the high yield capital debt markets.  The Company is also evaluating additionalsupport from current strategic partners, the possibility of a sale of anotherminority interest in the Mt. Hope project to other strategic partners, debtfrom private investment groups as well as the continued monitoring of thecapital markets as potential sources of interim project financing needs.  Recent disruptions in national andinternational credit markets have led to very illiquid and volatileconditions.  There is a scarcity ofcredit and lenders are imposing tighter lending standards and higher interestrates on loans.  Our ability to obtainthe necessary funding for the Mt. Hope Project as well as the terms for suchfunding may be adversely affected by these disruptions in the creditmarkets.  Our existing cash on hand at September 30,2008 should be sufficient to fund planned operations for the Mt. HopeProject, as well as our other planned operations through the first quarter of 2009.  If we are unable to raise capital whenneeded, it will be necessary to develop alternative plans that could delay thedevelopment and completion of the Mt. Hope Project.  There is no assurance that we will be able toobtain the necessary financing for the Mt. Hope Project on termsacceptable to us, or at all.

 

In September 2008we appointed Barclays Capital and Credit Suisse Securities (USA) LLC as co-leadproject finance arrangers to structure and arrange the financing package forthe Mt. Hope Project.

 

Wealso require capital to continue the exploration and evaluation of the LibertyProperty, as well as continue payment of ongoing general and administrativecosts associated with supporting our planned operations.

 

**NOTE3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

** **

Thissummary of significant accounting policies is presented to assist inunderstanding the financial statements. The financial statements and notes are representations of the Company’smanagement, which is responsible for their integrity and objectivity.  These accounting policies conform toaccounting principles generally accepted in the United States of America (“U.S.GAAP”) and have been consistently applied in the preparation of the financial statements.

 

*Accounting Method*

 

Ourfinancial statements are prepared using the accrual basis of accounting inaccordance with U.S. GAAP.  At December 31,2007, all of our subsidiaries were wholly owned.  In February 2008, we entered into theJoint Venture which establishes our ownership interest in Eureka Moly at80%.  At September 30, 2008, theconsolidated financial 

 

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statements include all of our wholly ownedsubsidiaries and Eureka Moly.  ThePOS-Minerals contributions attributable to their 20% interest are shown asMinority Interest in the financial statements.

 

*Estimates*

 

Theprocess of preparing financial statements requires the use of estimates andassumptions regarding certain types of assets, liabilities, revenues, andexpenses.  Such estimates primarilyrelate to unsettled transactions and events as of the date of the financialstatements.  Accordingly, uponsettlement, actual results may differ from estimated amounts.

 

*Cash and Cash Equivalents*

 

Weconsider all highly liquid investments with original maturities of three monthsor less to be cash equivalents.  Therestricted cash of Eureka Moly represents the unspent amount of thePOS-Minerals contributions, which are available for the continuing developmentof the Mt. Hope Project.

 

*Exploration and Development StageActivities*

 

We were in theexploration stage from January 2002 until October 4, 2007.  On October 4, 2007, our Board approvedthe development of the Mt. Hope Project as contemplated in the BankableFeasibility Study and we then entered into the Development Stage.  We have not realized any revenue fromoperations.  We will be primarily engagedin development of the Mt. Hope Project and exploration and evaluation ofthe Liberty Property until we enter the production stage.

 

*Fair Value of Financial Instruments*

 

Ourfinancial instruments as defined by Statement of Financial Accounting StandardsNo. 157, “Fair Value Measurements,” include cash, restricted cash,accounts payable and accrued liabilities. All instruments are accounted for on a historical cost basis, which, dueto the short maturity of these financial instruments, approximates fair valueat September 30, 2008 and December 31, 2007.

 

*Basic and Diluted Loss Per Share*

 

Lossper share was computed by dividing the net loss by the weighted average numberof shares outstanding during the period. The weighted average number of shares was calculated by taking thenumber of shares outstanding and weighting them by the amount of time that theywere outstanding.  Outstanding warrantsto purchase 7,455,434 and 11,861,015 shares of common stock, options topurchase 4,175,490 and 3,777,500 shares of common stock and unvested stockawards totaling 195,000 and 270,000 at September 30, 2008 and 2007,respectively, were not included in the computation of diluted loss per sharefor the three and nine months ended September 30, 2008 and 2007,respectively, because to do so would have been antidilutive.  Therefore, basic loss per share is the sameas diluted loss per share.

 

*Mineral Exploration and DevelopmentCosts*

 

Allexploration expenditures are expensed as incurred.  Significant property acquisition payments foractive exploration properties are capitalized. If no economic ore body is discovered, previously capitalized costs, inexcess of the property value, are expensed in the period the property isabandoned.  Expenditures to develop newmines, to define further mineralization in existing ore bodies, and to expandthe capacity of operating mines, are capitalized and amortized on aunits-of-production basis over proven and probable reserves.

 

Shoulda property be abandoned, its capitalized costs are charged to operations.  The Company charges to the consolidatedstatement of operations the allocable portion of capitalized costs attributableto properties sold.  Capitalized costsare allocated to properties sold based on the proportion of claims sold to theclaims remaining within the project area.

 

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*Mining Properties, Land and WaterRights*

 

Costsof acquiring and developing mining properties, land and water rights arecapitalized as appropriate by project area. Exploration and related costs and costs to maintain mining properties,land and water rights are expensed as incurred while the property is in theexploration and evaluation stage. Development and related costs and costs to maintain mining properties,land and water rights are capitalized as incurred while the property is in thedevelopment stage.  When a propertyreaches the production stage, the related capitalized costs are amortized usingthe units-of-production basis over proven and probable reserves.  Mining properties, land and water rights areperiodically assessed for impairment of value, and any subsequent losses arecharged to operations at the time of impairment.  If a property is abandoned or sold, a gain orloss is recognized and included in the consolidated statement of operations.

 

*Provision for Taxes*

 

Incometaxes are provided based upon the liability method of accounting pursuant toStatement of Financial Accounting Standards No. 109, “Accounting forIncome Taxes” (hereinafter “SFAS 109”). Under this approach, deferred income taxes are recorded to reflect thetax consequences in future years of differences between the tax basis of assetsand liabilities and their financial reporting amounts at each year-end.  A valuation allowance is recorded against thedeferred tax asset if management does not believe the Company has met the “morelikely than not” standard imposed by SFAS 109 to allow recognition of suchan asset.

