Table of Contents

 

 

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended March 31, 2010**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For the transition period from               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 115**

**Lakewood, CO 80401**

**Telephone:  (303) 928-8599**

**(Address and telephone number ofprincipal executive offices)**

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  **YES****x****NO****o**

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files).  **YES****o****NO****o**

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  **YES****o****NO****x**

 

The number of sharesoutstanding of registrant’s common stock as of May 5, 2010, was72,567,538.

 

 

 

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**TABLE OF CONTENTS**

 
| ** **       | ** **                                                                                  | **Page** |
|------------------|---------------------------------------------------------------------------------------------|----------|
| **Part I**  |
|             |                                                                                        |     |
| ITEM 1.          | FINANCIAL STATEMENTS                                                                        | 3        |
|             |                                                                                        |     |
| ITEM 2.          | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 22       |
|             |                                                                                        |     |
| ITEM 3.          | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 30       |
|             |                                                                                        |     |
| ITEM 4.          | CONTROLS AND PROCEDURES                                                                     | 32       |
|             |                                                                                        |     |
| **Part II** |
|             |                                                                                        |     |
| ITEM 1.          | LEGAL PROCEEDINGS                                                                           | 33       |
|             |                                                                                        |     |
| ITEM 1A.         | RISK FACTORS                                                                                | 33       |
|             |                                                                                        |     |
| ITEM 2.          | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                | 35       |
|             |                                                                                        |     |
| ITEM 3.          | DEFAULTS UPON SENIOR  SECURITIES                                                            | 35       |
|             |                                                                                        |     |
| ITEM 4.          | SUBMISSION OF MATTERS TO A  VOTE OF SECURITY HOLDERS                                        | 35       |
|             |                                                                                        |     |
| ITEM 5.          | OTHER INFORMATION                                                                           | 35       |
|             |                                                                                        |     |
| ITEM 6.          | EXHIBITS                                                                                    | 35       |

 

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**PART I- FINANCIAL INFORMATION**

 

**ITEM 1.  FINANCIAL STATEMENTS**

 

**GENERAL MOLY, INC.**

**(A DEVELOPMENTSTAGE COMPANY)**

**CONSOLIDATEDBALANCE SHEETS**

 

**(In thousands,except par value amounts)**

 
| ** **                                                                                                                             | ** ** | **March 31,  2010** | ** ** | **December 31,** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|
| ** **                                                                                                                             | ** ** | **(Unaudited)**          | ** ** | **2009**              | ** ** |
| **ASSETS**                                                                                                                             |       |                     |       |                  |       |
| CURRENT ASSETS                                                                                                                         |       |                     |       |                  |       |
| Cash and cash equivalents                                                                                                              |       | $                        | 24,617     |                  | $          | 48,614 |   |
| Deposits, prepaid expenses and other current  assets                                                                                   |       | 184                      |       | 179                   |       |
| Total Current Assets                                                                                                                   |       | 24,801                   |       | 48,793                |       |
| Mining properties, land and water rights — Note 4                                                                                 |       | 103,978                  |       | 101,190               |       |
| Deposits on project property, plant and equipment                                                                                      |       | 66,059                   |       | 42,648                |       |
| Restricted cash held for electricity transmission                                                                                      |       | 12,286                   |       | 12,286                |       |
| Restricted cash held for reclamation bonds                                                                                             |       | 1,133                    |       | 1,133                 |       |
| Non-mining property and equipment, net                                                                                                 |       | 503                      |       | 553                   |       |
| Other assets                                                                                                                           |       | 2,994                    |       | 2,994                 |       |
| **TOTAL ASSETS**                                                                                                                       |       | $                        | 211,754    |                  | $          | 209,597 |   |
| **LIABILITIES, CONTINGENTLY  REDEEMABLE NONCONTROLLING INTEREST AND EQUITY**                                                           |       |                     |       |                  |       |
| CURRENT LIABILITIES                                                                                                                    |       |                     |       |                  |       |
| Accounts payable and accrued liabilities                                                                                               |       | $                        | 8,055      |                  | $          | 3,799 |   |
| Current portion of long term debt                                                                                                      |       | 153                      |       | 163                   |       |
| Total Current Liabilities                                                                                                              |       | 8,208                    |       | 3,962                 |       |
| Provision for post closure reclamation and  remediation costs                                                                          |       | 561                      |       | 586                   |       |
| Deferred gain                                                                                                                          |       | 200                      |       | 100                   |       |
| Long term debt, net of current portion                                                                                                 |       | 231                      |       | 268                   |       |
| Total Liabilities                                                                                                                      |       | 9,200                    |       | 4,916                 |       |
|                                                                                                                                   |       |                     |       |                  |       |
| COMMITMENTS AND CONTINGENCIES – NOTE 9                                                                                            |       |                     |       |                  |       |
|                                                                                                                                   |       |                     |       |                  |       |
| CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST                                                                                        |       | 99,761                   |       | 99,761                |       |
|                                                                                                                                   |       |                     |       |                  |       |
| EQUITY                                                                                                                                 |       |                     |       |                  |       |
| Preferred stock, Series A, $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, 72,567,538 and 72,437,538 shares issued and outstanding,  respectively |       | 73                       |       | 72                    |       |
| Additional paid-in capital                                                                                                             |       | 188,007                  |       | 187,290               |       |
| Accumulated deficit before exploration stage                                                                                           |       | (213                     | )          | (213                  | )          |
| Accumulated deficit during exploration and  development stage                                                                          |       | (85,074                  | )          | (82,229               | )          |
| Total Equity                                                                                                                           |       | 102,793                  |       | 104,920               |       |
| **TOTAL LIABILITIES, CONTINGENTLY  REDEEMABLE NONCONTROLLING INTEREST AND EQUITY**                                                     |       | $                        | 211,754    |                  | $          | 209,597 |   |

 

The accompanyingnotes are an integral part of these consolidated financial statements.

 

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**GENERAL MOLY, INC.**

**(A DEVELOPMENTSTAGE COMPANY)**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

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

 
| ** **                                                                         | ** ** | **Three Months Ended**   | ** ** | **January 1, 2002  (Inception of  Exploration** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **March 31,  2010** | ** ** | **March 31,  2009**                             | ** ** | **Stage) to March  31, 2010** | ** ** |
|                                                                               |       |                     |       |                                                 |       |   |   |
| REVENUES                                                                           |       | $                        | —     |                                                 | $          | — |   | $ | — |   |
| OPERATING  EXPENSES:                                                               |       |                     |       |                                                 |       |   |   |
| Exploration  and evaluation                                                        |       | 127                      |       | 198                                                  |       | 37,637 |   |
| General  and administrative expense                                                |       | 2,719                    |       | 2,913                                                |       | 51,705 |   |
| TOTAL  OPERATING EXPENSES                                                          |       | 2,846                    |       | 3,111                                                |       | 89,342 |   |
| LOSS  FROM OPERATIONS                                                              |       | (2,846                   | )          | (3,111                                               | )          | (89,342 | ) |
| OTHER  INCOME                                                                      |       |                     |       |                                                 |       |   |   |
| Interest  and dividend income                                                      |       | 1                        |       | 8                                                    |       | 3,964 |   |
| Other  income                                                                      |       | —                   |       | —                                               |       | 65 |   |
| TOTAL  OTHER INCOME                                                                |       | 1                        |       | 8                                                    |       | 4,029 |   |
| LOSS  BEFORE TAXES                                                                 |       | (2,845                   | )          | (3,103                                               | )          | (85,313 | ) |
| Income  Taxes                                                                      |       | —                   |       | —                                               |       | — |   |
| NET  LOSS                                                                          |       | $                        | (2,845     | )                                                    | $          | (3,103 | ) | $ | (85,313 | ) |
| Less:  Net loss attributable to contingently redeemable noncontrolling interest    |       | —                   |       | 103                                                  |       | 239 |   |
| NET  LOSS ATTRIBUTABLE TO GENERAL MOLY, INC.                                       |       | $                        | (2,845     | )                                                    | $          | (3,000 | ) | $ | (85,074 | ) |
| Basic  and diluted net loss attributable to General Moly per share of common stock |       | $                        | (0.04      | )                                                    | $          | (0.04 | ) |   |   |
| Weighted  average number of shares outstanding – basic and diluted            |       | 72,546                   |       | 71,964                                               |       |   |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

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**GENERAL MOLY, INC.**

**(A DEVELOPMENTSTAGE COMPANY)**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Unaudited – Inthousands)**

 
| ** **                                                                                     | ** ** | **Three Months Ended**   | ** ** | **January 1, 2002  (Inception of  Exploration  Stage) to** | ** ** |
|------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                                                     | ** ** | **March 31,  2010** | ** ** | **March 31,  2009**                                        | ** ** | **March 31,  2010** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                                          |       |                     |       |                                                            |       |   |   |
| Net Loss                                                                                       |       | $                        | (2,845     | )                                                               | $          | (3,103 | ) | $ | (85,313 | ) |
| Adjustments to reconcile net loss to net cash used  by operating activities:                   |       |                     |       |                                                            |       |   |   |
| Services and expenses paid with common stock                                                   |       | —                   |       | —                                                          |       | 1,990 |   |
| Forfeitures of deposits on property and equipment                                              |       | —                   |       | —                                                          |       | 378 |   |
| Depreciation and amortization                                                                  |       | 89                       |       | 85                                                              |       | 986 |   |
| Equity compensation for employees and directors                                                |       | 431                      |       | 284                                                             |       | 13,889 |   |
| Decrease (increase) in deposits, prepaid expenses  and other                                   |       | (5                       | )          | (136                                                            | )          | (92 | ) |
| Decrease (increase) in restricted cash held for  electricity transmission                      |       | —                   |       | 259                                                             |       | (12,286 | ) |
| (Decrease) increase in accounts payable and accrued  liabilities                               |       | (1,191                   | )          | (390                                                            | )          | 2,174 |   |
| (Decrease) increase in post closure reclamation and  remediation costs                         |       | (25                      | )          | —                                                          |       | 352 |   |
| Net cash used by operating activities                                                          |       | (3,546                   | )          | (3,001                                                          | )          | (77,922 | ) |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                                          |       |                     |       |                                                            |       |   |   |
| Payments for the purchase of equipment                                                         |       | —                   |       | —                                                          |       | (1,424 | ) |
| Purchase of securities                                                                         |       | —                   |       | —                                                          |       | (137 | ) |
| Purchase and development of mining properties, land  and water rights                          |       | (2,772                   | )          | (8,200                                                          | )          | (97,405 | ) |
| Deposits on property, plant and equipment                                                      |       | (17,788                  | )          | (710                                                            | )          | (60,814 | ) |
| Proceeds from option to purchase agreement                                                     |       | 100                      |       | —                                                          |       | 200 |   |
| Increase in restricted cash held for reclamation  bonds                                        |       | —                   |       | —                                                          |       | (642 | ) |
| Cash provided by sale of marketable securities                                                 |       | —                   |       | —                                                          |       | 246 |   |
| Net cash used by investing activities                                                          |       | (20,460                  | )          | (8,910                                                          | )          | (159,976 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                                          |       |                     |       |                                                            |       |   |   |
| Proceeds from issuance of stock, net of issuance  costs                                        |       | 56                       |       | —                                                          |       | 165,260 |   |
| Cash proceeds from POS-Minerals Corporation                                                    |       | —                   |       | —                                                          |       | 100,000 |   |
| Cash paid to POS-Minerals Corporation for purchase  price adjustment                           |       | —                   |       | —                                                          |       | (2,994 | ) |
| Decrease (increase) in restricted cash — Eureka Moly,  LLC                                |       | —                   |       | 10,776                                                          |       | — |   |
| Net (decrease) increase in debt                                                                |       | (47                      | )          | (32                                                             | )          | 203 |   |
| Net cash provided by financing activities                                                      |       | 9                        |       | 10,744                                                          |       | 262,469 |   |
| Net (decrease) increase in cash and cash  equivalents                                          |       | (23,997                  | )          | (1,167                                                          | )          | 24,571 |   |
| Cash and cash equivalents, beginning of period                                                 |       | 48,614                   |       | 78,462                                                          |       | 46 |   |
| Cash and cash equivalents, end of period                                                       |       | $                        | 24,617     |                                                            | $          | 77,295 |   | $ | 24,617 |   |
| NON-CASH INVESTING AND FINANCING ACTIVITIES:                                                   |       |                     |       |                                                            |       |   |   |
| Equity compensation capitalized as development                                                 |       | $                        | 267        |                                                            | $          | 29 |   | $ | 5,346 |   |
| Restricted cash held for reclamation bond acquired  in an acquisition                          |       | —                   |       | —                                                          |       | 491 |   |
| Post closure reclamation and remediation costs and  accounts payable assumed in an acquisition |       | —                   |       | —                                                          |       | 263 |   |
| Common stock and warrants issued for property and  equipment                                   |       | —                   |       | —                                                          |       | 1,586 |   |
| Accrued portion of deposits on property, plant and  equipment                                  |       | (5,411                   | )          | —                                                          |       | (5,411 | ) |

 

**The accompanying notes are anintegral part of these consolidated financial statements.**

 

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**GENERAL MOLY, INC.**

**(A DEVELOPMENT STAGE COMPANY)**

 

**NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE1 — DESCRIPTION OF BUSINESS**

 

General Moly, Inc. (“we”, “us”, “our”, “theCompany”, or “General Moly”) is a Delaware corporation originally incorporatedas General Mines Corporation on November 23, 1925.  In 1966, the Company amended its articles ofincorporation to change its name to Idaho General Petroleum and MinesCorporation, and amended its articles again in 1967 changing its name to IdahoGeneral Mines, Inc. On October 5, 2007, we reincorporated in theState of Delaware (“Reincorporation”) through a merger involving Idaho GeneralMines, Inc. and General Moly, Inc., a Delaware corporation that was awholly owned subsidiary of Idaho General Mines, Inc. The Reincorporationwas effected by merging Idaho General Mines, Inc. with and into GeneralMoly, with General Moly being the surviving entity.  For purposes of the Company’s reportingstatus with the Securities and Exchange Commission, General Moly is deemed asuccessor to Idaho General Mines, Inc.

 

We were in the exploration stage until October 4,2007 when our Board of Directors (“Board”) approved the development of the Mt.Hope molybdenum property (“Mt. Hope Project”) in Eureka County, Nevada.  The Company is now in the development stageand is currently proceeding with the development of the Mt. Hope Project.  We are also conducting exploration and evaluationactivities on our Liberty molybdenum property (“Liberty Property” formerlyreferred to as the Hall-Tonopah Property) in Nye County, Nevada.  In addition, we have certain other, non-core,mineral interests in the Western United States that we are currently evaluatingfor potential development or sale.

 

**The Mt. Hope Project.**  From October 2005 to January 2008,we owned the rights to 100% of the Mt. Hope Project.  Effective as of January 1, 2008, wecontributed all of our interest in the assets related to the Mt. Hope Project,including our lease of the Mt. Hope Project into a newly formed entity, EurekaMoly, LLC, a Delaware limited liability company (“LLC”), and in February 2008(“Closing Date”) entered into an agreement (“LLC Agreement”) for the developmentand operation of the Mt. Hope Project (“Project”) with POS-Minerals Corporation(“POS-Minerals”) an affiliate of POSCO, a large Korean steel company.  Under the LLC Agreement, POS-Minerals owns a20% interest in the LLC and General Moly, through a wholly-owned subsidiary,owns an 80% interest.  These ownershipinterests and/or required contributions under the LLC Agreement are discussedbelow.

