Table ofContents

 

 

 

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**x****      QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

** **

**For the quarterly period ended September 30, 2010**

** **

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

 

**For thetransition period from              to          **

 

**CommissionFile Number: 001-32986**

 

**GeneralMoly, Inc.**

(Exactname of registrant as specified in its charter)

 

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

 

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

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days.  **YES****x****NO****o**

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). **YES****o****NO****o**

 

Indicate by check mark whetherthe registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of 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 October 27, 2010, was72,592,538.

 

 

 

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**TABLEOF CONTENTS**

 
| ** **       | ** **                                                                                  | **Page**   |
|------------------|---------------------------------------------------------------------------------------------|------------|
| ** **       | ** **                                                                                  | ** ** |
| **Part I**  |
| ** **       |                                                                                        |       |
| ITEM 1.          | FINANCIAL STATEMENTS                                                                        | 3          |
|             |                                                                                        |       |
| ITEM 2.          | MANAGEMENT’S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 21         |
|             |                                                                                        |       |
| ITEM 3.          | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 30         |
|             |                                                                                        |       |
| ITEM 4.          | CONTROLS AND  PROCEDURES                                                                    | 32         |
|             |                                                                                        |       |
| **Part II** |
| ** **       |                                                                                        |       |
| ITEM 1.          | LEGAL PROCEEDINGS                                                                           | 32         |
|             |                                                                                        |       |
| 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.          | REMOVED AND RESERVED                                                                        | 35         |
|             |                                                                                        |       |
| ITEM 5.          | OTHER INFORMATION                                                                           | 35         |
|             |                                                                                        |       |
| ITEM 6.          | EXHIBITS                                                                                    | 35         |

 

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**PART I - FINANCIAL INFORMATION**

 

**ITEM 1.                FINANCIAL STATEMENTS**

 

**GENERALMOLY, INC.(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED BALANCE SHEETS**

 

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

 
| ** **                                                                                                                             | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| **ASSETS**                                                                                                                             | ** ** | ** **                   |       |                        |       |
| CURRENT  ASSETS                                                                                                                        |       |                         |       |                        |       |
| Cash  and cash equivalents                                                                                                             |       | $                            | 17,275     |                        | $          | 48,614 |   |
| Deposits,  prepaid expenses and other current assets                                                                                   |       | 72                           |       | 179                         |       |
| Total  Current Assets                                                                                                                  |       | 17,347                       |       | 48,793                      |       |
| Mining  properties, land and water rights — Note 4                                                                                |       | 107,279                      |       | 101,190                     |       |
| Deposits  on project property, plant and equipment                                                                                     |       | 67,553                       |       | 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                                                                                                |       | 401                          |       | 553                         |       |
| Other  assets                                                                                                                          |       | 2,994                        |       | 2,994                       |       |
| **TOTAL  ASSETS**                                                                                                                      |       | $                            | 208,993    |                        | $          | 209,597 |   |
| **LIABILITIES,  CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST AND EQUITY**                                                           | ** ** | ** **                   |       |                        |       |
| CURRENT  LIABILITIES                                                                                                                   |       |                         |       |                        |       |
| Accounts  payable and accrued liabilities                                                                                              |       | $                            | 4,475      |                        | $          | 3,799 |   |
| Current  portion of long term debt                                                                                                     |       | 139                          |       | 163                         |       |
| Total  Current Liabilities                                                                                                             |       | 4,614                        |       | 3,962                       |       |
| Provision  for post closure reclamation and remediation costs                                                                          |       | 561                          |       | 586                         |       |
| Deferred  gain                                                                                                                         |       | 200                          |       | 100                         |       |
| Long  term debt, net of current portion                                                                                                |       | 10,267                       |       | 268                         |       |
| Total  Liabilities                                                                                                                     |       | 15,642                       |       | 4,916                       |       |
|                                                                                                                                   |       |                         |       |                        |       |
| COMMITMENTS  AND CONTINGENCIES – Note 10                                                                                          |       |                         |       |                        |       |
| CONTINGENTLY  REDEEMABLE NONCONTROLLING INTEREST                                                                                       |       | 98,754                       |       | 99,761                      |       |
|                                                                                                                                   |       |                         |       |                        |       |
| EQUITY                                                                                                                                 |       |                         |       |                        |       |
| Common  stock, $0.001 par value; 200,000,000 shares authorized, 72,592,538 and  72,437,538 shares issued and outstanding, respectively |       | 73                           |       | 72                          |       |
| Additional  paid-in capital                                                                                                            |       | 189,332                      |       | 187,290                     |       |
| Accumulated  deficit before exploration stage                                                                                          |       | (213                         | )          | (213                        | )          |
| Accumulated  deficit during exploration and development stage                                                                          |       | (94,595                      | )          | (82,229                     | )          |
| Total  Equity                                                                                                                          |       | 94,597                       |       | 104,920                     |       |
| **TOTAL  LIABILITIES, CONTINGENTLY REDEEMABLE NONCONTROLLING INTEREST AND EQUITY**                                                     |       | $                            | 208,993    |                        | $          | 209,597 |   |