 

*Reclamation and Remediation*

 

Expendituresfor ongoing compliance with environmental regulations that relate to currentoperations are expensed or capitalized as appropriate.  Expenditures resulting from the remediationof existing conditions caused by past operations that do not contribute tofuture revenue generations are expensed as incurred.  Liabilities are recognized when environmentalassessments indicate that remediation efforts are probable and the costs can bereasonably estimated.

 

Estimates of suchliabilities are based upon currently available facts, existing technology andpresently enacted laws and regulations taking into consideration the likelyeffects of inflation and other societal and economic factors, and includeestimates of associated legal costs. These amounts also reflect prior experience in remediating contaminatedsites, other companies’ clean-up experience and data released by TheEnvironmental Protection Agency or other organizations.  Such estimates are by their nature impreciseand can be expected to be revised over time because of changes in governmentregulations, operations, technology and inflation.  Recoveries are evaluated separately from theliability and, when recovery is assured, the Company records and reports anasset separately from the associated liability.

 

*Accounting Pronouncements—Recent*

 

In September 2006,the FASB issued FASB Statement No. 157, “Fair Value Measurements” (“SFAS157”). SFAS 157 defines fair value, establishes a framework for measuring fairvalue in generally accepted accounting principles, and expands disclosuresabout fair value measurements. The provisions of SFAS 157 were adopted on January 1,2008. In February 2008, the FASB staff issued Staff Position No. 157-2“Effective Date of FASB Statement No. 157” which delayed the effectivedate of SFAS 157 for nonfinancial assets and nonfinancial liabilities whichwill be effective for our fiscal year beginning January 1, 2009.

 

SFAS157 establishes a fair value hierarchy that prioritizes the inputs to valuationtechniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices inactive markets for identical assets or liabilities (Level 1 measurements) andthe lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchyunder SFAS 157 are described below:

 

Level 1 – Unadjustedquoted prices in active markets that are accessible at the measurement date foridentical unrestricted assets or liabilities.

 

8

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Level 2 – Quoted pricesin markets that are not active, or inputs that are observable, either directlyor indirectly, for substantially the full term of the asset or liability.

Level 3 – Prices orvaluation techniques that require inputs that are both significant to fairvalue measurement and unobservable (supported by little or no market activity).

 

TheCompany’s cash, restricted cash, and cash equivalents are classified withinLevel 1 of the fair value hierarchy because they are valued using quoted marketprices.  The cash instruments that arevalued based on quoted market prices in active markets are primarily moneymarket securities.

 

In February 2007,the FASB issued FASB Statement No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permitsentities to choose to measure many financial instruments and certain otheritems at fair value, with the objective of improving financial reporting bymitigating volatility in reported earnings caused by measuring related assetsand liabilities differently without having to apply complex hedge accountingprovisions. The provisions of SFAS 159 were adopted January 1, 2008. TheCompany did not elect the Fair Value Option for any of its financial assets orliabilities and therefore the adoption of SFAS 159 had no impact on ourconsolidated financial statements.

 

In December 2007,the FASB issued FASB Statement No. 160, “Noncontrolling Interests inConsolidated Financial Statements- an amendment of ARB No. 51” (“SFAS 160”),which establishes accounting and reporting standards pertaining to ownershipinterests in subsidiaries held by parties other than the parent, the amount ofnet income attributable to the parent and to the noncontrolling interest,changes in a parent’s ownership interest, and the valuation of any retainednoncontrolling equity investment when a subsidiary is deconsolidated. SFAS 160also establishes disclosure requirements that clearly identify and distinguishbetween the interests of the parent and the interests of the noncontrollingowners. SFAS 160 is effective for our fiscal year beginning January 1,2009. When adopted the minority interest will be reclassified as equityattributable to outside shareholders within total equity for all periodspresented.

 

**NOTE4 — MINING PROPERTIES, LAND AND WATER RIGHTS**

** **

Wecurrently have interests in two mining properties that are the primary focus ofour operations.  The Mt. HopeProject is currently in the development stage and the Liberty Property is inthe exploration and evaluation stage.

 

**The Mt. Hope Project. **We are currently in the process of developing theMt. Hope Project.  From November 2004to January 2008, we owned the rights to 100% of the Mt. HopeProject.  In February 2008, weentered into the Joint Venture with POS-Minerals and we now own 80% of theMt. Hope Project and POS-Minerals owns the remaining 20%.  While these ownership interests and/or therequired contributions under the Joint Venture can change based on our failureto satisfy specified conditions, including the receipt of the necessaryoperating permits by December 31, 2009, failure to achieve production by December 31,2011 for reasons other than force majeure, or non-payment of amounts due underthe Joint Venture by either party, we expect the ownership interests in theJoint Venture to remain as they are now through the life of the project and thecontributions to be received in the amounts that follow.

 

Pursuantto the terms of the Joint Venture, POS-Minerals agreed to make cashcontributions to the Joint Venture in the aggregate amount of$170.0 million plus their 20% share of all development costs incurred fromthe Closing Date through the POS-Minerals Third Contribution Date in exchangefor their 20% interest, of which $50.0 million was received in February 2008,$50.0 million was received in June 2008 (the “February 2008 and June 2008Contributions”), and the Third Contribution Amount is to be received on thePOS-Minerals Third Contribution Date. These initial funds are available to fund the Mt. Hope Projectdevelopment costs incurred after the Closing Date.  Additionally, during the third quarter of2008, we paid to POS-Minerals $3.0 million as a final purchase price adjustmentbased on the terms of the Joint Venture related to the difference in thebudgeted versus actual expenditures of the Mt. Hope Project prior to theClosing Date.

 

We arerequired, pursuant to the terms of the Joint Venture, to advance funds requiredfor the development of the Mt. Hope Project in excess of the February 2008and June 2008 Contributions until the POS-Minerals Third ContributionDate, at which point POS-Minerals is required to reimburse us for their 20%share of all development costs incurred from the Closing Date through thePOS-Minerals Third Contribution Date. All costs incurred after 

 

9

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the POS-Minerals Third Contribution Date will beallocated and funded pro rata based on each party’s ownership interest.