 

Pursuant to the terms of theLLC Agreement, POS-Minerals made its first and second cash contributions to theLLC totaling $100.0 million during the year ended December 31, 2008 (“InitialContributions”).  Additional amounts willbe due from POS-Minerals within 15 days after the date (“ROD Contribution Date”)that specified conditions (“ROD Contribution Conditions”) have beensatisfied.  The ROD ContributionConditions are the receipt of major operating permits for the project, that theRecord of Decision (“ROD”) from the United States Bureau of Land Management (“BLM”)for the project has become effective, and any administrative or judicialappeals with respect thereto are final. We are currently targeting the effectiveness of the ROD and thesatisfaction of the ROD Contribution Conditions to occur late in the fourthquarter of 2010 or early in the first quarter of 2011, but circumstances beyondour control, including reviewing agency delays or requests for additionalinformation or studies, and requests for review or appeals of the BLM decision,could cause the effectiveness of the ROD and/or the satisfaction of the RODContribution Conditions to be delayed.

 

As a result of the RODContribution Date not occurring on or before December 31, 2009, the LLCAgreement allowed POS-Minerals to elect (“Ownership Election”) to either retainits 20% share by contributing an additional $56.0 million plus its 20% share ofall Project costs incurred from the Closing Date to the ROD Contribution Dateor reduce its ownership interest to 13%. On March 3,2010, POS-Minerals formally made the election to retain its 20% share, and thereforeelected to make the additional $56.0 million contribution plus its 20% share ofall Project costs incurred from the Closing Date to the ROD Contribution Date.

 

In addition, if commercialproduction at the Mt. Hope Project is not achieved by December 31, 2011,****for reasons other than a force majeure event, the LLC maybe required to return to POS-Minerals $36.0 million of its contributions to theLLC, with no corresponding reduction in POS-Minerals’ ownershippercentage.  Based on our

 

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current plan and expectedtimetable, Mt. Hope Project will not achieve commercial production by December 31,2011, and our payment to POS-Minerals will be due January 27, 2012.  If POS-Minerals does not make its additional$56.0 million contribution when due after the ROD Contribution Date, itsinterest will be reduced to 10% and the return of contributions will be zero.

 

Our wholly-owned subsidiaryand 80% owner of the LLC, Nevada Moly (“Nevada Moly”), is obligated under theterms of the LLC Agreement to make capital contributions to fund the return ofcontributions to POS-Minerals, if required. If Nevada Moly does not make these capital contributions, POS-Mineralshas an election to either make a secured loan to the LLC to fund the return ofcontributions, or receive an additional interest in the LLC of approximately5%.  In the latter case, our interest inthe LLC is subject to dilution by a percentage equal to the ratio of 1.5 timesthe amount of the unpaid contributions over the aggregate amount of deemedcapital contributions (as determined under the LLC Agreement) of both partiesto the LLC (“Dilution Formula”).  At December 31,2009, the aggregate amount of deemed capital contributions of both parties was$880.0 million.

 

Furthermore, a provision inthe LLC Agreement permits POS-Minerals the option to put its interest in the LLC to NevadaMoly after a change of control of the Company, as defined in the LLC agreement,followed by (i) failure to begin full construction at the LLC by theCompany or the surviving entity before December 31, 2010, or (ii) failureto use standard mining industry practice in connection with development andoperation of the project as contemplated by the parties for a period of twelvemonths after December 31, 2010.  IfPOS-Minerals puts its interest, Nevada Moly would be required to purchase theinterest for 120% of POS-Minerals contributions to the LLC plus 10% interest.

 

The Initial Contributions of$100.0 million that were made by POS-Minerals during 2008 were expended by thesecond quarter of 2009 in accordance with the program and budget requirementsof the Mt. Hope Project.  Nevada Moly isrequired, pursuant to the terms of the LLC Agreement, to advance funds requiredto pay costs for the development of the Mt. Hope Project that exceed theInitial Contributions until the ROD Contribution Date, at which point thecontributions described above to be made by POS-Minerals will be applied toreimburse us for POS-Minerals’ share of such development costs.  All costs incurred after the ROD ContributionDate will be allocated and funded pro rata based on each party’s ownershipinterest.  The interest of a party in theLLC that does not make its pro rata capital contributions to fund costsincurred after the ROD Contribution Date is subject to dilution based on theDilution Formula.

 

**NOTE 2 — LIQUIDITY,CAPITAL REQUIREMENTS AND RESTRUCTURING**

 

Our consolidated cash balance at March 31, 2010,was $24.6 million compared to $48.6 million at December 31, 2009.  The cash needs for the development of the Mt.Hope Project require that we or the LLC finalize significant financing inaddition to the capital contributions to be received from POS-Minerals.  As described in Note 1, POS-Minerals formallymade the election to retain its 20% share, thereby agreeing to make anadditional $56.0 million contribution plus its 20% share of all Project costsincurred from the Closing Date to the ROD Contribution Date.

 

The new anticipated sources of financing describedbelow, combined with the election by POS-Minerals to retain its 20% share andmake required contributions, provide substantially all of our currently plannedfunding required to construct and place into commercial operation the Mt. HopeProject.

 

**SecuritiesPurchase Agreement with Hanlong (USA) Mining Investment Inc. and Chinese BankLoan**

 

On March 4, 2010, we signed a Securities PurchaseAgreement (the “Purchase Agreement”) with Hanlong (USA) Mining Investment, Inc.(“Hanlong”), an affiliate of Sichuan Hanlong Group, a large privately heldChinese company.  We began discussions with Hanlong inDecember, 2009.  The PurchaseAgreement and the related agreements described below form the basis of asignificant investment by Hanlong in the Company that is intended to providethe Company with adequate capital to develop the Mt. Hope Project.  ThePurchase Agreement provides for the sale to Hanlong of shares of our commonstock in two tranches that will aggregate 25% of our outstanding stock on afully diluted basis.  The average price per share, based on theanticipated number of shares to be issued, is $2.88 for an aggregate price of$80 million, and constitutes a small premium as compared to the $2.60closing share price of the Company on March 4, 2010.  The shareissuance is part of a larger transaction that includes the 

 

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commitment by Hanlong to use its commerciallyreasonable efforts to procure a $665 million bank loan for the Company(the “Term Loan”) from a prime Chinese bank that will be guaranteed by anaffiliate of Hanlong, a $20 million bridge loan from Hanlong to theCompany, and a long-term molybdenum supply off-take agreement pursuant to whicha Hanlong affiliate will agree to purchase a substantial part of the molybdenumproduction from the Mt. Hope Project at specified prices.

 

**Securities PurchaseAgreement**

 

*Stock Purchase*.  The Purchase Agreement provides, subject toterms and conditions of the Purchase Agreement, for the purchase by Hanlong foran aggregate price of $80 million, of approximately 27.8 million shares ofour common stock which will equal 25% of our outstanding common stock on afully-diluted basis following the purchase, or approximately 38.3% of ourcurrently outstanding common stock.  Fully diluted means all of ouroutstanding common stock plus all outstanding options and warrants, whether ornot currently exercisable.  Hanlong is obligated to purchase the first12.5% of our fully-diluted shares, or approximately 11.9 million (“Tranche 1”)for $40 million, or approximately $3.36 per share, following satisfactionof certain conditions, including receipt of stockholder approval of the equityissuances in connection with the transaction, publication of the notice ofavailability of the Draft Environmental Impact Statement (the “DEIS”)concerning the Mt. Hope Project by the Bureau of Land Management (the “BLM”),receipt of necessary Chinese government approvals for certain portions of thetransaction, assurances from Hanlong as to the availability of the Term Loan,approval of the shares for listing on the NYSE Amex and absence of certaindefaults.  The actual number of shares and price per share will beadjusted for any change in the number of fully diluted shares before theclosing of Tranche 1.  The parties may waive the conditions to theirrespective obligations.  The Company anticipates that Tranche 1 willclose in the third or fourth quarter of 2010.

 

The second tranche (“Tranche 2”), which willinvolve the purchase of approximately 15.9 million additional shares, will befor a purchase price of an additional $40 million, or approximately $2.52per share.  The actual number of shares and price per share will beadjusted for any change in the number of fully diluted shares before theclosing of Tranche 2.  Significant conditions to the closing ofTranche 2 include issuance of the Record of Decision for the Mt. HopeProject by the Bureau of Land Management, approval of the plan of operation forthe Mt. Hope Project by the BLM, and the completion of documentation for andsatisfaction of conditions precedent to lending under the Term Loan.  ThePurchase Agreement may be terminated by either party (provided the terminatingparty is not in default) if the closings of Tranche 1 and Tranche 2have not occurred by January 31, 2011, and September 30, 2011,respectively, subject to extension under some circumstances to January 31,2012.

 

The potential purchase of common stock by Hanlong gaveArcelorMittal, S.A. (“Arcelor”), which presently owns approximately 10.0% ofour fully diluted common stock, the right to acquire additional shares so thatit could maintain its current level of ownership.  Subsequent to March 31,2010, on April 16, 2010, we entered into a Consent and Waiver Agreementwhereby Arcelor agreed to waive its anti-dilution rights with respect to theCompany’s proposed issuance of stock under the Hanlong investment.  Arcelor will retain anti-dilution rights forfuture issuances of Company common stock. Arcelor also consented to the issuance of common stock at a price thatmay be below the market price.  Arcelorwill also have the one-time right to purchase a number of shares that willensure that Arcelor owns 10% of the outstanding common stock if we issue morethan 10,000,000 shares of common stock. In connection with the Consent and Waiver Agreement, Arcelor and the Company also entered into anExtension Molybdenum Supply Agreement on April 16, 2010 (the “ExtensionAgreement”), providing Arcelor with a five-year option to make effective anagreement to purchase from the Company three million pounds of molybdenum peryear for 10 years following the expiration of the current five year, 6.5million annual pound molybdenum supply agreement.  The additional optional off-take will bepriced in alignment with the Company’s existing supply agreements.  In order for Arcelor to exercise this optionand make the Extension Agreement effective, Arcelor must have beneficialownership of more than 11,100,000 shares of Company common stock on or prior toApril 15, 2015.  Arcelor currentlyowns 8,256,699 shares of common stock.

 

Hanlong will have the right to purchase a portion ofany additional shares of common stock that we issue so that it can maintain itspercentage ownership unless its ownership is at the time below 5%.  It mayalso acquire additional shares so that it maintains a 20% indirect interest inthe Mt. Hope Project if our interest in the LLC is reduced below80%.  If we issue shares to fund our obligation to fund the Mt. HopeProject under certain circumstances and 

 

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Hanlong exercises its rights to maintain itspercentage interest, we will be obligated to refund to Hanlong the cost of suchshares over a three-year period up to an aggregate of $9 million.

 

*Break Fees*.  A break fee is payable by both the Company andHanlong if the Purchase Agreement terminates because of the failure of certainconditions to the closing of Tranche 1 or Tranche 2.  A breakfee of $10 million is payable to the Company if the Purchase Agreement isterminated because Hanlong fails to obtain necessary Chinese governmentapprovals or to give its assurances about the availability of the TermLoan.  The Company has agreed to pay $5 million to Hanlong if theconditions concerning our stockholder approval, the publication of the DEIS orthe Record of Decision are not timely satisfied or waived and the PurchaseAgreement is terminated.  The Company break fees may be increased by$5 million if the Purchase Agreement is terminated and the Company hasviolated the “no-shop” provisions of the Purchase Agreement and may beincreased in other circumstances not to exceed an additional $3 million if theCompany requests and Hanlong grants certain extensions of deadlines concerningthe DEIS and up to an additional $2 million if the Company requests and Hanlonggrants certain extensions concerning the Record of Decision.  In addition,the Company must pay a $2 million fee to Hanlong if it grants the extension concerningthe Record of Decision, which fee can be credited against the arrangement feedescribed above.  The break fee payable by the Company to Hanlong may bepaid in cash, or, in certain circumstances, in shares of our common stock atour option.  If paid in shares, the price would be the volume weightedaverage of our common stock on the NYSE Amex for the five days ending sixdays after the announcement of the termination.

 

*No Shop*.  The Company has agreed that it will not seekalternative proposals that would supplant the proposed transaction with Hanlonguntil the Closing of the transactions contemplated by the Purchase Agreement orthe earlier termination of the Purchase Agreement.  The Board may, in theexercise of its fiduciary obligations, consider an unsolicited offer that itviews as superior to the Hanlong transaction. The Company can terminate the Hanlong transaction for a superior offerby paying Hanlong a break fee in cash.

 

*Registration Rights*.  We have agreed to register forsale the shares purchased by Hanlong at its request.

 

*Chinese Bank Loan*.  Pursuant to the PurchaseAgreement, Hanlong is obligated to use its commercially reasonable efforts toprocure the Term Loan in an amount of at least $665 million with a term ofat least 14 years after commercial production begins at the Mt. HopeProject.  The Term Loan is expected to bear interest at a rate of LIBORplus a spread of between 2% and 4% per annum.  The Purchase Agreementprovides that the Term Loan will have customary covenants and conditions;however, the terms of the Term Loan have not been negotiated with the lenderand we have no assurance as to the final terms of the Term Loan.  Hanlongor an affiliate is obligated to guarantee the Bank Loan.  When funds canbe drawn by the Company under the Term Loan, the Company will pay a$15 million arrangement fee to Hanlong who will pay all fees and expensesassociated with the Term Loan before the Term Loan Closing, including thosecharged by the Chinese bank.

 

**Bridge Loan**

 

Hanlong has also agreed to provide a $20 millionbridge loan (the “Bridge Loan”) to the Company in two equal $10 milliontranches.  Subsequent to March 31, 2010, we drew down Tranche 1 inthe amount of $10 million on April 26, 2010.  The second loan tranchewill be available five business days after receipt of stockholder approval andis subject to the satisfaction of customary conditions.  The first trancheof the Bridge Loan bears interest at LIBOR plus 2% per annum.  The secondtranche of the Bridge Loan will bear interest at 10% per annum.  TheBridge Loan will be repaid from the proceeds of the Term Loan.  If Hanlongagrees, the second tranche may also be repaid, at the Company’s election, inshares of the Company’s common stock.  If paid in shares, the price wouldbe the volume weighted average of the Company’s shares on the NYSE Amex for afive-day period after public announcement of the event that requiredrepayment.  The Company may offset its right to receive the break feeagainst its obligations to repay borrowings under the Bridge Loan.  If notsooner repaid, the Bridge Loan will mature on the earliest of 120 days afterthe issuance of the Record of Decision, the date on which the PurchaseAgreement terminates, and January 31, 2012.  The Bridge Loan and ourobligation to pay a break fee to Hanlong under the Purchase Agreement issecured by a pledge by us of a 10% interest in the LLC.