 

Theaccompanying notes are an integral part of these consolidated financial statements.

 

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**GENERALMOLY, INC.(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited- In thousands, except per share amounts)**

 
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** | **January 1, 2002  (Inception of  Exploration  Stage) to** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **September  30, 2010**     | ** ** | **September  30, 2009**         | ** ** | **September  30, 2010**                                                        | ** ** | **September  30, 2009** | ** ** | **September 30,  2010** | ** ** |
| REVENUES                                                                           |       | $                                | —     |                            | $          | —                                                                         |       | $ | — |   | $ | — |   | $ | — |   |
| OPERATING  EXPENSES:                                                               |       |                             |       |                            |       |                                                                           |       |   |   |   |   |
| Exploration  and evaluation                                                        |       | 191                              |       | 273                             |       | 499                                                                            |       | 638 |   | 38,009 |   |
| Writedowns  of development and deposits                                            |       | 5,038                            |       | 378                             |       | 5,038                                                                          |       | 378 |   | 5,416 |   |
| General  and administrative expense                                                |       | 2,037                            |       | 1,705                           |       | 7,741                                                                          |       | 7,341 |   | 56,349 |   |
| TOTAL  OPERATING EXPENSES                                                          |       | 7,266                            |       | 2,356                           |       | 13,278                                                                         |       | 8,357 |   | 99,774 |   |
| LOSS  FROM OPERATIONS                                                              |       | (7,266                           | )          | (2,356                          | )          | (13,278                                                                        | )          | (8,357 | ) | (99,774 | ) |
| OTHER  INCOME AND EXPENSE                                                          |       |                             |       |                            |       |                                                                           |       |   |   |   |   |
| Interest  and dividend income                                                      |       | 3                                |       | 6                               |       | 9                                                                              |       | 15 |   | 3,972 |   |
| Interest  expense                                                                  |       | (63                              | )          | —                          |       | (104                                                                           | )          | — |   | (104 | ) |
| Other  income                                                                      |       | —                           |       | —                          |       | —                                                                         |       | — |   | 65 |   |
| TOTAL  OTHER INCOME AND EXPENSE                                                    |       | (60                              | )          | 6                               |       | (95                                                                            | )          | 15 |   | 3,933 |   |
| LOSS  BEFORE TAXES                                                                 |       | (7,326                           | )          | (2,350                          | )          | (13,373                                                                        | )          | (8,342 | ) | (95,841 | ) |
| Income  Taxes                                                                      |       | —                           |       | —                          |       | —                                                                         |       | — |   | — |   |
| NET  LOSS                                                                          |       | $                                | (7,326     | )                               | $          | (2,350                                                                         | )          | $ | (13,373 | ) | $ | (8,342 | ) | $ | (95,841 | ) |
| Less:  Net loss attributable to contingently redeemable noncontrolling interest    |       | 1,007                            |       | —                          |       | 1,007                                                                          |       | 239 |   | 1,246 |   |
| NET  LOSS ATTRIBUTABLE TO GENERAL MOLY, INC.                                  |       | $                                | (6,319     | )                               | $          | (2,350                                                                         | )          | $ | (12,366 | ) | $ | (8,103 | ) | $ | (94,595 | ) |
| Basic  and diluted net loss attributable to General Moly per share of common stock |       | $                                | (0.09      | )                               | $          | (0.03                                                                          | )          | $ | (0.17 | ) | $ | (0.11 | ) |   |   |
| Weighted  average number of shares outstanding – basic and diluted            |       | 72,571                           |       | 72,393                          |       | 72,562                                                                         |       | 72,154 |   |   |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