 

Ourrights in the Mt. Hope Project are subject to the terms of the lease describedfurther in Note 9.

 

**The Liberty Property.**  We are currently in the process ofexploration and evaluation of the Liberty Property.

 

**Summary. **Thefollowing is a summary of mining properties, land and water rights at September 30,2008 and December 31, 2007 (in thousands):

 
| **Mining properties, land and water rights:** | ** ** | **At September  30, 2008** | ** ** | **At  December 31,  2007** | ** ** |
|------------------------------------------------------------------------|------------|--------------------------------------|------------|---------------------------------|------------|
| Mt. Hope  Project:                                                |       |                                 |       |                            |       |
| Development  costs                                                     |       | $                                    | 39,228     |                            | $          | 7,989 |   |
| Mineral, land  and water rights                                        |       | 10,253                               |       | 9,792                           |       |
| Advance  Royalties                                                     |       | 3,650                                |       | 1,100                           |       |
| Total  Mt. Hope Project                                           |       | 53,131                               |       | 18,881                          |       |
| Total Liberty  Property                                                |       | 9,782                                |       | 9,808                           |       |
| Other Properties                                                       |       | 889                                  |       | 889                             |       |
| Total                                                                  |       | $                                    | 63,802     |                            | $          | 29,578 |   |

 

**NOTE5 — COMMON STOCK WARRANTS**

** **

**NineMonths ended September 30, 2008**

** **

Duringthe nine months ended September 30, 2008 we issued 125,930 shares ofcommon stock upon the cashless exercise of warrants and 4,437,523 shares ofcommon stock were issued upon the cash exercise of warrants in the amount of$20.3 million.

 

Thefollowing is a summary of common stock warrant activity from January 1,2007 through the nine months ended September 30, 2008:

 
| **Description**                                         | ** ** | **Number of  Shares Under  Warrants** | ** ** | **Exercise Price** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------|------------|-------------------------|------------|
| Balance at  January 1, 2007                        |       | 12,217,675                                      |       | $0.80 to $3.75          |       |
| Issued in  connection with private placements and other |       | 3,676,471                                       |       | $5.20                   |       |
| Issued as  finders fee                                  |       | 1,000,000                                       |       | $10.00                  |       |
| Exercised for  cash                                     |       | (4,261,689                                      | )          | $0.80 to $3.75          |       |
| Exercised in  cashless exchange                         |       | (542,000                                        | )          | $1.00 to $3.75          |       |
| Expired                                                 |       | (10,000                                         | )          | $1.00                   |       |
| Balance at  December 31, 2007                      |       | 12,080,457                                      |       | $0.80 to $10.00         |       |
| Exercised for  cash                                     |       | (4,437,523                                      | )          | $0.80 to $5.20          |       |
| Exercised in  cashless exchange                         |       | (187,500                                        | )          | $3.75                   |       |
| Balance at  September 30, 2008                     |       | 7,455,434                                       |       | $3.75 to $10.00         |       |
| Weighted average  exercise price                        |       | $                                               | 4.59       |                    |       |   |
|                                                         |            |                                                 |            |                         |            |  |

 

Of thewarrants outstanding at September 30, 2008, 6,455,434 are exercisable at$3.75 per warrant and expire February 2011 and 1,000,000 are exercisableat $10.00 per share once General Moly has received financing necessary for thecommencement of commercial production at the Mt. Hope project and will expireone year afterwards.

 

10

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**NOTE6 — PREFERRED STOCK**

** **

Pursuantto our Certificate of Incorporation we are authorized to issue10,000,000 shares of $.001 per share par value preferred stock.  The authorized but unissued shares ofpreferred stock may be issued in designated series from time to time by one ormore resolutions adopted by our Board. The directors have the power to determine the preferences, limitationsand relative rights of each series of preferred stock.  At December 31, 2007 and September 30,2008, no shares of preferred stock were issued or outstanding.

 

**NOTE7 — EQUITY INCENTIVES**

** **

During2006, our Board and stockholders adopted the Company 2006 Equity Incentive Plan(the “2006 Plan”).  In October 2007,our stockholders approved an amendment to the 2006 Plan increasing the amountof shares that may be issued under the 2006 Plan from 3,500,000 to5,100,000.  During 2004, our Board andstockholders adopted the Company 2003 Stock Option Plan (the “2003 Plan” andtogether with the 2006 Plan, the “Plans”). The purpose of the Plans is to give us greater ability to attract,retain, and motivate our officers and key employees.  The Plans are intended to provide us with theability to provide incentives more directly linked to the success of ourbusiness and increases in stockholder value.

 

Underthe 2006 Plan, our Board is authorized to grant incentive stock options (“ISOs”)to employees (pursuant to Internal Revenue Code 422), non-statutory stockoptions, restricted stock awards, restricted stock units and stock appreciationrights.  The aggregate number of sharesof common stock that may be issued pursuant to awards granted under the 2006Plan will not exceed 5,100,000, plus the number of shares that are ungrantedand those that are subject to reversion under the 2003 Plan.  As of September 30, 2008, the maximumnumber of shares available for issuance under the 2003 Plan was360,000 shares and under the 2006 Plan was 799,792 shares.  Shares under the 2003 Plan that becomeeligible for awards under the 2006 Plan may not be granted again under the 2003Plan.

 

Thefollowing is a summary of our equity incentive plans as of September 30,2008:

 
| **Equity incentives**                            | ** ** | **Number of  Securities to be  Issued Upon  Exercise of  Outstanding Options** | ** ** | **Weighted Average  Exercise Price of  Outstanding Options** | ** ** | **Number of  Securities  Remaining Available  for Future Issuance  Under Equity  Compensation Plans** | ** ** |
|-------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity  incentives not approved by security holders   |       | 925,500                                                                                                      |       | $                                                                                | 1.59       |                                                                                                                                | n/a        |   |
| Equity incentive  plans approved by security holders: |       |                                                                                                         |       |                                                                             |       |                                                                                                                                |       |
| 2006 Plan                                             |       | 3,189,990                                                                                                    |       | 5.89                                                                             |       | 799,792                                                                                                                             | (1)        |
| 2003 Plan                                             |       | 60,000                                                                                                       |       | 2.10                                                                             |       | 360,000                                                                                                                             |       |
| Total                                                 |       | 4,175,990                                                                                                    |       | $                                                                                | 4.88       |                                                                                                                                | 1,159,792  |   |

 

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(1)             Theaggregate number of shares of common stock that may be issued pursuant toawards granted under the 2006 Plan will not exceed 5,100,000, plus the numberof shares that are ungranted and those that are subject to reversion under 2003Plan.  Shares under the 2003 Plan thatbecome eligible for awards under the 2006 Plan may not be granted again underthe 2003 Plan.