 

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**Molybdenum SupplyAgreement**

 

The Company signed a molybdenum supply agreement (the “SupplyAgreement”) with a Hanlong affiliate (referred to in this subsequent discussionas “Hanlong”), which will be effective upon the later of the Tranche 2 closing,the Term Loan closing, or the Company’s election not to enter into the TermLoan.  Until the expiration of certain existing molybdenum supplyagreements by which the Company is currently bound (the “Existing SupplyAgreements”), Hanlong will be required to purchase all the Company’s share ofthe Mt. Hope molybdenum production above that necessary for the Company to meetits existing supply commitments.  After the expiration of the ExistingSupply Agreements, until the original scheduled maturity date of the Term Loan,or if the Company elects not to enter into the Term Loan, 14 years aftercommencement of commercial production from the Mt. Hope Mine, Hanlong mustannually purchase the greater of 16 million pounds and 70% of the Company’sshare of Mt. Hope production.  Following the original scheduled maturitydate of the Term Loan, or if the Company elects not to enter into the TermLoan, 14 years after commencement of commercial production from the Mt. HopeMine, Hanlong must purchase a percentage of the Company’s share of Mt. Hopeproduction equal to 2.5 times Hanlong’s fully-diluted percentage ownership ofour common stock.  Subject to certain exceptions, the Supply Agreementwill terminate once Hanlong’s fully-diluted percentage ownership of the Companyfalls below 5%. As long as Hanlong continues to guarantee the Term Loan, theSupply Agreement will not terminate even if Hanlong’s ownership falls below5%.  If the cause of Hanlong’s ownership falling below 5% is a change ofcontrol of the Company or a dilutive transaction in which Hanlong does not havethe right to participate, the Supply Agreement will not terminate and Hanlongwill be obligated to continue to purchase a percentage of the Company’s shareof Mt. Hope production equal to 2.5 times Hanlong’s fully-diluted percentageownership of the Company as it existed immediately prior to such change ofcontrol or dilutive transaction.  If the Company elects not to enter intothe Term Loan, and the second loan tranche does not close, Hanlong’s obligationto purchase the Company’s share of Mt. Hope production in each of the periodsdescribed above will be half of the obligations described above.

 

Prices under the Supply Agreement are at twolevels.  Twenty-five percent of the production Hanlong receives will be soldat a fixed-floor price per pound subject to adjustment, which pricing issimilar to floor-price protected contracts that the Company has in place withother large steel producers and metal traders.  Those contracts havefixed-floor prices ranging from $12.50 to $13.50 per pound and incrementaldiscounts above the floor price.  For the remaining 75% of the productionHanlong receives, it will pay spot prices for molybdenum, less a smalldiscount.

 

The result of the transaction will be that if theCompany elects to enter into the Term Loan, or if the Tranche 2 closing occurs,all of Mt. Hope’s production will be committed for the first five years ofoperation, approximately half of which will contain floor price protection tohelp support the Company’s ability to service its debt in periods of low metalprices.

 

**Cash Conservation Plan**

 

The Company remains in a cash conservation planimplemented in March 2009 designed to reduce expenditures and conservecash in order to maximize financial flexibility.  With our March 31, 2010, consolidatedcash balance of $24.6 million, we have the capacity to continue our currentlevel of permitting efforts, maintain efforts to finalize project financing,and secure and hold critical long lead equipment for the ultimate constructionof the Mt. Hope project through the end of 2010.

 

The Company has purchase orders for two types ofequipment – milling process equipment and mining equipment.  Most equipment orders for the custom-builtgrinding and other milling process equipment will be completed by themanufacturers and stored.  The grindingand milling process equipment require the longest lead times and maintainingthese orders is critical to the Company’s ability to re-start the developmentof Mt. Hope rapidly.  Fabrication of lesscritical equipment has been suspended with some manufacturers.  The Company has completed final negotiationswith other equipment manufacturers to suspend or terminate fabrication of othermilling equipment and to determine the equipment fabrication costs incurred todate, storage costs, and the expected timing of restarting fabrication.

 

Based on our current plan, we expect to makeadditional payments of approximately $8.0 million under milling processequipment orders throughout the remaining three quarters of 2010, and $12.8million in 2011.  As additional financingbecomes available and equipment procurement is restarted, agreements that weresuspended or terminated 

 

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will be renegotiated under new market terms andconditions, as necessary.  For thegyratory crusher, SAG and ball mills and related electric mill drives, and someother long-lead equipment, we will own the equipment upon final payments thathave occurred throughout 2009, during 2010, and into early 2011.  This strategy will allow for a rapid restartof the Mt. Hope Project development upon BLM approval of the Draft EIS, whichwill initiate the restart of engineering.

 

Some orders for mining equipment have been cancelled,and discussions with the remaining suppliers to either cancel or suspendexisting agreements are complete.  Thelead times and costs associated with many of these items have declined.  Once financing becomes available, the Companyanticipates placing orders for this mining equipment.  The Company will continue to evaluate alloptions to facilitate a rapid re-start of the project development.

 

The cash conservation plan has reduced our total cashutilization for general administration and overhead to approximately $1 millionper month.  Engineering efforts,approximately 60% complete, were largely suspended in the second quarter of2009, and will resume pending the BLM approval of the Draft EIS.  Some engineering that is critical forpermitting or project restart readiness has continued at a slower pace.

 

We also require capital to maintain our mining claimsand other rights related to the Liberty Property, as well as continue paymentof ongoing general and administrative costs associated with supporting ouroperations.

 

**NOTE 3 — SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

** **

The interim consolidated financial statements of theCompany are unaudited.  In the opinion ofmanagement, all adjustments and disclosures necessary for a fair presentationof these interim statements have been included. All such adjustments are, in the opinion of management, of a normalrecurring nature except for the adoption of the new accounting standards discussedbelow.  The results reported in theseinterim consolidated financial statements are not necessarily indicative of theresults that may be reported for the entire year.  These interim consolidated financialstatements should be read in conjunction with the consolidated financialstatements included in our Annual Report on Form 10-K for the year ended December 31,2009, filed with the SEC on March 5, 2010.

 

This summary of significant accounting policies ispresented to assist in understanding the consolidated financialstatements.  The financial statements andnotes are representations of the Company’s management, which is responsible fortheir integrity and objectivity.  Theseaccounting policies conform to accounting principles generally accepted in theUnited States of America (“GAAP”) and have been consistently applied in thepreparation of the consolidated financial statements.

 

**Accounting Method**

 

Our interim consolidated financial statements areprepared using the accrual basis of accounting in accordance with GAAP.  With the exception of the LLC, all of oursubsidiaries are wholly owned.  In February 2008,we entered into the agreement which established our ownership interest in theLLC at 80%.  At March 31, 2010, theinterim consolidated financial statements include the results of our whollyowned subsidiaries and the LLC.  ThePOS-Minerals contributions attributable to their 20% interest are shown as Contingently Redeemable NoncontrollingInterest on the Consolidated Balance Sheet.  For the quarter ended March 31, 2010,the LLC had no net operating expenses and therefore the Consolidated Statementsof Operations reflects no net loss attributable to contingently redeemablenoncontrolling interest for that period.

 

**Contingently RedeemableNoncontrolling Interest**

 

On January 1, 2009, we adopted FinancialAccounting Standards Board (“FASB”) issued authoritative guidance related toNoncontrolling Interests in Consolidated Financial Statements, the provisionsof which, among others, require the recognition of a noncontrolling interest(previously referred to as minority interest), as a component of equity in theconsolidated financial statements and separate from the parent’s equity for allperiods presented. In addition, the amount of consolidated net income or lossattributable to the noncontrolling interest is included in net income or losson the face of the consolidated statement of operations.  Under GAAP, certain noncontrolling 

 

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interests in consolidated entities meet the definitionof mandatorily redeemable financial instruments if the ability to redeem theinterest is outside of the control of the consolidating entity.  Asdescribed in the ‘Description of Business’ and in Note 1, the LLC Agreementpermits POS-Minerals the option to put its interest in the LLC to Nevada Molyupon a change of control, as defined in the LLC Agreement, followed by (i) failureto begin full construction at the LLC by the Company or the surviving entitybefore December 31, 2010, or (ii) failure to use standard miningindustry practice in connection with development and operation of the projectas contemplated by the parties for a period of twelve months after December 31,2010.  As such, the contingently redeemable noncontrolling interest hascontinued to be shown as a separate caption between liabilities and equity(mezzanine section).  The carrying value of the contingently redeemablenoncontrolling interest reflects the investment of the noncontrolling interest,less losses attributable to the interest.

 

**Estimates**

 

The process of preparing consolidated financialstatements requires the use of estimates and assumptions regarding certaintypes of assets, liabilities, revenues, and expenses.  Such estimates primarily relate to unsettledtransactions and events as of the date of the consolidated financialstatements.  Accordingly, uponsettlement, actual results may differ from estimated amounts.

 

**Cash and Cash Equivalents**

 

We consider all highly liquid investments withoriginal maturities of three months or less to be cash equivalents. The Company’scash equivalent instruments are classified within Level 1 of the fair valuehierarchy established by FASB guidance for Fair Value Measurements because theyare valued based on quoted market prices in active markets.  These cashinstruments included $10.0 million in U.S. Treasury securities at March 31,2010.

 

**Exploration andDevelopment Stage Activities**

 

We were in the exploration stage from January 2002until October 4, 2007.  On October 4,2007, our Board of Directors approved the development of the Mt. Hope Projectas contemplated in the Bankable Feasibility Study (“BFS”) and we then enteredinto the Development Stage.  We have notrealized any revenue from operations.  Wewill be primarily engaged in development of the Mt. Hope Project andexploration and evaluation of the Liberty Property until we enter theproduction stage of the Mt. Hope Project.

 

**Basic and DilutedConsolidated Net Loss Per Share**

 

Net loss per share was computed by dividing the netloss attributable to General Moly, Inc. by the weighted average number ofshares outstanding during the period.  Theweighted average number of shares was calculated by taking the number of sharesoutstanding and weighting them by the amount of time that they wereoutstanding.  Outstanding warrants topurchase 7,455,434 and 7,445,434 shares of common stock, options to purchase2,949,989 and 3,490,490 shares of common stock, and unvested stock awardstotaling 218,154 and 185,000 at March 31, 2010 and 2009, respectively, and520,889 Shares under Stock Appreciation Rights (“SARs”) at March 31, 2010,were not included in the computation of diluted loss per share for the threemonths ended March 31, 2010 and 2009, respectively, because to do so wouldhave been antidilutive.  Therefore, basicloss per share is the same as diluted loss per share.

 

**Mineral Exploration andDevelopment Costs**

 

All exploration expenditures are expensed asincurred.  Significant propertyacquisition payments for active exploration properties are capitalized.  If no economic ore body is discovered, previouslycapitalized costs are expensed in the period the property is abandoned.  Expenditures to develop new mines, to definefurther mineralization in existing ore bodies, and to expand the capacity ofoperating mines, are capitalized and amortized on a units-of-production basisover proven and probable reserves.

 

Should a property be abandoned, its capitalized costsare charged to operations.  The Companycharges to the consolidated statement of operations the allocable portion ofcapitalized costs attributable to properties sold. 

 

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Capitalized costs are allocated to properties soldbased on the proportion of claims sold to the claims remaining within theproject area.

 

**Mining Properties, Landand Water Rights**

 

Costs of acquiring and developing mining properties,land and water rights are capitalized as appropriate by project area.  Exploration and related costs and costs tomaintain mining properties, land and water rights are expensed as incurredwhile the property is in the exploration and evaluation stage.  Development and related costs and costs tomaintain mining properties, land and water rights are capitalized as incurredwhile the property is in the development stage. When a property reaches the production stage, the related capitalizedcosts are amortized using the units-of-production basis over proven andprobable reserves.  Mining properties,land and water rights are periodically assessed for impairment of value, andany subsequent losses are charged 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.

 

**Depreciation andAmortization**

 

Property and equipment are recorded at cost anddepreciated using the straight-line method over the estimated useful lives ofthe assets. Property and equipment are depreciated using the followingestimated useful lives: field equipment – five years; office furniture,fixtures; and equipment – five years; vehicles – three to five years; leaseholdimprovements – three years; residential trailers – ten to twenty years; andbuildings and improvements – ten years. At March 31, 2010, and 2009, accumulated depreciation andamortization was $0.7 million and $0.4 million, respectively, of which $0.1million in the three months ended March 31, 2010, and 2009, wascapitalized.

 

**Provision for Taxes**

 

Income taxes are provided based upon the liabilitymethod of accounting.  Under thisapproach, deferred income taxes are recorded to reflect the tax consequences infuture years of differences between the tax basis of assets and liabilities andtheir financial reporting amounts at each year-end.  In accordance with authoritative guidance for*Income Taxes*, a valuation allowance isrecorded against the deferred tax asset if management does not believe theCompany has met the “more likely than not” standard to allow recognition ofsuch an asset.

 

**Reclamation andRemediation**

 

Expenditures for ongoing compliance with environmentalregulations that relate to current operations are expensed or capitalized asappropriate.  Expenditures resulting fromthe remediation of existing conditions caused by past operations that do not contributeto future revenue generations are expensed. Liabilities are recognized when environmental assessments indicate thatremediation efforts are probable and the costs can be reasonably estimated.

 

Estimates of such liabilities are based upon currentlyavailable facts, existing technology and presently enacted laws and regulationstaking into consideration the likely effects of inflation and other societaland economic factors, and include estimates of associated legal costs.  These amounts also reflect prior experiencein remediating contaminated sites, other companies’ clean-up experience anddata released by The Environmental Protection Agency or otherorganizations.  Such estimates are bytheir nature imprecise and can be expected to be revised over time because ofchanges in government regulations, operations, technology and inflation.  Recoveries are evaluated separately from theliability. When recovery is assured, the Company records and reports an assetseparately from the associated liability.

 

**Stock-based Compensation**

 

Stock-based compensation represents the fair valuerelated to stock-based awards granted to members of the board of directors,consultants, officers and employees.  The Company uses the Black-Scholesmodel to determine the fair value of stock-based awards under authoritativeguidance for *Stock-Based Compensation*. For stock-based compensation that is earned upon the satisfaction of a servicecondition, the cost is recognized on a straight-line 

 

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basis (net of estimated forfeitures) over therequisite vesting period (up to three years).  Awards expire five yearsfrom the date of vesting.

 

Further information regarding stock-based compensationcan be found in Note 7 — “Equity Incentives.”

 

**Comprehensive Loss**

 

For the three months ended March 31, 2010, and2009, the Company’s comprehensive loss was equal to the respective consolidatednet losses for the periods presented.

 

**Recently IssuedAccounting Pronouncements**

 

**Consolidation(Topic 810):  Accounting and Reportingfor Decreases in Ownership of a Subsidiary — a Scope******Clarification**

 

In January 2010,the FASB issued Accounting Standards Update (ASU) 2010-02, Consolidation (ASC810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. Thisamendment to ASC 810 clarifies, but does not change, the scope of current USGAAP. It clarifies the decrease in ownership provisions of ASC 810-10 andremoves the potential conflict between guidance in that ASC and assetderecognition and gain or loss recognition guidance that may exist in other USGAAP. An entity will be required to follow the amended guidance beginning inthe period that it first adopts FAS 160 (now included in ASC 810-10). For thoseentities that have already adopted FAS 160, the amendments are effective at thebeginning of the first interim or annual reporting period ending on or after December 15,2009. The amendments should be applied retrospectively to the first period thatan entity adopts FAS 160. The adoption of ASU 2010-02 has had no materialeffect on the Company’s financial condition, results of operation, or cashflows.