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**GENERALMOLY, INC.(A DEVELOPMENT STAGE COMPANY)CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited– In thousands)**

 
| ** **                                                                                      | ** ** | **Nine Months Ended** | ** ** | **January 1, 2002  (Inception of  Exploration  Stage) to** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|--------------------------------------------------------------------------------|------------|
| ** **                                                                                      | ** ** | **September 30,  2010**    | ** ** | **September 30,  2009**                                                   | ** ** | **September 30,  2010** | ** ** |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                                          |       |                            |       |                                                                           |       |   |   |
| Net  Loss                                                                                       |       | $                               | (13,373    | )                                                                              | $          | (8,342 | ) | $ | (95,841 | ) |
| Adjustments  to reconcile net loss to net cash used by operating activities:                    |       |                            |       |                                                                           |       |   |   |
| Services  and expenses paid with common stock                                                   |       | —                          |       | —                                                                         |       | 1,990 |   |
| Repricing  of warrants                                                                          |       | 585                             |       | —                                                                         |       | 585 |   |
| Writedowns  of development and deposits                                                         |       | 5,038                           |       | 378                                                                            |       | 5,416 |   |
| Depreciation  and amortization                                                                  |       | 273                             |       | 259                                                                            |       | 1,170 |   |
| Interest  expense                                                                               |       | 104                             |       | —                                                                         |       | 104 |   |
| Equity  compensation for employees and directors                                                |       | 940                             |       | 1,330                                                                          |       | 14,398 |   |
| Decrease  in deposits, prepaid expenses and other                                               |       | 107                             |       | 112                                                                            |       | 20 |   |
| Decrease  in restricted cash held for electricity transmission                                  |       | —                          |       | 259                                                                            |       | (12,286 | ) |
| Increase  (decrease) in accounts payable and accrued liabilities                                |       | 424                             |       | (1,027                                                                         | )          | 3,789 |   |
| (Decrease)  increase in post closure reclamation and remediation costs                          |       | (25                             | )          | (145                                                                           | )          | 352 |   |
| Net  cash used by operating activities                                                          |       | (5,927                          | )          | (7,176                                                                         | )          | (80,303 | ) |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                                          |       |                            |       |                                                                           |       |   |   |
| Payments  for the purchase of equipment                                                         |       | —                          |       | (7                                                                             | )          | (1,424 | ) |
| Purchase  of securities                                                                         |       | —                          |       | —                                                                         |       | (137 | ) |
| Purchase  and development of mining properties, land and water rights                           |       | (10,534                         | )          | (17,520                                                                        | )          | (105,167 | ) |
| Deposits  on property, plant and equipment                                                      |       | (24,905                         | )          | (9,093                                                                         | )          | (67,931 | ) |
| Proceeds  from option to purchase agreement                                                     |       | 100                             |       | 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                                                          |       | (35,339                         | )          | (26,520                                                                        | )          | (174,855 | ) |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                                          |       |                            |       |                                                                           |       |   |   |
| Proceeds  from issuance of stock, net of issuance costs                                         |       | 56                              |       | 99                                                                             |       | 165,260 |   |
| Proceeds  from debt                                                                             |       | 10,000                          |       | —                                                                         |       | 10,000 |   |
| Cash  proceeds from POS-Minerals Corporation                                                    |       | —                          |       | —                                                                         |       | 100,000 |   |
| Cash  paid to POS-Minerals Corporation for purchase price adjustment                            |       | —                          |       | —                                                                         |       | (2,994 | ) |
| Decrease  in restricted cash – Eureka Moly, LLC                                            |       | —                          |       | 13,878                                                                         |       | — |   |
| Net  (decrease) increase in leased assets                                                       |       | (129                            | )          | (97                                                                            | )          | 121 |   |
| Net  cash provided by financing activities                                                      |       | 9,927                           |       | 13,880                                                                         |       | 272,387 |   |
| Net  (decrease) increase in cash and cash equivalents                                           |       | (31,339                         | )          | (19,816                                                                        | )          | 17,229 |   |
| Cash  and cash equivalents, beginning of period                                                 |       | 48,614                          |       | 78,462                                                                         |       | 46 |   |
| Cash  and cash equivalents, end of period                                                       |       | $                               | 17,275     |                                                                           | $          | 58,646 |   | $ | 17,275 |   |
| NON-CASH  INVESTING AND FINANCING ACTIVITIES:                                                   |       |                            |       |                                                                           |       |   |   |
| Equity  compensation capitalized as development                                                 |       | $                               | 714        |                                                                           | $          | 714 |   | $ | 5,793 |   |
| 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 |   |