 

**StockOptions**

** **

Duringthe nine months ended September 30, 2008, we granted 589,990 options underthe 2006 Plan with an exercise price ranging from $6.71 to $11.45 with vestingat various dates through 2011.  Theseoptions were granted to officers and employees of the Company.  The fair value of each option is estimated onthe grant date using the Black-Scholes Option Price Calculation.  The following assumptions were made inestimating the fair value:  risk freeinterest rate of 1.7% to 5.2%; volatility of 85% to 104%; dividend rate of 0%;and expected life of from 3.5 to 5.5 years.  The total value of options awarded during thenine months ended September 30, 2008 was calculated at 

 

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$3.4 million. Expense was recorded of $1.3 million and $1.8 million wascapitalized as part of development costs for the options that were earnedduring the nine months ended September 30, 2008.

 

Thefollowing is a summary of stock option activity for the nine months ended September 30,2008:

 
| **Description**                                  | ** ** | **Number of Shares  Under Options** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|--------------------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------------|------------|
| Outstanding  January 1, 2008                |       | 4,067,500                                          |       | $                                              | 3.91       |   |
| Granted                                          |       | 589,990                                            |       | 8.72                                           |       |
| Forfeited                                        |       | (30,000                                            | )          | 4.05                                           |       |
| Exercised                                        |       | (452,000                                           | )          | 1.18                                           |       |
| Outstanding  September 30, 2008             |       | 4,175,490                                          |       | $                                              | 4.88       |   |
| Exercisable at  September 30, 2008          |       | 2,858,832                                          |       | $                                              | 3.41       |   |
| Weighted Average  Fair Value Granted During 2008 |       | $                                                  | 5.79       |                                           |       |   |
|                                                  |            |                                                    |            |                                                |            |  |  |

** **

**StockAwards under the 2006 Plan**

** **

Duringthe year ended December 31, 2007, we issued 250,000 shares of commonstock to an officer of the Company that were earned based on achievingcertain performance based milestones.** **Additionally, during the yearended December 31, 2007, we reserved for issuance 535,000 shares ofnon-vested common stock for officers and employees of the Company of which280,000 were issued upon achievement of certain performance based milestones inthe nine months ended September 30, 2008 and 60,000 shares were forfeitedand removed from the shares reserved upon an officer’s resignation on August 1,2008.  The remaining 195,000 will vestand be issued based on the achievement of certain performance basedmilestones established for each person**.**

 

Duringthe nine months ended September 30, 2008 and the year ended December 31,2007, we issued 133,550 and 160,000 shares, respectively, to directorsthat vest over one and two year periods in exchange for services as Boardmembers.  During the nine months ended September 30,2008, two of the directors retired, forfeiting a total of 63,334 shares of suchstock.  Also during the nine months endedSeptember 30, 2008 and the year ended December 31, 2007, we issued10,000 shares and 5,000 shares, respectively, to retiring Board members inexchange for services rendered.

 

Duringthe nine months ended September 30, 2008 we issued 40,002 shares ofunvested common stock to employees. These shares vest based on employees’ service period over one, two andthree year periods.

 

Thetotal value of stock awards granted and expensed during the nine months ended September 30,2008 was $1.3 million and $0.7 million, respectively.  The total value of stock awards grantedduring the year ended December 31, 2007 was $3.2 million of which$1.9 million was expensed and $1.3 million was capitalized as part ofdevelopment costs.

 

**NOTE8 — INCOME TAXES**

** **

At September 30,2008 and December 31, 2007, we had deferred tax assets principally arisingfrom the net operating loss carry forwards for income tax purposes multipliedby an expected rate of 35%.  As ourmanagement cannot determine that it is more likely than not that we willrealize the benefit of the deferred tax assets, a valuation allowance equal tothe deferred tax asset has been established at September 30, 2008 and December 31,2007.  The significant components of thedeferred tax asset at September 30, 2008 and December 31, 2007 wereas follows (in thousands):

 

12

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| **Description**                         | ** ** | **September 30,  2008** | ** ** | **December 31,  2007** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Operating loss  carry forward           |       | $                            | 49,609     |                        | $          | 39,755 |   |
| Unamortized  exploration expense        |       | 7,985                        |       | 8,268                       |       |
| Deductible stock  based compensation    |       | 864                          |       | 1,914                       |       |
| Net operating  loss carry forward       |       | $                            | 58,458     |                        | $          | 49,937 |   |
| Deferred tax  asset                     |       | $                            | 20,460     |                        | $          | 17,478 |   |
| Deferred tax  asset valuation allowance |       | $                            | (20,460    | )                           | $          | (17,478 | ) |
| Net deferred tax  asset                 |       | $                            | —     |                        | $          | — |   |

 

At September 30,2008 and December 31, 2007, we had net operating loss carry forwards ofapproximately $58.5 million and $49.9 million, respectively, whichexpire in the years 2022 through 2027.

 

**NOTE9—COMMITMENTS AND CONTINGENCIES**

** **

**Mt. HopeProject**

 

EurekaMoly currently has a 30-year renewable lease with Mount Hope Mines, Inc. (“MHMI”)for the Mt. Hope Project (as amended, the “Mt. Hope Lease”).  The Mt. Hope Lease may be terminatedupon the expiration of its 30-year term, earlier at the election of EurekaMoly, or upon Eureka Moly’s material breach and failure to cure suchbreach.  If Eureka Moly terminates thelease, termination is effective 30 days after receipt by MHMI of written noticeto terminate the Mt. Hope Lease and no further payments would be due toMHMI.  In order to maintain the lease,Eureka Moly must pay certain deferral fees and advance royalties as discussedbelow.