 

**Fair Value Measurementsand Disclosures (Topic 820):  ImprovingDisclosures about Fair Value Measurements**

 

In January 2010, the FASB issued Update No. 2010-06. Reporting entities will have to provideinformation about movements of assets among Levels 1 and 2 of the three-tierfair value hierarchy established by SFAS No. 157, *Fair Value Measurements* (FASB ASC 820). Also, a reconciliation of purchases, sales,issuance, and settlements of anything valued with a Level 3 method isrequired.  Disclosure regarding fairvalue measurements for each class of assets and liabilities will be required. Theguidance is effective for our first annual reporting period beginning after December 15,2009, and for interim periods within that annual period.  We do not expect this adoption to have amaterial impact on our consolidated financial statements.

 

**Subsequent Events (Topic855):  Amendments to Certain Recognitionand Disclosure Requirements**

 

In February 2010, the FASB issued Update No. 2010-09,*Subsequent Events (Topic 855): Amendments toCertain Recognition and Disclosure Requirements*. These amendments eliminatecontradictions between the requirements of U.S. GAAP and the SEC’s filingrules. The amendments also discharge the requirement that public companiesdisclose the date of their financial statements in both issued and revisedfinancial statements.  We do not expectthis adoption to have a material impact on our consolidated financialstatements.

 

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**NOTE 4 — MINING PROPERTIES, LAND AND WATERRIGHTS**

 

Wecurrently have interests in two mining properties that are the primary focus ofour operations.  The Mt. Hope Project iscurrently in the development stage and the Liberty Property is in theexploration and evaluation stage.  Thefollowing is a summary of mining properties, land and water rights at March 31,2010, and December 31, 2009 (in thousands):

 
| ** **                      | ** ** | **At March 31,  2010** | ** ** | **At  December 31,  2009** | ** ** |
|---------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| Mt.  Hope Project:              |       |                        |       |                            |       |
| Development  costs              |       | $                           | 79,777     |                            | $          | 76,985 |   |
| Mineral,  land and water rights |       | 10,253                      |       | 10,253                          |       |
| Advance  Royalties              |       | 3,300                       |       | 3,300                           |       |
| Total  Mt. Hope Project         |       | 93,330                      |       | 90,538                          |       |
| Total  Liberty Property         |       | 9,759                       |       | 9,763                           |       |
| Other  Properties               |       | 889                         |       | 889                             |       |
| Total                           |       | $                           | 103,978    |                            | $          | 101,190 |   |

 

On June 26,2009, the Company and Josephine Mining Corp. (“JMC”), a privately-ownedCanadian company whose president is a related party to one of the Company’sBoard members, entered into an Option to Purchase Agreement for the Company’sTurner Gold property, a multi-metallic property located in Josephine County,Oregon.  The Company acquired theproperty in 2004.  JMC paid $0.1 millionupon entering into the agreement, which allows JMC certain exploratory rightsthrough the option period.  Each optionis non-refundable.  The $0.1 million hasbeen recorded as a deferred gain pending completion of the purchase.  An additional $0.3 million installmentpayment is due December 26, 2010, and the final installment payment of$1.6 million is due on or before December 26, 2011.  Each installment payment under the Option toPurchase Agreement is optional, but is non-refundable once made.  If JMC makes all three of the installmentpayments, ownership of the Turner Gold property will transfer to JMC upon thefinal payment.  The Company has alsoretained a Production Royalty of 1.5% of all net smelter returns on futureproduction from the property.

 

On March 8,2010, the Company and Ascot USA, Inc. (“Ascot”), a Washington corporation,entered into an Option to Purchase Agreement for the Company’s Margaretproperty, an undivided 50% interest in the reserved mineral rights and all ofthe Company’s interest in the 105 unpatented mining claims comprising the RedBonanza Property, situated in the St. Helens Mining District, Skamania County,Washington.  The Company acquired theproperty in September of 2004. Ascot paid $0.1 million upon entering into the agreement, which allowsAscot certain exploratory rights through the option period.  Each option is non-refundable.  The $0.1 million has been recorded as adeferred gain pending completion of the purchase.  An additional $0.3 million installmentpayment is due June 8, 2011, and the final installment payment of $1.6million is due on or before June 8, 2012. Each installment payment under the Option to Purchase Agreement isoptional, but is non-refundable once made. If Ascot makes all three of the installment payments, ownership of theMargaret property will transfer to Ascot upon the final payment.  The Company has also retained a ProductionRoyalty of 1.5% of all net smelter returns on future production from theproperty.

 

**NOTE 5 — COMMON STOCK UNITS, COMMON STOCK ANDCOMMON STOCK WARRANTS**

 

Duringthe three months ended March 31, 2010, we issued 163,648 shares of commonstock pursuant to stock awards under the 2006 Equity Incentive Plan.

 

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At March 31,2010, we had warrants outstanding totaling 7,455,434, of which 6,455,434 areexercisable at $3.75 per warrant and expire February 2011 and 1,000,000are exercisable at $10.00 per share once General Moly has received financingnecessary for the commencement of commercial production at the Mt. Hope Projectand will expire one year afterwards.

 

Subsequentto March 31, 2010, Coghill CapitalManagement and its affiliates (“Coghill”), a significant stockholder in theCompany, provided substantial assistance to the Company with the signing of theConsent and Waiver Agreement and the Extension Agreement with Arcelor.  In recognition of that support, on April 16,2010, the Company amended and restated warrants issued to Coghill to purchaseone million shares of the Company’s common stock issued in connection with the November 2007private placement and original molybdenum supply agreement with Arcelor toreduce the price of the warrants from $10.00 per share to $5.00 per share.  The incremental cost of the reissued warrantsis $.6 million, which will be recorded as expense in the second quarter of2010.  The warrants remain exercisableonce the Company has received financing necessary for the commencement ofcommercial production at the Mt. Hope project and will expire one yearthereafter.  It will also becomeexercisable in the event of certain corporate reorganizations.

 

Pursuantto our Certificate of Incorporation, we are authorized to issue200,000,000 shares of $0.001 par value common stock.  All shares have equal voting rights, arenon-assessable and have one vote per share. Voting rights are not cumulative and therefore, the holders of more than50% of the common stock represented at the meeting of the stockholders could,if they choose to do so, elect all of the directors of the Company.

 

**NOTE 6 — PREFERRED STOCK**

 

Pursuantto our Certificate of Incorporation we are authorized to issue10,000,000 shares of $0.001 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 the board of directors.  The directors have the power to determine thepreferences, limitations and relative rights of each series of preferredstock.  At March 31, 2010, and 2009,no shares of preferred stock were issued or outstanding.  On March 5, 2010, the Board adopted astockholder rights plan.  Under the plan,each common stockholder of the Company at the close of business on March 5,2010 received a dividend of one right for each share of the Company’s commonstock held of record on that date.  Eachright will entitle the holder to purchase from the Company, in certaincircumstances, one one-thousandth of a share of newly-created Series Ajunior participating preferred stock of the Company for an initial purchaseprice of $15.00 per share.

 

Subjectto certain exceptions, if any person becomes the beneficial owner of 20% ormore of the Company’s common stock, each right will entitle the holder, otherthan the acquiring person, to purchase Company common stock or common stock ofthe acquiring person having a value of twice the exercise price.  In addition, if there is a businesscombination between the Company and the acquiring person, or in certain othercircumstances, each right that is not previously exercised will entitle theholder (other than the acquiring person) to purchase shares of common stock (oran equivalent equity interest) of the acquiring person at one-half the marketprice of those shares.

 

**NOTE 7 — EQUITY INCENTIVES**

 

In2006, the Board and shareholders of the Company approved the 2006 EquityIncentive Plan (“2006 Plan”) that replaced the 2003 Equity Incentive Plan (“2003Plan”).  The 2006 Plan authorizes theBoard, or a committee of the Board, to issue or transfer up to an aggregate of5,530,000 shares of common stock, 5,100,000 shares plus 430,000 shares carriedover from the 2003 Plan, of which 528,526 remain available for issuance.  Awards under the 2006 Plan may include incentivestock options, non-statutory stock options, restricted stock units, restrictedstock awards, and stock appreciation rights, or SARs.  At the option of the Board, SARs may besettled with cash, shares, or a combination of cash and shares.  The Company settles the exercise of otherstock-based compensation with common shares.

 

Stock-basedcompensation cost is estimated at the grant date based on the award’s fairvalue as calculated by the Black-Scholes option pricing model and is recognizedas compensation ratably on a straight-line basis over the requisitevesting/service period.  As of March 31,2010, there was $1.2 million of total unrecognized compensation 

 

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cost related to share-based compensation arrangements,which is expected to be recognized over a weighted-average period of 1.2 years.

 

**Stock Options and Stock Appreciation Rights**

 

Allstock options and SARs are approved prior to or on the date of grant.  Stock options and SARs are granted at anexercise price equal to or greater than the Company’s stock price on the dateof grant.  Both award types vest over aperiod of zero to three years with a contractual term of five years aftervesting.  The Company estimates the fairvalue of stock options and SARs using the Black-Scholes valuation model.  Key inputs and assumptions used to estimatethe fair value of stock options and SARs include the grant price of the award,expected option term, volatility of the Company’s stock, the risk-free interestrate and the Company’s dividend yield. The following table presents the weighted-average assumptions used inthe valuation and the resulting weighted-average fair value per option or SARgranted:

 

**StockOption and SAR Valuation Assumptions**

 
| Expected  Life *                                                                                                    |   | 3.5 to 5.5 years |   |
|---------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|
| Interest  Rate                                                                                                      |   | 0.5% to 5.0%     |   |
| Volatility  **                                                                                                      |   | 82.0% to 100.4%  |   |
| Dividend  Yields                                                                                                    |   | —           |   |
| Weighted  Average Fair Value of Stock Options Granted During the Three Months Ending  March 31, 2010           |   | None             |   |
| Weighted Average Fair Value of Stock Appreciation  Rights Granted During the Three Months ended March 31, 2010 |   | None             |   |

 

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*                    The expected life is the number of years that theCompany estimates, based upon history, that options or SARs will be outstandingprior to exercise or forfeiture.

* *          The Company’s estimates of expected volatility areprincipally based on the historic volatility of the Company’s common stock overthe most recent period commensurate with the estimated expected life of theCompany’s stock options or SARs and other relevant factors.

 

At March 31,2010, the aggregate intrinsic value of outstanding and exercisable (fullyvested) options and SARs was $1.1 million and had a weighted-average remainingcontractual term of 3 years.  The totalintrinsic value of options exercised during the three months ended March 31,2010, was nil.

 

**Restricted Stock Units and Stock Awards**

 

Grantsof restricted stock units and stock awards (“Stock Awards”) have been made toBoard members, officers, and employees. Stock Awards have been granted as performance based, earned over arequired service period or to Board members and the Company Secretary withoutany service requirement.  Incentive basedgrants for officers and employees generally vest and stock is received withoutrestriction to the extent of one-third of the grant for each year following thedate of grant.  Also, incentive basedgrants were offered to certain employees in connection with the cash conservationplan and vest January 1, 2011. Performance based grants are recognized as compensation based on theprobable outcome of achieving the performance condition.  Past compensation for Stock Awards issued tomembers of the Board of Directors that vested over time were recognized overthe vesting period of one to two years. Stock Awards issued to Board members and the Company Secretary that arefully vested at the time of issue are recognized as compensation upon grant ofthe award.

 

Thecompensation expense recognized by the Company for Stock Awards is based on theclosing market price of the Company’s common stock on the date of grant.  For the three months ended March 31,2010, the weighted-average grant-date fair value for Stock Awards was $2.30.

 

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**Summary of Equity Incentive Awards**

 

Thefollowing table summarizes activity under the Plans during the three monthsended March 31, 2010:

 
| ** **                          | ** ** | **Stock Options**                      | ** ** | **SARs**                           | ** ** | **Stock Awards**                     | ** ** |
|-------------------------------------|------------|----------------------------------------|------------|------------------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number of Shares  Under Option** | ** ** | **Weighted  Average  Strike  Price** | ** ** | **Number  of Shares  Under  Option** | ** ** | **Weighted  Average  Grant  Price** | ** ** | **Number of  Shares** | ** ** |
| Balance  at January 1, 2010    |       | $                                      | 5.53       |                               | 3,071,656  |                                 | $          | 1.55 |   | 528,006 |   | $ | 4.36 |   | 678,135 |   |
| Awards  Granted                     |       | —                                 |       | —                             |       | —                               |       | — |   | 2.30 |   | 115,460 |   |
| Awards  Exercised or Earned         |       | 2.78                                   |       | (20,000                            | )          | —                               |       | — |   | 2.29 |   | (110,000 | ) |
| Awards  Forfeited                   |       | 11.45                                  |       | (26,667                            | )          | 4.35                                 |       | (7,117 | ) | — |   | — |   |
| Awards  Expired                     |       | 8.43                                   |       | (75,000                            | )          | —                               |       | — |   | 2.31 |   | (5,000 | ) |
| Balance  at March 31, 2010     |       | $                                      | 5.42       |                               | 2,949,989  |                                 | $          | 1.54 |   | 520,889 |   | $ | 4.36 |   | 678,595 |   |
|                                |       |                                   |       |                               |       |                                 |       |   |   |   |   |   |   |
| Exercisable  at March 31, 2010 |       | $                                      | 5.14       |                               | 2,574,991  |                                 | $          | 1.55 |   | 176,347 |   |   |   | — |   |

 

**Summary of compensation cost recognized and capitalizedrelated to equity incentives**

 
| **Summary of Compensation Cost Recognized and  Capitalized related to Equity Incentives for the  Quarter Ended March 31 (in thousands):** | ** ** | **2010** | ** ** | **2009** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Stock  Options                                                                                                                                 |       | $        | (43        | )        | 545        |   |
| SARs                                                                                                                                           |       | 283      |       | 44       |       |
| Forfeitures  related to the restructuring                                                                                                      |       | —   |       | (567     | )          |
| Stock  Awards:                                                                                                                                 |       |     |       |     |       |
| Vesting  over time                                                                                                                             |       | 188      |       | 44       |       |
| Board  of Directors                                                                                                                            |       | 270      |       | 320      |       |
| Total                                                                                                                                          |       | $        | 698        |     | 386        |   |
| Included  in:                                                                                                                                  |       |     |       |     |       |
| Capitalized  as Development                                                                                                                    |       | 267      |       | 29       |       |
| Expensed                                                                                                                                       |       | 431      |       | 357      |       |
|                                                                                                                                           |       | $        | 698        |     | 386        |   |

 

**Taxes**

 

Aportion of the Company’s granted options are intended to qualify as incentivestock options (“ISO”) for income tax purposes. As such, a tax benefit is not recorded at the time the compensation costrelated to the options is recorded for book purposes due to the fact that anISO does not ordinarily result in a tax benefit unless there is a disqualifyingdisposition.  Stock option grants ofnon-qualified options result in the creation of a deferred tax asset, which isa temporary difference, until the time that the option is exercised.