 

The accompanying notes are an integral part of theseconsolidated financial statements.

 

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**GENERALMOLY, INC.(A DEVELOPMENT STAGE COMPANY)**

 

**NOTESTO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

 

**NOTE 1 — DESCRIPTION OF BUSINESS**

 

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

 

We were in the explorationstage 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 isnow in the development stage and is currently proceeding with the developmentof the Mt. Hope Project.  We are alsoconducting evaluation activities on our Liberty molybdenum property (“LibertyProperty” formerly referred to as the Hall-Tonopah Property) in Nye County,Nevada.

 

**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 thedevelopment and operation of the Mt. Hope 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 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 Mt. Hope Project,that the Record of Decision (“ROD”) from the United States Bureau of LandManagement (“BLM”) for the Mt. Hope Project has become effective, and anyadministrative or judicial appeals with respect thereto are final.  We are currently targeting the effectivenessof the ROD and the satisfaction of the ROD Contribution Conditions to occur bymid-2011, but circumstances beyond our control, including reviewing agencydelays or requests for additional information or studies, and requests forreview or appeals of the BLM decision, could cause the effectiveness of the RODand/or the satisfaction of the ROD Contribution Conditions to be delayed.

 

To maintain its 20% interestin the LLC, POS-Minerals will be required to make an additional $56.0 millioncontribution plus its 20% share of all Mt. Hope Project costs incurred from theClosing Date to the ROD Contribution Date within 15 days after the RODContribution Date.  If POS-Minerals doesnot make its additional $56.0 million contribution when due after the RODContribution Date, its interest will be reduced to 10% and the return ofcontributions (as defined below) will be zero.

 

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 current planand expected timetable, Mt. Hope Project will not achieve commercial productionby December 31, 2011, and our payment to POS-Minerals will be due January 27,2012.  Our wholly-owned subsidiary and80% owner of the LLC, Nevada Moly (“Nevada Moly”), is obligated under the termsof the LLC Agreement to make

 

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capital contributions tofund the return of contributions to POS-Minerals, if required.  If Nevada Moly does not make these capitalcontributions, POS-Minerals has an election to either make a secured loan tothe LLC to fund the return of contributions, or receive an additional interestin the LLC of approximately 5%.  In thelatter case, our interest in the LLC is subject to dilution by a percentageequal to the ratio of 1.5 times the amount of the unpaid contributions over theaggregate amount of deemed capital contributions (as determined under the LLCAgreement) of both parties to the LLC (“Dilution Formula”).  At December 31, 2009, the aggregateamount 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 theLLC to Nevada Moly after a change of control of the Company, as defined in theLLC agreement, followed by (i) failure to begin full construction at theLLC by the Company 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% interestper annum.

 

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, CAPITALREQUIREMENTS AND RESTRUCTURING**

 

Our consolidated cashbalance at September 30, 2010, was $17.3 million compared to $48.6 millionat December 31, 2009.  The cashneeds for the development of the Mt. Hope Project require that we or the LLCfinalize significant financing in addition to the capital contributions to bereceived from POS-Minerals.

 

The anticipated sources offinancing described below, combined with funds anticipated to be received fromPOS-Minerals in order to retain its 20% share, provide substantially all of ourcurrently planned funding required to construct and place the Mt. Hope Projectinto commercial operation.