 

Pursuantto the terms of the Mt. Hope Lease, the underlying total royalty onproduction payable to MHMI, less certain deductions, is the greater of: (i) $0.25per pound of molybdenum metal (or the equivalent of some other product) sold ordeemed to be sold from the Mt. Hope Project;  (ii) 3.5% if the average gross level ofproducts sold is equal to or lower than $12.00 per pound; (iii) 4.5%if the average gross level of products sold is higher than $12.00 per pound,but equal to or lower than $15 per pound, and (iv) 5% if the averagegross level of products sold is higher than $15 per pound (the “ProductionRoyalties”).  Additionally, Eureka Molyis obligated to pay Exxon Mineral Company a 1% net smelter royalty on allproduction.

 

TheMt. Hope Lease requires a royalty advance (the “Construction RoyaltyAdvance”) of the greater of $2.5 million or 3% of the construction capitalcost estimate upon the earlier of (i) Eureka Moly securing projectfinancing in sufficient amounts to develop and put the Mt. Hope Projectinto operation at an annual production level of at least 10 million poundsor (ii) October 19, 2008.

 

EurekaMoly has the right to defer the Construction Royalty Advance for one or twoyears by payment of a deferral fee (the “Deferral Fee”) in the amount of$0.4 million on or before October 19, 2008 and October 19, 2009in the event project financing for the project has not been secured by each ofthe dates.  By October 19, 2010,Eureka Moly must pay at a minimum $2.5 million of the Construction RoyaltyAdvance with the remainder due upon securing project financing or 50% of theremainder on October 19, 2011 and the other 50% due on October 19,2012.  On October 17, 2008 EurekaMoly paid the $0.4 million Deferral Fee of October 19, 2008 discussedabove to MHMI thereby deferring the Construction Royalty Advance.

 

Oncethe Construction Royalty Advance has been paid in full, Eureka Moly isobligated to pay an advance royalty (the “Annual Advance Royalty”) each October 19thereafter in the amount of $0.5 million per year.  The Construction Royalty Advance and theAnnual Advance Royalty are collectively referred to as the “Advance Royalties”.  All Advance Royalties are credited againstthe Production Royalties once the mine has achieved commercial production.  The Deferral Fees are not recoverable againstProduction Royalties.

 

EurekaMoly is obligated to pay the Construction Royalty Advance each time capital israised for the Mt. Hope Project. Based on the current estimate of raising capital and developing andoperating the mine, we believe Eureka Moly’s contractual obligations under theMt. Hope Lease will be as shown in the following table (inthousands).  This estimate is based onour current estimates of the timing of securing project financing andconstruction capital 

 

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costs.  Theamounts shown are the total amounts (in thousands) remaining at September 30,2008 under the contracts to Eureka Moly. Through September 30, 2008, we have advanced a total of $3.3million.

 

 
| **Year**         | ** ** | **Deferral Fees** | ** ** | **Advance Royalties** | ** ** | **Total** | ** ** |
|------------------|------------|------------------------|------------|----------------------------|------------|-----------|------------|
| 2008 (remainder) |       | $                      | 350        |                       | $          | —    |       | $ | 350 |   |
| 2009             |       | —                 |       | 21,650                     |       | 21,650    |       |
| 2010             |       | —                 |       | 500                        |       | 500       |       |
| 2011 (1)         |       | —                 |       | —                     |       | —    |       |
| Total            |       | $                      | 350        |                       | $          | 22,150    |       | $ | 22,500 |   |

 

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(1)          Based onour current estimates of production and molybdenum prices, after the first fullyear of production, Eureka Moly estimates that the Production Royalties will bein excess of the Annual Advance Royalties for the life of the project and,further, the Construction Royalty Advance will be fully recovered (creditedagainst MHMI Production Royalties) by the end of 2012.

 

**Depositson property, plant and equipment**

 

As acontinuing part of the development of the Mt. Hope Project, Eureka Molyhas begun to place orders for mining and milling equipment that must be builtto specification and requires a long lead time for engineering and manufacturing.  Contractual commitments for long lead itemsrequire progress payments during the engineering and construction of theequipment and have cancellation penalties in the event Eureka Moly cancels thecontract.

 

In theyear ended December 31, 2007, we entered into contracts to purchase aprimary crusher, a semi-autogenous mill, two ball mills and various motors forthe mills.  Additionally, during the ninemonths ended September 30, 2008, Eureka Moly entered into contracts topurchase, among other items, two electric shovels, two multi-hearth molybdenumroasters, 16 flotation cells, three blast hole drills and 24 haul trucks.  At September 30, 2008 and December 31,2007, $23.3 million and $0.5 million, respectively, had been paid underthe contracts.  At September 30,2008 Eureka Moly has committed to the following additional amounts under thecontracts by year (in thousands).

 
| **Year**         | ** ** | **Total** | ** ** |
|------------------|------------|-----------|------------|
| 2008 (remainder) |       | $         | 19,594     |   |
| 2009             |       | 127,775   |       |
| 2010             |       | 57,585    |       |
| 2011             |       | 942       |       |
| Total            |       | $         | 205,896    |   |

 

**Deposit into an escrow account forelectricity transmission service**

 

Duringthe three months ended September 30, 2008 Eureka Moly deposited into anescrow account $12.6 million as security for an electricity transmissioncontract that will provide electricity transmission to the Mt. HopeProject.

 
| **ITEM 2.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|-------------|-------------------------------------------------------------------------------------------------|

 

Referencesmade in this Quarterly Report of Form 10-Q to “we,” “our,” “us,” or the “Company,”refer to General Moly, Inc.

 

Thefollowing discussion and analysis of our financial condition and results ofoperations constitutes management’s review of the factors that affected ourfinancial and operating performance for the three and nine month periodsended September 30, 2008 and 2007.  This discussion should be read in conjunctionwith the 

 

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financial statements and notes thereto containedelsewhere in this report and in our Annual Report on Form 10-KSB, for theyear ended December 31, 2007, which was filed on March 21, 2008.

 

**Overview**

 

We area development stage company and are currently proceeding with the developmentof the Mt. Hope Project.  We arealso conducting exploration and evaluation activities on our Liberty Property.

 

On October 4,2007, our Board of Directors approved the development of the Mt. HopeProject as contemplated in our Bankable Feasibility Study (the “BankableFeasibility Study”).  The Company hascompleted basic engineering of the Mt. Hope Project and has updated itsBankable Feasibility Study based upon having completed 25% of the engineering.