 

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**NOTE 8 — CHANGES IN EQUITY**

 
| ** **                                                          | ** ** | **Activity for  Three Months Ended** | ** ** |
|---------------------------------------------------------------------|------------|--------------------------------------|------------|
| **Changes  in Equity**                                              | ** ** | **March 31,  2010**             | ** ** | **March 31,  2009** | ** ** |
| Total Equity December 31, 2009, &  2008, respectively |       | $                                    | 104,920    |   | $ | 113,048 |   |
| Common stock:                                                       |       |                                 |       |   |   |
| At beginning of period                                              |       | 72                                   |       | 72 |   |
| Stock Awards                                                        |       | 1                                    |       | — |   |
| At end of period                                                    |       | 73                                   |       | 72 |   |
|                                                                |       |                                 |       |   |   |
| Additional paid-in capital:                                         |       |                                 |       |   |   |
| At beginning of period                                              |       | 187,290                              |       | 185,179 |   |
| Exercised options                                                   |       | 55                                   |       | — |   |
| Stock based compensation                                            |       | 662                                  |       | 313 |   |
| At end of period                                                    |       | 188,007                              |       | 185,492 |   |
|                                                                |       |                                 |       |   |   |
| Accumulated deficit:                                                |       |                                 |       |   |   |
| At beginning of period                                              |       | (82,442                              | )          | (72,203 | ) |
| Consolidated net loss                                               |       | (2,845                               | )          | (3,000 | ) |
| At end of period                                                    |       | (85,074                              | )          | (75,203 | ) |
|                                                                |       |                                 |       |   |   |
| Total Equity March 31, 2010, & 2009,  respectively    |       | $                                    | 102,793    |   | $ | 110,361 |   |

 

**NOTE 9 — INCOME TAXES**

 

At March 31,2010, and December 31, 2009, we had deferred tax assets principallyarising from the net operating loss carry forwards for income tax purposesmultiplied by an expected rate of 35%. As management of the Company cannot determine that it is more likelythan not that we will realize the benefit of the deferred tax assets, avaluation allowance equal to the net deferred tax asset has been established atMarch 31, 2010, and December 31, 2009.  The significant components of the deferredtax asset at March 31, 2010, and December 31, 2009, were as follows(in thousands):

 

**DeferredTax Asset Valuation**

 
| ** **                                       | ** ** | **March 31,  2010** | ** ** | **December 31,  2009** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Operating loss carry forward                     |       | $                        | 97,156     |                        | $          | 92,086 |   |
| Unamortized exploration expense                  |       | 11,471                   |       | 10,899                      |       |
| Fixed asset depreciation                         |       | (197                     | )          | (105                        | )          |
| Deductible stock based compensation              |       | 1,360                    |       | 902                         |       |
| Deductible temporary difference                  |       | $                        | 109,790    |                        | $          | 103,782 |   |
| Taxable temporary difference - development costs |       | (35,666                  | )          | (32,502                     | )          |
| Net deductible temporary difference              |       | $                        | 74,124     |                        | $          | 71,280 |   |
| Deferred tax asset                               |       | $                        | 25,943     |                        | $          | 24,948 |   |
| Deferred tax asset valuation allowance           |       | $                        | (25,943    | )                           | $          | (24,948 | ) |
| Net deferred tax asset                           |       | $                        | —     |                        | $          | — |   |

 

At March 31,2010, and December 31, 2009, we had net operating loss carry forwards ofapproximately $97.2 million and $92.1 million, respectively, which expirein the years 2023 through 2030.  Thechange in the allowance account from December 31, 2009, to March 31,2010, was $1.0 million.

 

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**NOTE 10—COMMITMENTS ANDCONTINGENCIES**

** **

**Mt. Hope Project**

 

TheMt. Hope Lease may be terminated upon the expiration of its 30-year term,earlier at the election of the LLC, or upon a material breach of the agreementand failure to cure such breach.  If theLLC terminates the lease, termination is effective 30 days after receipt byMount Hope Mines, Inc. (“MHMI”) of written notice to terminate the Mt.Hope Lease and no further payments would be due to MHMI.  In order to maintain the lease, the LLC mustpay certain deferral fees and advance royalties as discussed below.

 

TheMt. Hope Lease Agreement requires a royalty advance (“Construction RoyaltyAdvance”) of 3% of certain construction capital costs, as defined in the Mt.Hope Lease.  The LLC is obligated to paya portion of the Construction Royalty Advance each time capital is raised forthe Mt. Hope Project based on 3% of the expected capital to be used for thosecertain construction capital costs defined in the lease.  Through March 31, 2010, we have paid$3.3 million of the total Construction Royalty Advance.  Based on our Project Capital Estimate weestimate that $22.2 million remains unpaid related to the Construction RoyaltyAdvance.  Based on the current estimateof raising capital and developing and operating the mine, we believe that $1.5million of the LLC’s remaining Construction Royalty Advance will be paid in2010, and the remaining $20.7 million will be paid in 2011, however, asdiscussed above, this would only be paid if Hanlong financing becomesavailable.  In the event there are anyremaining unpaid Construction Royalty Advance amounts on October 19, 2011,due to a delay in achieving expected project financing, the remainder must bepaid 50% on October 19, 2011, and 50% on October 19, 2012.

 

Oncethe Construction Royalty Advance has been paid in full, the LLC is obligated topay an advance royalty (“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 MHMI Production Royalties (as hereinafter defined) once the mine hasachieved commercial production.  Afterthe mine begins production, the LLC estimates that the Production Royaltieswill be in excess of the Annual Advance Royalties for the life of the projectand, further, the Construction Royalty Advance will be fully recovered(credited against MHMI Production Royalties) by the end of 2014.

 

**Deposits on project property, plant and equipment**

 

At March 31,2010, we have contracts to purchase mining equipment comprised of two electricshovels and have cancelled orders for mine drills and loaders.  We have a non-binding letter of agreement on24 haul trucks that establishes our priority for delivery and provides for thethen current pricing using market indices upon initiation of an order.  We have active orders with varying stages offabrication on milling process equipment comprised of two 230kV primarytransformers and substation, a primary crusher, a semi-autogenous mill, twoball mills, and various motors for the mills. We have suspended fabrication on 16 flotation cells, lime slakingequipment, hydrocyclones, and other smaller milling process equipment with theability to re-initiate fabrication at any time. We have completed negotiations with the manufacturer of two multi-hearthmolybdenum roasters to terminate its fabrication of this equipment and receivefully-fabricated components of the order. We plan to re-establish a new purchase order with this manufacturer asadditional financing is finalized and equipment procurement is restarted underthe current market terms and conditions.

 

Thefollowing table sets forth cash commitments under mining and milling equipmentcontracts (collectively, “Purchase Contracts”) for the LLC at March 31,2010 (in millions):

 
| **Year**               | ** ** | **As of********March 31, 2010** | ** ** |
|------------------------|------------|--------------------------------------|------------|
| 2010  – Remainder |       | $                                    | 8.0        |   |
| 2011                   |       | 21.1                                 |       |
| 2012                   |       | 21.1                                 |       |
| 2013                   |       | 2.4                                  |       |
| 2014                   |       | —                               |       |
| Total                  |       | $                                    | 52.6       |   |

 

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**Obligations under capital and operating leases**

 

Wehave contractual obligations under capital and operating leases that willrequire a total of $1.0 million in payments over the next four years.  Our expected payments are $0.3 million, $0.4million, $0.2 million and $0.1 million for the years ended December 31,2010, 2011, 2012 and 2013, respectively.

 

**Environmental Considerations**

 

Ourmineral property holdings in Shoshone County, Idaho include lands contained inmining districts that have been designated as “Superfund” sites pursuant to theComprehensive Environmental Response, Compensation, and Liability Act.  This “Superfund Site” was established toinvestigate and remediate primarily the Bunker Hill properties of Smelterville,Idaho, a small portion of Shoshone County where a large smelter waslocated.  However, because of the extentof environmental impact caused by the historical mining in the mining district,the Superfund Site covers the majority of Shoshone County including ourChicago-London and Little Pine Creek properties (which are distant from theoriginal smelter location) as well as many small towns located in NorthernIdaho.  We have conducted a propertyenvironmental investigation of these properties which revealed no evidence ofmaterial adverse environmental effects at either property.  We are unaware of any pending action orproceeding relating to any regulatory matters that would affect our financialposition due to these inactive mining claims in Shoshone County.

 

**NOTE 11—SUBSEQUENT EVENTS**

 

**Consent and Waiver of Anti-dilution Rights andOption for Extension Molybdenum Supply**

 

Subsequentto March 31, 2010, on April 16, 2010, we entered into a Consent andWaiver Agreement whereby Arcelor agreed to waive its anti-dilution rights withrespect to the Company’s proposed issuance of stock under the Hanlonginvestment.  Arcelor will retainanti-dilution rights for future issuances of Company common stock.  Arcelor also consented to the issuance of commonstock at a price that may be below the market price.  Arcelor will also have the one-time right topurchase a number of shares that will ensure that Arcelor owns 10% of theoutstanding common stock if we issue more than 10,000,000 shares of commonstock.

 

Arcelorand the Company also entered into an Extension Molybdenum Supply Agreement on April 16,2010 (the “Extension Agreement”), providing Arcelor with a five-year option tomake effective an agreement to purchase from the Company three million poundsof molybdenum per year for 10 years following the expiration of the current fiveyear, 6.5 million annual pound molybdenum supply agreement.  The additional optional off-take will bepriced in alignment with the Company’s existing supply agreements.  In order for Arcelor to exercise this optionand make the Extension Agreement effective, Arcelor must have beneficialownership of more than 11,100,000 shares of Company common stock on or prior toApril 15, 2015.  Arcelor currentlyowns 8,256,699 shares of common stock.

 

Thisrepresents the completion of a keycondition precedent in the Bridge Loan agreement with Hanlong.

 

**Revaluation of Warrants**

 

Subsequentto March 31, 2010, Coghillprovided substantial assistance to the Company with the signing of the Consentand Waiver Agreement and the Extension Agreement with Arcelor.  In recognition of that support, on April 16,2010, the Company amended and restated warrants issued to Coghill to purchaseone million shares of the Company’s common stock issued in connection with the November 2007private placement and original molybdenum supply agreement with Arcelor toreduce the price of the warrants from $10.00 per share to $5.00 per share.  The incremental cost of the reissued warrantsis $.6 million, which will be recorded as expense in the second quarter of2010.  The warrants remain exercisableonce the Company has received financing necessary for the commencement ofcommercial production at the Mt. Hope project and will expire one yearthereafter.  It will also becomeexercisable in the event of certain corporate reorganizations.

 

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**Water Rights Appeal**

 

OnMarch 26, 2009, the Nevada State Engineer approved the Company’spreviously filed water applications that requested mining and milling use of11,300 acre feet annually of water to be drawn from a well field near the Mt.Hope project in Kobeh Valley.  On April 24,2009, two appeals of the ruling were filed by Eureka County, Tim Halpin, EurekaProducers’ Cooperative and Cedar Ranches, LLC., (“Petitioners”) with theSeventh Judicial District Court of the State of Nevada challenging the StateEngineer’s decision.  On April 23,2010, the District Court issued an order remanding the matter for anotherhearing by the State Engineer.  The Courtruled that the Petitioners’ due process rights to a full and fair hearing wereviolated when the State Engineer considered and relied upon a version of theCompany’s hydrology model that had not been presented to the Petitioners beforethe hearing.  The Company anticipates theState Engineer will promptly schedule a new hearing and does not anticipatethat the new hearing will affect the Mt. Hope construction or productiontimelines.  The District Court’s decisionis separate from and does not affect the Federal permitting process and thework associated with the Company’s EIS.

 

**Bridge Loan**

 

OnApril 26, 2010 we drew down Tranche 1 of the Bridge Loan in the amount of$10 million.  This first tranche of theBridge Loan bears interest at LIBOR plus 2% per annum.

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

 

Referencesmade in this Quarterly Report on 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 three months ended March 31, 2010,and 2009.  This discussion should be readin conjunction with the consolidated financial statements and notes theretocontained elsewhere in this report and in our Annual Report on Form 10-Kfor the year ended December 31, 2009, which was filed on March 5,2010.

 

Weroutinely post important information about us on our Company website.  Our website address is www.generalmoly.com.

 

**Overview**

 

We area development stage company and began the development of the Mt. Hope Projecton October 4, 2007.  During the yearended December 31, 2008 we also completed work on a pre-feasibility studyof our Liberty Property.  We continue toapproach the Liberty Property in a care and maintenance mode, and do not expectto spend appreciable amounts of capital on the Liberty Property until market conditionswarrant its development.

 

Thedevelopment of the Mt. Hope Project has a Project Capital Estimate of $1,153.9million including development costs of approximately $1,039.3 million (in 2008dollars) and $114.6 million in cash financial assurance requirements andpre-payments.  These amounts do notinclude financing costs or amounts necessary to fund operating workingcapital.  Through the quarter ended March 31,2010, we have spent approximately $164.4 million and have $24.6 millionremaining cash on hand for use in the development of the Mt. Hope Project andother cash requirements.

 

TheCompany remains in a cash conservation plan implemented in March 2009designed to reduce expenditures and conserve cash in order to maximizefinancial flexibility.  In addition toconserving cash, the plan seeks to retain critical employees and the ability tostart construction at the Mt. Hope project pending the availability of theHanlong financing.  With our March 31,2010, consolidated cash balance of $24.6 million, we have the capacity tocontinue our current level of permitting efforts, maintain efforts to finalizeproject financing, and secure the most critical long lead equipment for theultimate construction of the Mt. Hope project through the end of 2010 withoutfinalizing the Hanlong financing.

 

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Oncewe have received the major operating permits and the ROD from the BLM and loanprocurement efforts are complete, it is expected that Mt. Hope can beconstructed and in production within 20 months. In the interim, our permitting efforts are continuing full-time.  The Company has maintained its orders forgrinding, milling, and other specialty long lead equipment, although otherengineering, administrative and third-party work has been slowed or suspended.

 

Theworldwide molybdenum price has fluctuated between $5.33 per pound in 2003 toover $40.00 per pound in 2005.  In 2009,molybdenum prices averaged $11.12 per pound. Molybdenum prices fell substantially between October 2008 and April 2009from approximately $33.50 per pound to $7.70 per pound.  Following April, prices generally rose andfinished 2009 at approximately $12.00 per pound.  In the first quarter of 2010, molybdenumprices have continued to trend up, and were approximately $18 per pound in April 2010.

 

**Restructuring and Suspension of ProjectDevelopment**

 

Asdiscussed above, in March 2009, we implemented a cash conservation plan toreduce expenditures and conserve cash in order to maximize financialflexibility.  Engineering efforts,approximately 60% complete, were largely suspended pending the finalization offinancing.  Some engineering that iscritical for permitting or project restart readiness has continued at a slowerpace.

 

TheCompany issued purchase orders for two types of equipment – milling processequipment and mining equipment.  Mostequipment orders for the custom-built grinding and other milling processequipment will be completed by the manufacturers and stored.  The grinding and milling process equipmentrequire the longest lead times and maintaining these orders is critical to theCompany’s ability to re-start the development of Mt. Hope rapidly.  Fabrication of less critical equipment hasbeen suspended with some manufacturers. With respect to the remaining millingprocess equipment, where schedule is not critical, the manufacturers haveagreed to suspend fabrication of the equipment. The Company has completed negotiation with other equipment manufacturersto suspend or terminate fabrication of other milling equipment and to determinethe equipment fabrication costs incurred to date, storage costs, and theexpected timing of restarting fabrication. As the Hanlong financing becomes available and equipment procurement isrestarted, agreements that were suspended or terminated will be renegotiatedunder the then current market terms and conditions, as necessary.