 

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

 

On March 4, 2010, wesigned a Securities Purchase Agreement (“Purchase Agreement”) with Hanlong(USA) Mining Investment, Inc. (“Hanlong”), an affiliate of Sichuan HanlongGroup, a large privately held Chinese company.  The Purchase Agreement andthe related agreements described below form the basis of a significantinvestment by Hanlong in the Company that is intended to provide the Companywith adequate capital to develop the Mt. Hope Project.  The PurchaseAgreement provides for the sale to Hanlong of shares of our common stock in twotranches that will aggregate 25% of our outstanding stock on a fully dilutedbasis.  The average price per share, based on the anticipated number ofshares to be issued, is $2.88 for an aggregate price of $80.0 million, andconstitutes a small premium as compared to the $2.60 closing share price of theCompany on March 4, 2010.  The share issuance is part of a largertransaction that includes the commitment by Hanlong to use its commerciallyreasonable efforts to procure a $665.0 million bank loan for the Company (“TermLoan”) from a prime Chinese bank that will be guaranteed by an affiliate of Hanlong,a $20.0 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.

 

*Stock Purchase*.  ThePurchase Agreement provides, subject to terms and conditions of the PurchaseAgreement, for the purchase by Hanlong for an aggregate price of$80.0 million, of approximately 27.8 million shares of our common stock whichwill equal 25% of our outstanding common stock on a fully-diluted basisfollowing the purchase, or approximately 38.3% of our outstanding common stockon March 4, 2010.  Fully diluted

 

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is defined as 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 $40.0 million, or approximately $3.36 per share, followingsatisfaction of certain conditions, including receipt of stockholder approvalof the equity issuances in connection with the transaction (received at theAnnual Meeting of Stockholders held on May 13, 2010), publication of thenotice of availability of the Draft Environmental Impact Statement (“DEIS”)concerning the Mt. Hope Project by the BLM, receipt of necessary Chinesegovernment approvals for certain portions of the transaction, assurances fromHanlong as to the availability of the Term Loan, approval of the shares forlisting on the New York Stock Exchange Amex (“NYSE Amex”) and absence ofcertain defaults.  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.

 

On October 26, 2010,the Company and Hanlong executed an amendment to the Hanlong agreement settingthe closing of Hanlong’s purchase of the first tranche of equity in the Companyon December 20, 2010.  The partieshave agreed that the publication of the Mt. Hope Project’s DEIS is no longer acondition precedent to Hanlong’s first tranche equity investment.  Timely publication of the DEIS does, however,remain a requirement of the entire agreement, and, in conjunction with thisamendment, the required date for DEIS publication has been extended to May 31,2011 from February 28, 2011, although the Company does not currentlyestimate the additional time to be required.

 

Hanlong and the Companycontinue to work toward achievement of Tranche 1 Conditions.  The Company received overwhelming supportfrom stockholders at the Company’s Annual General Meeting and is continuing toprogress toward publication of the DEIS. Hanlong received Chinese Government approvals for the equity investmentfrom the National Development and Reform Commission (“NDRC”) and the Ministryof Commerce (“MOFCOM”) on October 8 and October 12, 2010,respectively.  Hanlong filed the MOFCOMapproval with the State Administration of Foreign Exchange (“SAFE”) on October 12,2010, fulfilling Hanlong’s Chinese Government approval obligations.

 

On July 30, the Companyand Hanlong executed an amendment to the Hanlong agreement extending thedeadline for obtaining Chinese Government approvals by two months to October 13,2010, which approvals have now been received, as well as extending the Company’sdeadlines for publishing its DEIS and receiving its ROD to February 28,2011 and November 30, 2011, respectively, although the Company currentlydoes not anticipate utilizing the additional time permitted for the publicationof the DEIS or receipt of the ROD.

 

The second tranche (“Tranche 2”),will involve the purchase of an additional 12.5% of our fully diluted shares orapproximately 15.9 million additional shares, for an additional$40.0 million, or approximately $2.52 per share.  The actual numberof shares and price per share will be adjusted for any change in the number offully diluted shares before the closing of Tranche 2.  Significantconditions to the closing of Tranche 2 include issuance of the ROD for theMt. Hope Project by the BLM, approval of the plan of operation for the Mt. HopeProject by the BLM, and the completion of documentation for and satisfaction ofconditions precedent to lending under the Term Loan.  The PurchaseAgreement may be terminated by either party (provided the terminating party isnot in default) if the closings of Tranche 1 and Tranche 2 have notoccurred by March 31, 2011 (subject to extension until June 30, 2011under certain circumstances), and December 31, 2011, respectively, subjectto extension under some circumstances to March 31, 2012.