 

Thedevelopment of the Mt. Hope Project has an estimated total capitalrequirement ranging from approximately $1.1 billion to $1.2 billioncomprised of initial development costs of approximately $1,040.0 million(in 2008 dollars); $65.0 million in cash bonding requirements;$26.0 million in Advance Royalty Payments; $16.0 million in pre-payments;and amounts necessary for working capital. Depending on the ultimate capital structure to finance the project,additional costs may be necessary for financing costs.  Through September 30, 2008 Eureka Molyhas placed approximately $228.5 million in equipment orders and has pre-paid$12.6 million into an escrow arrangement for electricity transmissionservices.  The original estimated totalcapital requirement was approximately $1.0 billion, comprised of initialdevelopment costs in excess of $850.0 million (in 2007 dollars); $53.0 millionin cash bonding requirements; $22.0 million in Advance Royalty Payments; andamounts necessary for working capital. The total increase in the estimated initial development costs comparedwith the August 2007 Bankable Feasibility Study amount was primarily aresult of increases to construction labor rates, commodity prices (primarilyfuel costs), indirect construction costs, increase in quantity of constructionmaterials and Company salary and wages.

 

Effectiveas of January 1, 2008, we contributed all of our interest in the assetsrelated to the Mt. Hope Project, including the Mt. Hope Lease, toEureka Moly and in February 2008 (the “Closing Date”) entered into theMt. Hope Project joint venture with POS-Minerals (the “Joint Venture”).  Under the terms of the Joint Venture,POS-Minerals owns a 20% interest in Eureka Moly, and General Moly, through asubsidiary, owns an 80% interest. While these ownership interests and/or therequired contributions under the Joint Venture can change based on our failureto satisfy certain specified conditions, including the receipt of the necessaryoperating permits by December 31, 2009, failure to achieve production by December 31,2011 for reasons other than force majeure, or non-payment of amounts due underthe Joint Venture by either party, we expect the interests to remain as theyare now through the life of the project and the contributions to be received inthe amounts that follow.

 

Pursuantto the terms of the Joint Venture, POS-Minerals agreed to make cashcontributions to the Joint Venture in the aggregate amount of $170.0 millionplus their 20% share of all development costs incurred from the Closing Datethrough the POS-Minerals Third Contribution Date in exchange for their 20%interest, of which $50.0 million was received in February 2008,$50.0 million was received in June 2008 (the “February 2008 andthe June 2008 Contributions”), and the remaining $70.0 million willbe received once the Mt. Hope Project receives the necessary permits todevelop and operate the project (the “POS-Minerals Third Contribution Date”).  These initial funds are available to fund theMt. Hope Project development costs incurred subsequent to the ClosingDate. Additionally, in the third quarter of 2008, we paid to POS-Minerals $3.0million as a final purchase price adjustment based on the terms of the JointVenture related to the difference in the budgeted versus actual expenditures ofthe Mt. Hope Project prior to the Closing Date.

 

We arerequired, pursuant to the terms of the Joint Venture, to advance funds requiredfor the development of the Mt. Hope Project that exceed the February 2008and June 2008 Contributions until the POS-Minerals Third Contribution Dateat which point POS-Minerals is required to reimburse us for their 20% share ofall development costs incurred from the Closing Date through the POS-MineralsThird Contribution Date.  All costsincurred after the POS-Minerals Third Contribution Date will be allocated andfunded pro rata based on each party’s ownership interest.

 

15

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Additionalcapital will be required through the commencement of Mt. Hope processing,which is estimated to begin in late 2010. Our ability to develop the project on time and on budget is dependenton, among other things, the permitting process and our ability to raise thenecessary capital to fund the Mt. Hope Project both in sufficient amountand in a timely manner.  Additionally, ifthe currently estimated costs of the Mt. Hope Project are exceeded we willneed to raise additional capital to fund such overruns.

 

We donot currently have the capital necessary to complete the Mt. Hope Projectand, accordingly, plan to raise the capital on an ongoing basis whenneeded.  We currently estimate needingbetween $600-$700 million to fully finance the Mt. Hope project.  The Company is currently, and will on anongoing basis be, pursuing the most efficient sources of funding for theproject including, but not limited to, the equity markets, the bank projectfinance markets and the high yield capital debt markets.  The Company is also evaluating additionalsupport from current strategic partners, the possibility of a sale of anotherminority interest in the Mt. Hope project to other strategic partners, debtfrom private investment groups as well as the continued monitoring of thecapital markets as potential sources of interim project financing needs.  Recent disruptions in national andinternational credit markets have led to very illiquid and volatileconditions.  There is a scarcity ofcredit and lenders are imposing tighter lending standards and higher interestrates on loans.  Our ability to obtainthe necessary funding for the Mt. Hope Project as well as the terms for suchfunding may be adversely affected by these disruptions in the creditmarkets.  The existing cash on hand at September 30,2008 should be sufficient to fund planned operations for the Mt. HopeProject, as well as our other planned operations through the first quarter of2009.  If we are unable to raise capitalwhen needed, it will be necessary to develop alternative plans that could delaythe development and completion of the Mt. Hope Project.  There is no assurance that we will be able toobtain the necessary financing for the Mt. Hope Project on customary orfavorable terms, or at all.

 

We alsorequire additional capital to continue the exploration and evaluation of theLiberty Property, as well as continue payment of ongoing general andadministrative costs associated with supporting our planned operations.

 

**Liquidityand Capital Resources**

** **

Wehave limited capital resources and thus have had to rely upon the sale ofequity securities and the formation of a joint venture for the cash requiredfor exploration and development purposes, for mineral property acquisitions andto fund our general and administrative costs. As discussed above in the overview section, we will require, andcontinue to require additional funds on an ongoing basis until Eureka Moly hascompleted the development of the Mt. Hope Project and profitableoperations are achieved.  Since we do notexpect to generate any revenues until the Mt. Hope Project beginsproduction, we will continue to rely on the sale of our equity and debtsecurities, bank financing and joint venture arrangements to raisecapital.  There is no assurance that wewill be able to obtain the necessary financing in the amount required at anyparticular time or for any period or, if available, that it can be obtained onterms acceptable to us.