 

Thedrills and loaders for the mine operation have been cancelled, and discussionsfor the purchase of the electric shovels are complete and this order wasamended and remains in effect.  Anagreement has been reached with a truck manufacturer to hold production slotsfor timely delivery.  The manufacturingtimes have shortened and pricing associated with many of these items havedeclined from 2007 levels.  Oncefinancing becomes available, the Company anticipates placing orders for thecancelled mining equipment again.  TheCompany will continue to evaluate all options to facilitate a timely re-startof the project development.

 

**Permitting Update**

 

TheMt. Hope Project will require both Federal and State permits before it cancommence construction and operations. Major permits required for the Mt. Hope Project include the ROD, a BLMissued permit, the water pollution control permit and reclamation permit fromthe Nevada Division of Environmental Protection—Bureau of Mining Regulation andReclamation (“BMRR”), and an air quality permit from the Nevada Division ofEnvironmental Protection— Bureau of Air Pollution Control (“BAPC”).

 

TheBLM is preparing an environmental impact statement (“EIS”) analyzing theenvironmental impacts of the Mt. Hope Project and alternatives in accordancewith the National Environmental Policy Act. Upon completion and approval of the EIS, the BLM will issue the ROD forthe Mt. Hope Project.  The ROD will beeffective on the date the BLM has recorded its decision to approve the EIS andplan of operations for the Mt. Hope Project. We currently expect to receive the ROD late in the fourth quarter of2010 or early in the first quarter of 2011. In September 2006, the BLM determined that the plan of operationsmet the regulatory requirements with respect to completeness andcomprehensiveness.  Since that time,baseline technical reports have been submitted and plan of operations updateshave been submitted to accommodate additional detail based on progression ofproject design.  All technical reportsthat form the basis of the EIS have been submitted to the BLM for approval atthe time of this filing.  Final approvalby the BLM of the technical reports will allow the completion of a draft EIS,which will then be open to additional 

 

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public review and comment.  Public comment will then be considered and ifwarranted by the BLM will be incorporated into the draft for publication of aFinal EIS.

 

Theother time critical State permits have also been submitted for agency reviewand approval at the time of this filing. We believe these other major operating permits will be received on orprior to the effective date of the ROD.

 

Althoughwe currently are targeting the effectiveness of the ROD and the receipt of allmajor operating permits to occur late in the fourth quarter of 2010 or early inthe first quarter of 2011, circumstances beyond our control, includingreviewing - agency delays or requests for additional information or studies,and appeals of the BLM decision, could cause the effectiveness of the ROD to bedelayed.  The occurrence of any or acombination of these adverse circumstances may increase the estimated costs ofdevelopment, require us to obtain additional interim financing, and / or delayour ability to consummate project financing or other significantfinancing.  A delay in the ROD or thereceipt of major operating permits also affects the satisfaction of the RODContribution Conditions, extends the time for the receipt of POS-Minerals thirdcontribution, if any, and may affect the contingent obligation of Eureka Molyto refund capital contributions to POS-Minerals and the amount of any suchrefund.  See “—The Mt. Hope Project”below.

 

**Water Rights Update**

 

On March 26,2009, the Nevada State Engineer approved the Company’s previously filed waterapplications that requested mining and milling use of 11,300 acre feet annuallyof water to be drawn from a well field near the Mt. Hope project in KobehValley.  On April 24, 2009, twoappeals of the ruling were filed by Eureka County, Tim Halpin, Eureka Producers’Cooperative and Cedar Ranches, LLC., (“Petitioners”) with the Seventh JudicialDistrict Court of the State of Nevada challenging the State Engineer’sdecision.  On April 23, 2010, theDistrict Court issued an order remanding the matter for another hearing by theState Engineer.  The Court ruled that thePetitioners’ due process rights to a full and fair hearing were violated whenthe State Engineer considered and relied upon a version of the Company’shydrology model that had not been presented to the Petitioners before thehearing.  The Company anticipates theState Engineer will promptly schedule a new hearing and does not anticipatethat the new hearing will affect the Mt. Hope construction or productiontimelines.  The District Court’s decisionis separate from and does not affect the Federal permitting process and thework associated with the Company’s EIS.

 

**The Mt. Hope Project**

 

Effective as of January 1, 2008, we contributedall of our interest in the assets related to the Mt. Hope Project, includingour lease of the Mt. Hope Project into a newly formed entity, Eureka Moly, LLC,a Delaware limited liability company (“LLC”), and in February 2008 (“ClosingDate”) entered into an agreement (“LLC Agreement”) for the development andoperation of the Mt. Hope Project (“Project”) with POS-Minerals Corporation (“POS-Minerals”)an affiliate of POSCO, a large Korean steel company.  Under the LLC Agreement, POS-Minerals owns a20% interest in the LLC and General Moly, through a wholly-owned subsidiary,owns an 80% interest.  These ownershipinterests and/or required contributions under the LLC Agreement can change asdiscussed below.

 

Pursuant to the terms of the LLC Agreement,POS-Minerals made its first and second cash contributions to the LLC totaling$100.0 million during the year ended December 31, 2008 (“InitialContributions”).  Additional amounts willbe due from POS-Minerals within 15 days after the date (“ROD Contribution Date”)that specified conditions (“ROD Contribution Conditions”) have beensatisfied.  The ROD ContributionConditions are the receipt of major operating permits for the project, that theRecord of Decision (“ROD”) from the United States Bureau of Land Management (“BLM”)for the project has become effective, and any administrative or judicialappeals with respect thereto are final. As a result of the ROD Contribution Date not occurring on or before December 31,2009, the LLC Agreement allowed POS-Minerals to elect (“Ownership Election”) toeither retain its 20% share by contributing an additional $56.0 million plusits 20% share of all Project costs incurred from the Closing Date to the RODContribution Date or reduce its ownership interest to 13% and fund itsremaining 13% share of all Project costs incurred from the Closing Date to theROD Contribution Date.  On March 3, 2010, POS-Mineralsformally made the election to retain its 20% share, and thereby elected to makethe additional $56.0 million contribution plus its 20% share of all Projectcosts incurred from the Closing Date to the ROD Contribution Date.  These additional amounts will be due fromPOS-Minerals within 15 days after the ROD Contribution Date.

 

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In addition, if commercial production at the Mt. HopeProject is not achieved by December 31, 2011,****forreasons other than a force majeure event, the LLC may be required to return toPOS-Minerals a portion of its contributions to the LLC, with no correspondingreduction in POS-Minerals’ ownership percentage.  Based on our current plan and expectedtimetable, Mt. Hope Project will not achieve commercial production by December 31,2011.  As POS-Minerals has elected toretain its 20% interest and make its additional $56.0 million contribution, thereturn of contributions will be $36.0 million on or prior to January 27,2012.  If POS-Minerals does not make itsadditional $56.0 million contribution when due after the ROD Contribution Date,its interest will be reduced to 10% and the return of contributions will bezero.

 

Our wholly-owned subsidiary and 80% owner of the LLC,Nevada Moly, is obligated under the terms of the LLC Agreement to make capitalcontributions to fund the return of contributions to POS-Minerals, ifrequired.  If Nevada Moly does not makethese capital contributions, POS-Minerals has an election to either make asecured loan to the LLC to fund the return of contributions or receive anadditional interest in the LLC of approximately 5%.  In the latter case, our interest in the LLCis subject to dilution by a percentage equal to the ratio of 1.5 times theamount of the unpaid contributions over the aggregate amount of deemed capitalcontributions (as determined under the LLC Agreement) of both parties to theLLC (“Dilution Formula”).  At December 31,2009, the aggregate amount of deemed capital contributions of both parties was$880.0 million.

 

Furthermore, a provision in the LLC Agreement permitsPOS-Minerals theoption to put its interest in the LLC to Nevada Moly after a change of controlof the Company, as defined in the LLC agreement, followed by (i) failureto begin full construction at the LLC by the Company or the surviving entitybefore December 31, 2010, or (ii) failure to use standard miningindustry practice in connection with development and operation of the projectas contemplated by the parties for a period of twelve months after December 31,2010.  If POS-Minerals puts its interest,Nevada Moly would be required to purchase the interest for 120% of POS-Mineralscontributions to the LLC plus 10% interest.

 

The Initial Contributions of $100.0 million that weremade by POS-Minerals during 2008 were expended by the second quarter of 2009 inaccordance with the program and budget requirements of the Mt. HopeProject.  Nevada Moly is required,pursuant to the terms of the LLC Agreement, to advance funds required to paycosts for the development of the Mt. Hope Project that exceed the InitialContributions until the ROD Contribution Date, at which point the contributionsdescribed above to be made by POS-Minerals will be applied to reimburse us for POS-Minerals’share of such development costs.  Allcosts incurred after the ROD Contribution Date will be allocated and funded prorata based on each party’s ownership interest. The interest of a party in the LLC that does not make its pro ratacapital contributions to fund costs incurred after the ROD Contribution Date issubject to dilution based on the Dilution Formula.

 

**Liquidity, Capital Resources and CapitalRequirements**

 

*For theperiod from December 31, 2009 to March 31, 2010*

 

Ourtotal consolidated cash balance at March 31, 2010, was $24.6 millioncompared to $48.6 million at December 31, 2009.  The decrease in our consolidated cashbalances for the three months ended March 31, 2010, was due primarily todevelopment costs incurred of $2.8 million, deposits on property plant andequipment totaling $17.8 million, and general and administrative costs of $3.4million.  Deposits on property, plant andequipment relate primarily to scheduled payments for long lead time equipmentfor the Mt. Hope Project.  See “—Contractual Obligations” below.

 

Withour cash conservation plan, our non-equipment related cash requirements havedeclined to approximately $1 million per month. Based on our current plan and expected timetable, we expect to makeadditional payments of approximately $8.0 million under milling processequipment orders through the end of 2010, and $12.8 million in 2011.  As the Hanlong financing becomes availableand equipment procurement is restarted, agreements that were suspended orterminated will be renegotiated under current market terms and conditions, asnecessary.  Accordingly, based on ourcurrent cash on hand and our cash conservation plan, the Company expects itwill have adequate liquidity for operations through the year ended December 31,2010, without finalizing the Hanlong financing discussed below, whilemaintaining the current cash conservation strategy.

 

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Thenew anticipated sources of financing described below, combined with theelection by POS-Minerals to retain its 20% share and make requiredcontributions, provide substantially all of the funding expected to be requiredto construct and place into commercial operation the Mt. Hope Project.

 

**Securities Purchase Agreement with Hanlong (USA)Mining Investment Inc. and Chinese Bank Loan**

 

On March 4,2010, we (the “Company”) signed a Securities Purchase Agreement (the “PurchaseAgreement”) with Hanlong (USA) Mining Investment, Inc. (“Hanlong”), anaffiliate of Sichuan Hanlong Group, a large privately held Chinesecompany.  We began discussions with Hanlong in December 2009.  The Purchase Agreement and the relatedagreements described below form the basis of a significant investment byHanlong in the Company that is intended to provide the Company with adequatecapital to develop the Mt. Hope Project.  The Purchase Agreement providesfor the sale to Hanlong of shares of our common stock in two tranches that willaggregate 25% of our outstanding stock on a fully diluted basis.  Theaverage price per share, based on the anticipated number of shares to beissued, is $2.88 for an aggregate price of $80 million, and constitutes asmall premium as compared to the $2.60 closing share price of the Company on March 4,2010.  The share issuance is part of a larger transaction that includesthe commitment by Hanlong to use its commercially reasonable efforts to procurea $665 million bank loan for the Company (the “Term Loan”) from a primeChinese bank that will be guaranteed by an affiliate of Hanlong, a$20 million bridge loan from Hanlong to the Company, and a long-termmolybdenum supply off-take agreement pursuant to which a Hanlong affiliate willagree to purchase a substantial part of the molybdenum production from the Mt.Hope Project at specified prices.

 

**Securities Purchase Agreement**

 

*Stock Purchase*.  The Purchase Agreement provides, subject toterms and conditions of the Purchase Agreement, for the purchase by Hanlong foran aggregate price of $80 million, of approximately 27.8 million shares ofour common stock which will equal 25% of our outstanding common stock on afully-diluted basis following the purchase, or approximately 38.3% of our currentlyoutstanding common stock.  Fully diluted means all of our outstandingcommon stock plus all outstanding options and warrants, whether or notcurrently exercisable.  Hanlong is obligated to purchase the first 12.5%of our fully-diluted shares, or approximately 11.9 million (“Tranche 1”)for $40 million, or approximately $3.36 per share, following satisfactionof certain conditions, including receipt of stockholder approval of the equityissuances in connection with the transaction, publication of the notice ofavailability of the Draft Environmental Impact Statement (the “DEIS”)concerning the Mt. Hope Project by the Bureau of Land Management (the “BLM”),receipt of necessary Chinese government approvals for certain portions of thetransaction, assurances from Hanlong as to the availability of the Term Loan,approval of the shares for listing on the NYSE Amex and absence of certaindefaults.  The actual number of shares and price per share will beadjusted for any change in the number of fully diluted shares before theclosing of Tranche 1.  The parties may waive the conditions to theirrespective obligations.  The Company anticipates that Tranche 1 willclose in the third or fourth quarter of 2010.

 

Thesecond tranche (“Tranche 2”), which will involve the purchase ofapproximately 15.9 million additional shares, will be for a purchase price ofan additional $40 million, or approximately $2.52 per share.  Theactual number of shares and price per share will be adjusted for any change inthe number of fully diluted shares before the closing of Tranche 2. Significant conditions to the closing of Tranche 2 include issuance of theRecord of Decision for the Mt. Hope Project by the Bureau of Land Management,approval of the plan of operation for the Mt. Hope Project by the BLM, and thecompletion of documentation for and satisfaction of conditions precedent tolending under the Term Loan.  The Purchase Agreement may be terminated byeither party (provided the terminating party is not in default) if the closingsof Tranche 1 and Tranche 2 have not occurred by January 31,2011, and September 30, 2011, respectively, subject to extension undersome circumstances to January 31, 2012.

 

Thepotential purchase of common stock by Hanlong gave ArcelorMittal, S.A. (“Arcelor”),which presently owns approximately 10.0% of our fully diluted common stock, theright to acquire additional shares so that it could maintain its current levelof ownership.  Subsequent to March 31, 2010, on April 16, 2010,we entered into a Consent and Waiver Agreement whereby Arcelor agreed to waiveits anti-dilution rights with respect to the Company’s proposed issuance ofstock under the Hanlong investment. Arcelor will retain anti-dilution rights for future issuances of Companycommon stock.  Arcelor also consented tothe issuance of common stock at a price that may be below the marketprice.  Arcelor will also have theone-time right to purchase a number of shares that will 

 

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ensure that Arcelor owns 10% of the outstanding commonstock if we issue more than 10,000,000 shares of common stock.  In connection with the Consent and WaiverAgreement, Arcelor and the Company alsoentered into an Extension Molybdenum Supply Agreement on April 16, 2010(the “Extension Agreement”), providing Arcelor with a five-year option to makeeffective an agreement to purchase from the Company three million pounds ofmolybdenum per year for 10 years following the expiration of the current fiveyear, 6.5 million annual pound molybdenum supply agreement.  The additional optional off-take will bepriced in alignment with the Company’s existing supply agreements.  In order for Arcelor to exercise this optionand make the Extension Agreement effective, Arcelor must have beneficialownership of more than 11,100,000 shares of Company common stock on or prior toApril 15, 2015.  Arcelor currentlyowns 8,256,699 shares of common stock.