 

Hanlong will have the rightto purchase a portion of any additional shares of common stock that we issue sothat it can maintain its percentage ownership unless its ownership at the timeis below 5%.  It may also acquire additional shares so that it maintains a20% indirect interest in the Mt. Hope Project if our interest in the LLCis reduced below 80%.  If we issue shares to fund our obligation to fundthe Mt. Hope Project under certain circumstances and Hanlong exercises itsrights to maintain its percentage interest, we will be obligated to refund toHanlong the cost of such shares over a three-year period up to an aggregate of$9.0 million.

 

*Break Fees*.  A breakfee is payable by both the Company and Hanlong if the Purchase Agreementterminates because of the failure of certain conditions to the closing ofTranche 1 or Tranche 2.  A break fee of $10.0 million ispayable to the Company if the Purchase Agreement is terminated because Hanlongfails to obtain necessary Chinese government approvals or to give itsassurances about the availability of the Term Loan.  The Company hasagreed to

 

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pay $5.0 million toHanlong if the conditions concerning our stockholder approval, the publicationof the DEIS or the ROD are not timely satisfied or waived and the PurchaseAgreement is terminated.  The Company break fee may be increased by $5.0 millionif the Purchase Agreement is terminated and the Company has violated the “no-shop”provisions of the Purchase Agreement and may be increased in othercircumstances not to exceed an additional $3.0 million if the Company requestsand Hanlong grants certain extensions of deadlines concerning the DEIS and upto an additional $2.0 million if the Company requests and Hanlong grantscertain extensions concerning the ROD.  In addition, the Company must paya $2.0 million fee to Hanlong if it grants the extension concerning the ROD,which fee can be credited against the arrangement fee described below. The break fee payable by the Company to Hanlong may be paid in cash, or, incertain circumstances, in shares of our common stock at our option.  If paidin shares, the price would be the volume weighted average of our common stockon the NYSE Amex for the five days ending six days after the announcementof the termination.

 

*Chinese Bank Loan*. Pursuant to the Purchase Agreement, Hanlong is obligated to use its commerciallyreasonable efforts to procure the Term Loan in an amount of at least$665.0 million with a term of at least 14 years after commercialproduction begins at the Mt. Hope Project.  The Term Loan is expectedto bear interest at a rate of LIBOR plus a spread of between 2% and 4% perannum.  The Purchase Agreement provides that the Term Loan will havecustomary covenants and conditions; however, the terms of the Term Loan havenot been negotiated with the lender and we have no assurance as to the final termsof the Term Loan.  Hanlong or an affiliate is obligated to guarantee theBank Loan.  When funds can be drawn by the Company under the Term Loan,the Company will pay a $15.0 million arrangement fee to Hanlong who willpay all fees and expenses associated with the Term Loan before the Term LoanClosing, including those charged by the Chinese bank.

 

**Bridge Loan**

 

Hanlong has also agreed toprovide a $20.0 million bridge loan (“Bridge Loan”) to the Company in twoequal $10.0 million tranches.  On April 28, 2010, we drew downthe first tranche in the amount of $10.0 million.  The second tranchebecame 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 required repayment. The Company may offset its right to receive the break fee against itsobligations to repay borrowings under the Bridge Loan.  If not soonerrepaid, the Bridge Loan will mature on the earliest of 120 days after theissuance of the ROD, the date on which the Purchase Agreement terminates, andMarch 31, 2012.  The Bridge Loan and our obligation to pay a breakfee to Hanlong under the Purchase Agreement are secured by a pledge by us of a10% interest in the LLC.

 

**Cash Conservation Plan**

 

The Company continues tooperate under a cash conservation plan implemented in March 2009 designedto reduce expenditures and conserve cash in order to maximize financialflexibility.

 

The Company has purchaseorders for two types of equipment; milling process equipment and miningequipment.  Most equipment orders for thecustom-built grinding and other milling process equipment will be completed bythe manufacturers and stored.  Thegrinding and milling process equipment require the longest lead times andmaintaining these orders is critical to the Company’s ability to rapidlyrestart the Mt. Hope Project development. Fabrication of less critical equipment has been suspended with somemanufacturers.  The Company has completedfinal negotiations with other equipment manufacturers to suspend or terminatefabrication of other milling equipment and to determine the equipmentfabrication costs incurred to date, storage costs, and the expected timing ofrestarting fabrication.