 

 In September 2008 we appointed BarclaysCapital and Credit Suisse Securities (USA) LLC as co-lead project financearrangers to structure and arrange the financing package for the Mt. HopeProject.

 

Ourcash balance at September 30, 2008 was $79.5 million compared to$78.4 million at December 31, 2007. Additionally we have $41.6 million of restricted cash that representsthe unspent amount of the February 2008 and June 2008 Contributionsfrom POS-Minerals that is available for the continuing development of the Mt.Hope Project.

 

Totalassets as at September 30, 2008 were $226.1 million compared to$110.3 million as of December 31, 2007.  These increases were due primarily to thereceipt of a total of $100.0 million from POS-Minerals in the February andJune 2008 Contributions, and net proceeds from exercises of warrants andoptions totaling $20.5 million offset by expenditures for continuingexploration and evaluation of our Liberty Property, plus expenditures for ourgeneral and administrative costs.

 

Asdiscussed above, in addition to the $100.0 million we received from POS-Mineralsin the February 2008 and June 2008 Contributions, we are scheduled toreceive an additional $70.0 million at the time Eureka Moly receives thenecessary permits to develop and operate the Mt. Hope Project (includingthe record of decision for the Mt. Hope Project), which is expected in thethird quarter of 2009.  Additionally, weexpect POS-Minerals to fund approximately $60.0 million on thePOS-Minerals Third Contribution Date, which represents POS-Minerals’ share ofthe anticipated project costs from January 1, 2008 through thePOS-Minerals Third Contribution Date.

 

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Webelieve the cash on hand at September 30, 2008 (including the cashrestricted for use in the Joint Venture) will be sufficient to fund our jointventure development, exploration, evaluation and operating activities, as wellas our other planned operations, through the first quarter of 2009.

 

**Resultsof Operations**

 

For the three monthsended September 30, 2008 we had a net loss of $2.8 million compared with anet loss of $12.1 million in the same period for 2007.  For the nine months ended September 30, 2008we had a net loss of $11.8 million compared with a net loss of $30.6 million inthe same period for 2007.

 

For the three monthsended September 30, 2008 and September 30, 2007, exploration andevaluation expenses were $1.1 million and $6.0 million, respectively.  For the nine months ended September 30,2008 and September 30, 2007, exploration and evaluation expenses were $5.3million and $16.2 million, respectively. During the entire nine months ended September 30, 2007 both our Mt.Hope Project and our Liberty Property were in the exploration and evaluationstage.  In October 2007 the Mt. HopeProject advanced to the development stage. For the three and nine months ended September 30, 2008 we incurredexploration and evaluation costs on the Liberty Property as we progressed tothe completion of a pre-feasibility study on the Liberty Property that wascompleted in April 2008.

 

For the three monthsended September 30, 2008 and September 30, 2007, general andadministrative expenses were $2.2 million and $6.4 million, respectively.  For the nine months ended September 30,2008 and September 30, 2007, general and administrative expenses were $8.1million and $15.3 million, respectively. During the three months ended September 30, 2008 and September 30,2007 we incurred $0.4 million and $1.0 million, respectively and during thenine months ended September 30, 2008 and September 30, 2007 weincurred $2.0 million and $5.5 million, respectively, in non-cash equitycompensation for management and directors included in the general andadministrative expenses above.  Theamounts in 2007 were significantly higher than in 2008 as a greater amount ofequity compensation was incurred during the nine months ended September 30,2007 as we added new management personnel and directors as part of areorganization and expansion of the executive team compared with the sameperiod in 2008.  The cash portion of ourgeneral and administrative expense was approximately the same in both periods.

 

Interest income was $0.5million for the three months ended September 30, 2008 compared with $0.3million for the same period in 2007 and was $1.6 million for the nine monthsended September 30, 2008 compared with $0.9 million for the same period in2007 as a result of higher cash balances in 2008 compared with thecorresponding periods in 2007.

 

**Changesin Accounting Policies**

** **

We didnot change our accounting policies during the nine months ended September 30,2008.

 

**ITEM3.**                                                     QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

** **

**CommodityPrice Risk**

** **

We area development stage company in the business of the exploration, development andmining of properties primarily containing molybdenum.  As a result, upon commencement of production,which is estimated to begin at the Mt. Hope Project in late 2010, ourfinancial performance could be materially affected by fluctuations in themarket price of molybdenum and other metals we may mine.  The market prices of metals can fluctuatewidely due to a number of factors.  Thesefactors include fluctuations with respect to the rate of inflation, theexchange rates of the US dollar and other currencies, interest rates, global orregional political and economic conditions, banking environment, global andregional demand, production costs, and investor sentiment.

 

Inorder to better manage commodity price risk and to seek to reduce the negativeimpact of fluctuations in prices, we will seek to enter into long term supplycontracts.  On December 28, 2007, weentered into a molybdenum supply agreement with ArcelorMittal that provides forArcelorMittal to purchase 6.5 million pounds of molybdenum per year, plusor minus 10%, once the Mt. Hope Project commences commercial operations at

 

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minimum specified levels. The supply agreementprovides for a floor price along with a discount for spot prices above thefloor price and expires five years after the commencement of commercialproduction at the Mt. Hope Project. Both the floor and threshold levels at which the percentage discountschange are indexed to a producer price index.

 

Additionally,on May 14, 2008, we entered into a molybdenum supply agreement with SeAHBesteel Corporation (“SeAH Besteel”), Korea’s largest manufacturer of specialtysteels, that provides for SeAH Besteel to purchase 4.0 million pounds ofmolybdenum per year, plus or minus 10%, once the Mt. Hope Projectcommences commercial operations at minimum specified levels. Like theArcelorMittal supply agreement, the supply agreement with SeAH Besteel providesfor a floor price along with staged discounts for spot prices above the floorprice and expires five years from the date of first supply under theagreement.  Both the floor and thresholdlevels at which the percentage discounts change are indexed to a producer priceindex.

 

On August 8,2008, the Company entered into a molybdenum supply agreement (the “SojitzAgreement”) with Sojitz Corporation.  TheSojitz Agreement provides for the supply of five million pounds per year ofmolybdenum for five years, beginning once the Mt. Hope Project reaches certainminimum commercial production levels. One million annual pounds sold under the Sojitz Agreement will besubject to a per-pound molybdenum floor price and is offset by a flat discountto spot moly prices above the floor.  Theremaining four million annual pounds sold under the Sojitz Agreement will besold with reference to spot moly prices without regard to a floor price.