 

Hanlongwill have the right to purchase a portion of any additional shares of commonstock that we issue so that it can maintain its percentage ownership unless itsownership is at the time below 5%.  It may also acquire additional sharesso that it maintains a 20% indirect interest in the Mt. Hope Project ifour interest in the LLC is reduced below 80%.  If we issue shares to fundour obligation to fund the Mt. Hope Project under certain circumstancesand Hanlong exercises its rights to maintain its percentage interest, we willbe obligated to refund to Hanlong the cost of such shares over a three-yearperiod up to an aggregate of $9 million.

 

*Break Fees*.  A break fee is payable by both the Company andHanlong if the Purchase Agreement terminates because of the failure of certainconditions to the closing of Tranche 1 or Tranche 2.  A breakfee of $10 million is payable to the Company if the Purchase Agreement isterminated because Hanlong fails to obtain necessary Chinese governmentapprovals or to give its assurances about the availability of the TermLoan.  The Company has agreed to pay $5 million to Hanlong if theconditions concerning our stockholder approval, the publication of the DEIS orthe Record of Decision are not timely satisfied or waived and the PurchaseAgreement is terminated.  The Company break fees may be increased by$5 million if the Purchase Agreement is terminated and the Company hasviolated the “no-shop” provisions of the Purchase Agreement and may beincreased in other circumstances not to exceed an additional $3 million if theCompany requests and Hanlong grants certain extensions of deadlines concerningthe DEIS and up to an additional $2 million if the Company requests and Hanlonggrants certain extensions concerning the Record of Decision.  In addition,the Company must pay a $2 million fee to Hanlong if it grants the extensionconcerning the Record of Decision, which fee can be credited against thearrangement fee described above.  The break fee payable by the Company toHanlong may be paid in cash, or, in certain circumstances, in shares of ourcommon stock at our option.  If paid in shares, the price would be thevolume weighted average of our common stock on the NYSE Amex for thefive days ending six days after the announcement of the termination.

 

*No Shop*.  The Company has agreed that it will not seekalternative proposals that would supplant the proposed transaction with Hanlonguntil the Closing of the transactions contemplated by the Purchase Agreement orthe earlier termination of the Purchase Agreement.  The Board may, in theexercise of its fiduciary obligations, consider an unsolicited offer that itviews as superior to the Hanlong transaction.

 

*Registration Rights*.  We have agreed to register forsale the shares purchased by Hanlong at its request.

 

*Chinese Bank Loan*.  Pursuant to the PurchaseAgreement, Hanlong is obligated to use its commercially reasonable efforts toprocure the Term Loan in an amount of at least $665 million with a term ofat least 14 years after commercial production begins at the Mt. HopeProject.  The Term Loan is expected to bear interest at a rate of LIBORplus a spread of between 2% and 4% per annum.  The Purchase Agreementprovides that the Term Loan will have customary covenants and conditions;however, the terms of the Term Loan have not been negotiated with the lenderand we have no assurance as to the final terms of the Term Loan.  Hanlongor an affiliate is obligated to guarantee the Bank Loan.  When funds canbe drawn by the Company under the Term Loan, the Company will pay a$15 million arrangement fee to Hanlong who will pay all fees and expensesassociated with the Term Loan before the Term Loan Closing, including thosecharged by the Chinese bank.

 

**Bridge Loan**

 

Hanlong has also agreed to provide a $20 millionbridge loan (the “Bridge Loan”) to the Company in two equal $10 milliontranches.  Subsequent to March 31, 2010, we drew down Tranche 1 inthe amount of $10 million on April 26, 2010.  The second loan tranchewill be available five business days after receipt of stockholder approval andis subject to the satisfaction of customary conditions.  The first trancheof the Bridge Loan bears interest at 

 

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LIBOR plus 2% per annum.  The second tranche ofthe Bridge Loan will bear interest at 10% per annum.  The Bridge Loan willbe repaid from the proceeds of the Term Loan.  If Hanlong agrees, thesecond tranche may also be repaid, at the Company’s election, in shares of theCompany’s common stock.  If paid in shares, the price would be the volumeweighted average of the Company’s shares on the NYSE Amex for a five-day periodafter public announcement of the event that required repayment.  TheCompany may offset its right to receive the break fee against its obligationsto repay borrowings under the Bridge Loan.  If not sooner repaid, theBridge Loan will mature on the earliest of 120 days after the issuance of the Recordof Decision, the date on which the Purchase Agreement terminates, and January 31,2012.  The Bridge Loan and our obligation to pay a break fee to Hanlongunder the Purchase Agreement is secured by a pledge by us of a 10% limitedliability company interest in the LLC.

 

**Molybdenum Supply Agreement**

 

TheCompany signed a molybdenum supply agreement (the “Supply Agreement”) with aHanlong affiliate (referred to in this subsequent discussion as “Hanlong”),which will be effective upon the later of the Tranche 2 closing, the Term Loanclosing, or the Company’s election not to enter into the Term Loan.  Untilthe expiration of certain existing molybdenum supply agreements by which theCompany is currently bound (the “Existing Supply Agreements”), Hanlong will berequired to purchase all the Company’s share of the Mt. Hope molybdenumproduction above that necessary for the Company to meet its existing supplycommitments.  After the expiration of the Existing Supply Agreements,until the original scheduled maturity date of the Term Loan, or if the Companyelects not to enter into the Term Loan, 14 years after commencement ofcommercial production from the Mt. Hope Mine, Hanlong must annually purchasethe greater of 16 million pounds and 70% of the Company’s share of Mt. Hopeproduction.  Following the original scheduled maturity date of the TermLoan, or if the Company elects not to enter into the Term Loan, 14 years aftercommencement of commercial production from the Mt. Hope Mine, Hanlong mustpurchase a percentage of the Company’s share of Mt. Hope production equal to2.5 times Hanlong’s fully-diluted percentage ownership of our commonstock.  Subject to certain exceptions, the Supply Agreement will terminateonce Hanlong’s fully-diluted percentage ownership of the Company falls below5%. As long as Hanlong continues to guarantee the Term Loan, the SupplyAgreement will not terminate even if Hanlong’s ownership falls below 5%. If the cause of Hanlong’s ownership falling below 5% is a change of control ofthe Company or a dilutive transaction in which Hanlong does not have the rightto participate, the Supply Agreement will not terminate and Hanlong will beobligated to continue to purchase a percentage of the Company’s share of Mt.Hope production equal to 2.5 times Hanlong’s fully-diluted percentage ownershipof the Company as it existed immediately prior to such change of control ordilutive transaction.  If the Company elects not to enter into the TermLoan, and the second loan tranche does not close, Hanlong’s obligation topurchase the Company’s share of Mt. Hope production in each of the periodsdescribed above will be half of the obligations described above.

 

Pricesunder the Supply Agreement are at two levels.  Twenty-five percent of theproduction Hanlong receives will be sold at a fixed-floor price per poundsubject to adjustment, which pricing is similar to floor-price protectedcontracts that the Company has in place with other large steel producers andmetal traders.  Those contracts have fixed-floor prices ranging from$12.50 to $13.50 per pound and incremental discounts above the floorprice.  For the remaining 75% of the production Hanlong receives, it willpay spot prices for molybdenum, less a small discount.

 

The result ofthe transaction will be that if the Company elects to enter into the Term Loan,or if the Tranche 2 closing occurs, all of Mt. Hope’s production will becommitted for the first five years of operation, approximately half of whichwill contain floor price protection to help support the Company’s ability toservice its debt in periods of low metal prices.

 

Existingsupply agreements cover the sales of 100% of the production of Mt. Hope for thefirst 5 years of operation with 50% of those sales being covered by floor priceprotection.  Over the following 9 yearsof operation Hanlong is committed to purchase a minimum of 70% of productionwith 25% of that covered under floor price protection.  ArcelorMittal has an option to commit to 3million pounds of production from year 6 through year 15 of operation.  Hanlong has committed to take a percentage ofproduction which is 2.5 times their percentage ownership share of the Companyfor the life of the mine.

 

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**OtherCapital Requirements**

** **

Wealso require additional capital to maintain our mining claims and other rightsrelated to the Liberty Property, as well as continue payment of ongoing generaland administrative costs associated with supporting our planned operations.

 

**Resultsof Operations**

** **

*Three months ended March 31, 2010, compared tothree months ended March 31, 2009*

 

Forthe three months ended March 31, 2010, we had a consolidated net loss of$2.8 million compared with a consolidated net loss of $3.1 million in the sameperiod for 2009.

 

Forthe three months ended March 31, 2010, and 2009, exploration andevaluation expenses were $0.1 million and $0.2 million, respectively.

 

Forthe three months ended March 31, 2010, and 2009, general andadministrative expenses were $2.7 million and $2.9 million, respectively.  For the three months ended March 31,2010, the decline in costs compared to the previous year relates to theimplementation of our cash conservation plan.

 

Interestincome was nil for the three months ended March 31, 2010, as a result ofsubstantially lower interest rates and lower consolidated cash balances in 2010and 2009.

 

**ContractualObligations**

** **

Our contractual obligations as of March 31, 2010,were as follows:

 
| ** **                                              | ** ** | **Payments  due by period********(in millions)** | ** ** |
|---------------------------------------------------------|------------|--------------------------------------------------|------------|
| **Contractual obligations**                             | ** ** | **Total**                                        | ** ** | **2010** | ** ** | **2011 - 2013** | ** ** | **2014 - 2015** | ** ** | **2016 &  Beyond** | ** ** |
| Long-Term  Debt (Capital Lease) Obligations             |       | $                                                | 0.3        |   | $ | 0.1 |   | $ | 0.2 |   | $ | — |   | $ | — |   |
| Operating  Lease Obligations                            |       | 0.7                                              |       | 0.2 |   | 0.5 |   | — |   | — |   |
| Purchase  Contracts                                     |       | 52.6                                             |       | 8.0 |   | 44.6 |   | — |   | — |   |
| Advance  Royalties and Deferral Fees (1)                |       | 22.7                                             |       | 1.5 |   | 21.2 |   | — |   | — |   |
| Provision  for post closure reclamation and remediation |       | 0.6                                              |       | — |   | — |   | — |   | 0.6 |   |
| **Total**                                               |       | $                                                | 76.9       |   | 9.8 |   | $ | 66.5 |   | $ | — |   | $ | 0.6 |   |
|                                                         |            |                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          Assumes that full project financing is obtained during2010

 

At March 31,2010, we have contracts to purchase mining equipment comprised of two electricshovels and have cancelled orders for mine drills and loaders.  We have a non-binding letter of agreement on24 haul trucks that establishes our priority for delivery and provides for thethen current pricing using market indices upon initiation of an order.  We have active orders with varying stages offabrication on milling process equipment comprised of two 230kV primarytransformers and substation, a primary crusher, a semi-autogenous mill, twoball mills, and various 

 

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motors for the mills. We have suspended fabrication on 16 flotation cells, lime slakingequipment, hydrocyclones, and other smaller milling process equipment with theability to re-initiate fabrication at any time. We have completed negotiations with the manufacturer of two multi-hearthmolybdenum roasters to terminate its fabrication of this equipment and receivefinished goods of the partially completed order.  We plan to re-establish a new purchase orderwith this manufacturer as additional financing is secured and equipmentprocurement is restarted under the current market terms and conditions.

 

Thefollowing table sets forth the LLC’s remaining cash commitments under purchasecontracts at March 31, 2010, resulting from the re-negotiation andcancelation of Purchase Contracts as discussed above (in millions).

 
| **Period** | ** ** | **Cash  Commitments  Under Purchase  Contracts as of********March 31, 2010** | ** ** |
|------------|------------|-----------------------------------------------------------------------------------|------------|
| 2010       |       | 8.0                                                                               |       |
| 2011       |       | 21.1                                                                              |       |
| 2012       |       | 21.1                                                                              |       |
| 2013       |       | 2.4                                                                               |       |
| 2014       |       | —                                                                            |       |
| Total      |       | $                                                                                 | 52.6       |   |
|            |            |                                                                                   |            |  |

 

Cashcommitments under purchase contracts are inclusive of $20.8 million undermilling process equipment orders (approximately $8.0 million due through theend of 2010, and $12.8 million in 2011), and $31.8 million in mining equipmentorders.

 

Weestimate that we will be required to pay approximately $0.6 million inadditional insurance and handling costs, related to the custom-build grindingand other milling process equipment. Based on our current plan, we expect to make additional payments ofapproximately $8.0 million under these milling process equipment orders throughthe end of 2010, and $12.8 million in 2011. As our additional financing becomes available and equipment procurementis restarted, agreements that were suspended or terminated will be renegotiatedunder the then current market terms and conditions, as necessary.

 

If theCompany does not make payments required under the purchase contracts, it couldbe subject to claims for breach of contract or to cancellation of the purchasecontract.  In addition, we may proceed toselectively suspend, cancel or attempt to renegotiate additional purchasecontracts if we are forced to further conserve cash.  See “— Liquidity and Capital Resources”above.  If we cancel or breach anycontracts, we will take all appropriate action to minimize any losses, butcould be subject to claims or penalties under the contracts or applicablelaw.  The cancellation of certain keycontracts would cause a delay in the commencement of operations, haveramifications under the LLC Agreement with POS-Minerals and would add to thecost to develop our interest in the Mt. Hope Project.

 
| **ITEM 3.** | ** ** | **QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK** |
|-------------|------------|-----------------------------------------------------------------|

** **

**CommodityPrice Risk**

** **

Weare a development stage company in the business of the exploration, developmentand mining of properties primarily containing molybdenum.  As a result, upon commencement of production,our financial 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, the exchange rates of theU.S. dollar and other currencies, interest rates, global or regional politicaland economic conditions, banking environment, global and regional 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 

 

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molybdenumsupply agreement with Arcelor that provides for Arcelor to purchase 6.5 millionpounds of molybdenum per year, plus or minus 10%, once the Mt. Hope Projectcommences commercial operations at minimum specified levels. The supplyagreement provides for a floor price along with a discount for spot pricesabove the floor price and expires five years after the commencement ofcommercial production at the Mt. Hope Project. Both the floor and threshold levels at which the percentage discounts change areindexed to a producer price index.

 

OnMay 14, 2008, we entered into a molybdenum supply agreement with SeAHBesteel Corporation (“SeAH Besteel”), Korea’s largest manufacturer of specialtysteels, which provides for SeAH Besteel to purchase 4.0 million pounds ofmolybdenum per year, plus or minus 10%, once the Mt. Hope Project commencescommercial operations at minimum specified levels. Like the Arcelor supplyagreement, the supply agreement with SeAH Besteel provides for a floor pricealong with staged discounts for spot prices above the floor price and expiresfive years from the date of first supply under the agreement.  Both the floor and threshold levels at whichthe percentage discounts change are indexed to a producer price index.

 

OnAugust 8, 2008, the Company entered into a molybdenum supply agreement (“SojitzAgreement”) with Sojitz Corporation.  TheSojitz Agreement provides for the supply of 5.0 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 4.0 million annual pounds sold under the Sojitz Agreement will be sold with reference to spotmoly prices without regard to a floor price. The Sojitz Agreement includes an option for cancellation in the eventthat supply from the Mt. Hope Project has not begun by January 1, 2013.

 

On March 4, 2010,the Company signed a molybdenum supply agreement (“Supply Agreement”) with aHanlong affiliate (referred to in this subsequent discussion as “Hanlong”),which will be effective upon the later of the Tranche 2 closing, the Term Loanclosing, or the Company’s election not to enter into the Term Loan.  Until the expiration of certain existingmolybdenum supply agreements by which the Company is currently bound (“ExistingSupply Agreements”), Hanlong will be required to purchase all the Company’sshare of the Mt. Hope molybdenum production above that necessary for theCompany to meet its existing supply commitments.  After the expiration of the Existing SupplyAgreements, until original scheduled maturity date of the Term Loan, or if theCompany elects not to enter into the Term Loan, 14 years after commencement ofcommercial production from the Mt. Hope Mine, Hanlong must annually purchasethe greater of 16 million pounds and 70% of the Company’s share of Mt. Hopeproduction.  Following the original scheduledmaturity date of the Term Loan, or if the Company elects not to enter into theTerm Loan, 14 years after commencement of commercial production from the Mt.Hope Mine, Hanlong must purchase a percentage of the Company’s share of Mt.Hope production equal to 2.5 times Hanlong’s fully-diluted percentage ownershipof our common stock.  Subject to certainexceptions, the Supply Agreement will terminate once Hanlong’s fully-dilutedpercentage ownership of the Company falls below 5%. As long as Hanlong continuesto guarantee the Term Loan, the Supply Agreement will not terminate even ifHanlong’s ownership falls below 5%.  IfHanlong ceases to guarantee the Term Loan, if the cause of Hanlong’s ownershipfalling below 5% is a change of control of the Company or a dilutivetransaction in which Hanlong does not have the right to participate, the SupplyAgreement will not terminate and Hanlong will be obligated to continue topurchase a percentage of the Company’s share of Mt. Hope production equal to2.5 times Hanlong’s fully-diluted percentage ownership of the Company as itexisted immediately prior to such change of control or dilutivetransaction.  If the Company elects notto enter into the Term Loan, and Tranche 2 does not close, Hanlong’s obligationto purchase the Company’s share of Mt. Hope production in each of the periodsdescribed above will be half of the obligations described above.

 

Prices under the SupplyAgreement are at two levels.  Twenty-fivepercent of the production Hanlong receives will be sold at a fixed-floor priceper pound subject to adjustment, which pricing is similar to floor-priceprotected contracts that the Company has in place with other large steelproducers and metal traders.  Thosecontracts have fixed-floor prices ranging from $12.50 to $13.50 per pound andincremental discounts above the floor price. For the remaining 75% of the production Hanlong receives, it will payspot prices for molybdenum, less a small discount.

 

The result of thetransaction will be that if the Company elects to enter into the Term Loan, orif the Tranche 2 closing occurs, all of Mt. Hope’s production will be committedfor the first five years of operation, approximately 

 

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half of which willcontain floor price protection to help support the Company’s ability to serviceits debt in periods of low metal prices.

 

Existing supply agreementscover the sales of 100% of the production of Mt. Hope for the first 5 years ofoperation with 50% of those sales being covered by floor price protection.  Over the following 9 years of operationHanlong is committed to purchase a minimum of 70% of production with 25% ofthat covered under floor price protection. ArcelorMittal has an option to commit to 3 million pounds of productionfrom year 6 through year 15 of operation. Hanlong has committed to take a percentage of production which is 2.5times their percentage ownership share of the Company for the life of the mine.

 

Allfour long term supply agreements provide forsupply only after commercial production levels are achieved, and no provisionsrequire the Company to deliver product or make any payments if commercialproduction is never achieved, or declines in later periods.  The agreements require that monthlyshortfalls be made up only if the Company’s portion of Mt. Hope production isavailable for delivery, after POS-Minerals has taken its share.  In no event do these requirements to make upmonthly shortfalls become obligations of the Company if production does notmeet targeted levels.

 

Furthermore,each of the agreements have take-or-pay provisions that require the buyers toeither take delivery of product made available by the Company, or to pay asthough they had taken delivery pursuant to the term of the agreements.  The Company has no obligation to supplyproduct if it is not produced in sufficient quantity from the Mt. Hope miningand milling operation.

 

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.

 

**Interest Rate Risk**

 

As of March 31,2010, we had a balance of cash and cash equivalents and restricted cash of$24.6 million.  Interest rates on shortterm, highly liquid investments have not changed materially since December 31,2008 and continue to be 1% or less on an annualized basis. If and to the extentthat these funds were invested in interest bearing instruments during theentire three month period ended March 31, 2010, a hypothetical 1% pointdecrease in the rate of interest earned on these funds would reduce interestincome to nil for the three month period ended March 31, 2010.

 
| **ITEM 4.** | ** ** | **CONTROLS AND PROCEDURES** |
|-------------|------------|-----------------------------|

** **

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 andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934) as of the end of the period covered bythis Quarterly Report on Form 10-Q. Based on the foregoing, our management concluded that our disclosurecontrols and procedures are effective to ensure that information required to bedisclosed by us in reports that we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specifiedin the Securities and Exchange Commission rules and forms and suchinformation is accumulated and communicated to our management, including ourprincipal executive officer and principal financial officer, to allow timelydecisions regarding required disclosure.

 

Therewas no change in our internal control over financial reporting that occurredduring the quarter ended March 31, 2010, that has materially affected, oris reasonably likely to materially affect, our internal control over financialreporting.

 

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**PART II**

** **

**OTHER INFORMATION**

** **
| **ITEM  1.** | ** ** | **LEGAL  PROCEEDINGS** |
|--------------|------------|------------------------|

 

TheMt. Hope Project is primarily centered between two water basins: the KobehValley Basin and the Diamond Valley Basin. Operation of the Mt. Hope Project is expected to require 7,000 gpmof fresh water that will be sourced from wells located in Kobeh Valley, west ofthe Mt. Hope Project.  The Company haspurchased from existing water rights holders essentially all available waterrights in the Kobeh Valley Basin, totaling more than 16,000 acre feetannually.  The Company believes it hassufficient water rights for its planned mining and milling operations.

 

On March 26,2009, the Nevada State Engineer approved the Company’s previously filed waterapplications that requested mining and milling use of 11,300 acre feet annuallyof water to be drawn from a well field near the Mt. Hope project in KobehValley.  On April 24, 2009, twoappeals of the ruling were filed by Eureka County, Tim Halpin, Eureka Producers’Cooperative and Cedar Ranches, LLC., (“Petitioners”) with the Seventh JudicialDistrict Court of the State of Nevada challenging the State Engineer’sdecision.  On April 23, 2010, theDistrict Court issued an order remanding the matter for another hearing by theState Engineer.  The Court ruled that thePetitioners’ due process rights to a full and fair hearing were violated whenthe State Engineer considered and relied upon a version of the Company’shydrology model that had not been presented to the Petitioners before thehearing.  The Company anticipates theState Engineer will promptly schedule a new hearing and does not anticipatethat the new hearing will affect the Mt. Hope construction or productiontimelines.  The District Court’s decisionis separate from and does not affect the Federal permitting process and thework associated with the Company’s EIS.

 
| **ITEM 1A.** | ** ** | **RISK FACTORS.** |
|--------------|------------|-------------------|

** **

OurAnnual Report on Form 10-K for the year ended December 31, 2009,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-K and thisreport are 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.

 

**If certain conditions are not met under theHanlong transaction documents, our ability to begin development of the Mt. HopeProject could be delayed further.**

 

Theinvestments by Hanlong in our common stock and the related financing with aChinese bank and the moly supply agreement are subject to a number ofconditions precedent including, among other conditions described indescriptions of the transactions in our public filings, receipt by us ofrequired governmental permits, approvals of Chinese government authorities forinvestments in us by Hanlong and loans expected to be made by a Chinese Bank,and negotiation of acceptable loan terms with that bank. These conditions maynot be met, in which case our ability to begin development of the Mt. HopeProject could be delayed further while we attempt to obtain alternative financing.  We may not be successful in obtainingacceptable financing since the current credit markets are difficult fordevelopment stage companies.

 

**The existence of the stockholders rights plancould prevent an acquisition of our shares that might be at a premium to themarket price**

 

InMarch, 2010 our board of directors adopted a stockholder rights plan, commonlyknown as a “poison pill”, which is designed to prevent or discourageacquisition of more than 20 per cent of our outstanding stock without the priorapproval of our Board.  While our Board believes that the rights plan isin the best interests of our stockholders, its existence could prevent anacquisition of our shares that might be at a premium to the market price andthat stockholders might view as beneficial.  Other matters that mayprevent a takeover that is not approved by our Board are discussed in the riskfactors in our Form 10-K for the year ended December 31, 2009.

 

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**Special NoteRegarding Forward-Looking Statements**

** **

Certainstatements in this report may constitute forward-looking statements, whichinvolve known and unknown risks, uncertainties and other factors, which maycause actual results, performance or achievements of our Company, the Mt. HopeProject, Liberty Property and our other projects, or industry results, to bematerially different from any future results, performance or achievementsexpressed 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-K for the year ended December 31,2009, and this report, and include, among other things:

 

·                  our dependence on the success of the Mt. Hope Project;

·                  the ability to obtain all required permits and approvals for the Mt.Hope Project and the Liberty Property;

·                  issues related to the management of the Mt. Hope Project pursuant tothe LLC Agreement;

·                  investments by Hanlong and a loan from a Chinese bank are subject tosignificant consents, approvals and conditions precedent which may not beobtained or met;

·                  negotiation of acceptable loan terms with a Chinese bank in connectionwith the Hanlong transaction;

·                  risks related to the failure of POS-Minerals to make contributionspursuant to the LLC Agreement;

·                  fluctuations in the market price of, and demand for, molybdenum andother metals;

·                  the estimation and realization of mineral reserves and productionestimates, if any;

·                  the timing of exploration, development and production activities andestimated future production, if any;

·                  estimates related to costs of production, capital, operating andexploration expenditures;

·                  requirements for additional capital and the possible sources of suchcapital;

·                  government regulation of mining operations, environmental conditionsand risks, reclamation and rehabilitation expenses;

·                  title disputes or claims; and

·                  limitations of insurance coverage;

·                  our investors may lose their entire investment in our securities;

·                  the disruptions of 2008 and 2009 in the overall economy and financialmarkets may continue to adversely impact our business;

·                  counter party risks;

·                  inherent operating hazards of mining;

·                  climate change and climate change legislation for planned futureoperations;

·                  compliance/non-compliance with the Mt. Hope lease;

·                  losing key personnel or the inability to attract and retain additionalpersonnel;

·                  reliance on independent contractors, experts, technical and operationalservice providers over whom we have limited control;

·                  increased costs can affect our profitability;

·                  shortages of critical parts, equipment, and skilled labor may adverselyaffect our development costs;

·                  legislation may make it difficult to retain or attract officers anddirectors and can increase costs of doing business;

·                  adverse results of internal control evaluations could result in a lossof investor confidence and have an adverse effect on the price of the commonstock;

·                  our common stock has a limited public market which may adversely affectthe market price of our shares and may make it difficult for our shareholdersto sell their shares;

·                  we do not anticipate paying cash dividends in the foreseeable future;

·                  provisions of Delaware law and our charter and bylaws may delay orprevent transactions that would benefit shareholders.

 

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.  

 

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Except as required by law, we undertake no duty toupdate any forward-looking statements after the date of this report to conformthose statements to actual results or to reflect the occurrence ofunanticipated events.  We qualify allforward-looking statements contained in this report by the foregoing cautionarystatements.

 
| **ITEM 2.** | ** ** | **UNREGISTERED SALES OF EQUITY SECURITIES AND  USE OF PROCEEDS** |
|-------------|------------|------------------------------------------------------------------|

 

None.

 
| **ITEM 3.** | ** ** | **DEFAULTS UPON SENIOR SECURITIES** |
|-------------|------------|-------------------------------------|

 

None.

 
| **ITEM 4.** | ** ** | **REMOVED AND RESERVED** |
|-------------|------------|--------------------------|

 

 

 
| **ITEM 5.** | ** ** | **OTHER INFORMATION** |
|-------------|------------|-----------------------|

 

None.

 
| **ITEM 6.** | ** ** | **EXHIBITS** |
|-------------|------------|--------------|

 
| **Exhibit  Number** | ** ** | **Description of Exhibit**                                                                                                                                                                                                                                                              |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1†           |       | Certificate of  Designation of Series A Junior Participating Preferred Stock (Filed as  Exhibit 3.1 to our Current Report on Form 8-K filed on  March 5, 2010.)                                                                                                     |
| 3.2†           |       | Amended and Restated  Bylaws (Filed as Exhibit 3.2 to our Current Report on Form 8-K  filed on March 5, 2010.)                                                                                                                                                           |
| 4.1†           |       | Rights Agreement, dated  March 4, 2010, between the Company and Registrar and Transfer Company,  as Rights Agent (Filed as Exhibit 4.1 to our Current Report on  Form 8-K filed on March 5, 2010.)                                                                  |
| 10.1†          |       | Amendment No. 2 to  Limited Liability Company Agreement of Eureka Moly, LLC dated as of  January 20, 2010, by and between Nevada Moly, LLC and POS-Minerals  Corporation (Filed as Exhibit 10.3 to our Current Report on  Form 8-K filed on January 25, 2010.) |
| 10.2†          |       | Third Installment  Election, dated as of March 3, 2010, between Nevada Moly, LLC and  POS-Minerals Corporation (Filed as Exhibit 10.4 to our Current Report on  Form 8-K filed on March 5, 2010.)                                                                   |
| 10.3†          |       | Securities Purchase  Agreement between the Company and Hanlong (USA) Mining Investment, Inc.,  dated March 4, 2010 (Filed as Annex B to our Definitive Proxy Statement  filed on April 6, 2010.)                                                                         |
| 10.4†          |       | Bridge Loan Agreement  between the Company and Hanlong Mining Investment, Inc., dated  March 4, 2010 (Filed as Annex C to our Definitive Proxy Statement filed  on April 6, 2010.)                                                                                       |
| 10.5†          |       | Pledge Agreement  between Nevada Moly, LLC and Hanlong (USA) Mining Investment, Inc.,  dated March 4, 2010 (Filed as Annex D to our Definitive Proxy Statement  filed on April 5, 2010.)                                                                                 |
| 10.6*               |       | Molybdenum Supply  Agreement, dated as of March 4, 2010, by and among the Company and  Nevada Moly, LLC, China Han Long Mining Development Limited and Hanlong (USA)  Mining Investment, Inc.                                                                                 |
| 10.7†          |       | Form of  Stockholder Agreement between the Company and Hanlong (USA) Mining  Investment, Inc. (Filed as Annex E to our Definitive Proxy Statement  filed on April 5, 2010.)                                                                                              |
| 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 treatmenthas been requested for certain portions of this exhibit, and such confidentialportions have been separately filed with the Securities and ExchangeCommission.

 

† Previously filed asindicated and incorporated herein by reference.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

Dated: May 6, 2010

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

 

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