 

Whilewe have not used derivative financial instruments in the past, we may elect toenter into derivative financial instruments to manage commodity pricerisk.  We have not entered into anymarket risk sensitive instruments for trading or speculative purposes and donot expect to enter into derivative or other financial instruments for tradingor speculative purposes.

 

**InterestRate Risk**

** **

As of September 30,2008, we had a balance of cash and cash equivalents and restricted cash of $133.6million.  If and to the extent that thesefunds were invested in interest bearing instruments during the entire ninemonth period ended September 30, 2008, a hypothetical 1% decrease in therate of interest earned on these funds would affect our income for the ninemonth period ended September 30, 2008 by approximately $1.0 million.

 

**ITEM4.**                                                     CONTROLS ANDPROCEDURES

** **

Anevaluation was performed under the supervision and with the participation ofour management, including our principal executive officer and principalfinancial officer, of the effectiveness of our disclosure controls and procedures(as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934) as of the end of the period covered by thisQuarterly Report on Form 10-Q. Based on the foregoing, our chief executive officer and chief financialofficer concluded that our disclosure controls and procedures were effective asof the period covered by this Quarterly Report on Form 10-Q to ensure thatinformation required to be disclosed by us in reports that we file or submitunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission rules andforms and such information is accumulated and communicated to our management,including our principal executive officer and principal financial officer, toallow timely decisions regarding required disclosure.

 

Therewas no change in our internal control over financial reporting that occurredduring the quarter ended September 30, 2008 that has materially affected,or is reasonably likely to materially affect, our internal control overfinancial reporting.

 

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**PART II**

** **

**OTHER INFORMATION**

** **

**ITEM 1.**                                                     LEGAL PROCEEDINGS

 

We areinvolved from time to time in litigation incidental to our business. We believethat the outcome of current litigation is not expected to have a materialadverse effect on our results of operations or financial condition.

 

**ITEM1A.**                                            RISKFACTORS.

** **

OurAnnual Report on Form 10-KSB for the year ended December 31, 2007,including the discussion under the heading “Risk Factors” therein, and thisreport describe risks that may materially and adversely affect our business,results of operations or financial condition. The risks described in our Annual Report on Form 10-KSB and this reportare not the only risks facing us. Additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial also maymaterially adversely affect our business, financial condition and/oroperations.

 

**Special Note RegardingForward-Looking Statements**

** **

Certainstatements in this report may constitute “forward-looking statements” withinthe meaning of the Private Securities Litigation Reform Act of 1995, whichinvolve known and unknown risks, uncertainties and other factors, which maycause actual results, performance or achievements of our Company, theMt. Hope Project, Liberty Property and our other projects, or industryresults, to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements.  We use the words “may,” “will,” “believe,” “expect,”“anticipate,” “intend,” “future,” “plan,” “estimate,” “potential” and othersimilar expressions to identify forward-looking statements.  These forward-looking statements are subjectto a number of risks, uncertainties and assumptions that could cause actualresults to differ materially from those in the forward looking statements. Suchrisks, uncertainties and assumptions are described in the “Risk Factors”section included in our Annual Report on Form 10-KSB for the year ended December 31,2007 and this report, and include, among other things:

 

·                  our dependenceon the success of the Mt. Hope Project;

·                  the ability toobtain all required permits and approvals for the Mt. Hope Project and theLiberty Property;

·                  issues relatedto the management of the Mt. Hope Project pursuant to the Mt. HopeJoint Venture;

·                  risks related tothe failure of POS-Minerals to make contributions pursuant to the Mt. HopeJoint Venture;

·                  fluctuations inthe market price of, and demand for, molybdenum and other metals;

·                  the estimationand realization of mineral reserves, if any;

·                  the timing ofexploration, development and production activities and estimated futureproduction, if any;

·                  estimatesrelated to costs of production, capital, operating and explorationexpenditures;

·                  requirements foradditional capital and the possible sources of such capital;

·                  governmentregulation of mining operations, environmental conditions and risks, reclamationand rehabilitation expenses;

·                  title disputesor claims; and

·                  limitations ofinsurance coverage.

 

Youshould not place undue reliance on these forward-looking statements, whichspeak only as of the date of this report. These forward-looking statements are based on our current expectationsand are subject to a number of risks and uncertainties, including those setforth above.  Although we believe thatthe expectations reflected in these forward-looking statements are reasonable,our actual results could differ materially from those expressed in theseforward-looking statements, and any events anticipated in the forward-lookingstatements may not actually occur. Except as required by law, we undertake no duty to update anyforward-looking statements after the date of this report to conform thosestatements to actual results or to reflect the occurrence of unanticipatedevents.  We qualify all forward-lookingstatements contained in this report by the foregoing cautionary statements.

 

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**ITEM2.**                                                     UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

** **

None.

 

**ITEM3.**                                                     DEFAULTSUPON SENIOR SECURITIES

** **

None.

 

**ITEM4.**                                                     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS

** **

None.

 

**ITEM5.**                                                     OTHERINFORMATION

** **

None.

 

**ITEM6.**                                                     EXHIBITS

 
| **Exhibit   Number** | ** ** | **Description  of Exhibit**                                                                               |
|---------------------------|------------|-----------------------------------------------------------------------------------------------------------|
| 10.26*                    |       | Molybdenum Supply  Agreement between the Company and Sojitz Corporation, dated as of  August 8, 2008 |
| 31.1                      |       | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002 |
| 31.2                      |       | Certification of Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of  2002 |
| 32.1                      |       | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 |
| 32.2                      |       | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002 |

 

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* Confidential treatment has beenrequested for certain portions of this exhibit, and such confidential portionshave been separately filed with the Securities Exchange Commission.

 

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**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 

Dated: November 3, 2008

 
|   | GENERAL  MOLY, INC. |
|--------|---------------------|
|   |                |
|   | By:                 | /s/  David A. Chaput |
|   |                | David  A. Chaput |
|   |                | Chief  Financial Officer and |
|   |                | Duly  Authorized Officer |

 

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