 

Based on our current plan,we expect to make additional payments of approximately $0.2 million undermilling process equipment orders throughout the remaining quarter of 2010, and$13.4 million in 2011.  As additionalfinancing becomes available and equipment procurement is restarted, agreementsthat were suspended or terminated will be renegotiated under new market termsand conditions, as necessary.  For thegyratory crusher, semi-

 

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Autogenous Grinding (“SAG”)and ball mills and related electric mill drives, and some other long-leadequipment, we will own the equipment upon final payments that have occurredthroughout 2009, during 2010, and into early 2011.  This strategy should allow for a rapidrestart of the Mt. Hope Project development upon BLM approval for publicationof the DEIS, which will initiate the restart of engineering.

 

Some orders for miningequipment have been cancelled, and discussions with the remaining suppliers toeither cancel or suspend existing agreements are complete.  Once financing becomes available, the Companyanticipates placing orders for this mining equipment.  The Company will continue to evaluate alloptions to facilitate a rapid restart of the Mt. Hope Project development.

 

The cash conservation planhas reduced our total cash utilization for general administration and overheadto approximately $1 million per month, inclusive of maintenance costs at theLiberty Property.  Engineering efforts,approximately 60% complete, were largely suspended in the second quarter of2009, and will resume pending the BLM approval of the DEIS and the receipt ofTranche 1 funds from Hanlong.  Someengineering that is critical for permitting or project restart readiness hascontinued at a slower pace.

 

**NOTE 3 — SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**

 

The interim consolidatedfinancial statements of the Company are unaudited.  The year-end condensed balance sheet data wasderived from audited financial statements, but does not include all disclosuresrequired by accounting principles generally accepted in the United States ofAmerica.  In the opinion of management,all adjustments and disclosures necessary for a fair presentation of theseinterim statements have been included. All such adjustments are, in the opinion of management, of a normalrecurring nature except for the adoption of the new accounting standardsdiscussed below.  The results reported inthese interim consolidated financial statements are not necessarily indicativeof the results 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 significantaccounting policies is presented to assist in understanding the consolidatedfinancial statements.  The financialstatements and notes are representations of the Company’s management, which isresponsible for their integrity and objectivity.  These accounting policies conform toaccounting principles generally accepted in the United States of America (“GAAP”)and have been consistently applied in the preparation of the consolidatedfinancial statements.

 

**Accounting Method**

 

Our interim consolidatedfinancial statements are prepared using the accrual basis of accounting inaccordance with GAAP.  With the exceptionof the LLC, all of our subsidiaries are wholly owned.  In February 2008, we entered into theagreement which established our ownership interest in the LLC at 80%.  At September 30, 2010, the interimconsolidated financial statements include the results of our wholly ownedsubsidiaries and the LLC.  The POS-Mineralscontributions attributable to their 20% interest are shown as Contingently Redeemable NoncontrollingInterest on the Consolidated Balance Sheet.  For the quarter ended September 30,2010, the LLC had $5.0 million net operating expenses and therefore theConsolidated Statements of Operations reflects $1.0 million net lossattributable to contingently redeemable noncontrolling interest for thatperiod.

 

**Reclassification of Prior PeriodAmounts**

 

Certain prior period amountshave been reclassified to conform to the current period presentation.

 

**Contingently Redeemable Noncontrolling Interest**

 

On January 1, 2009, weadopted Financial Accounting Standards Board (“FASB”) issued authoritativeguidance related to Noncontrolling Interests in Consolidated FinancialStatements, the provisions of which, among others, require the recognition of anoncontrolling interest (previously referred to as minority interest), as acomponent of equity in the consolidated financial statements and separate fromthe parent’s equity for all periods presented. In

 

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addition, the amount ofconsolidated net income or loss attributable to the noncontrolling interest isincluded in net income or loss on the face of the consolidated statement ofoperations.    Under GAAP, certain noncontrolling interests inconsolidated entities meet the definition of mandatorily redeemable financialinstruments if the ability to redeem the interest is outside of the control ofthe consolidating entity.  As described in the ‘Description of Business’and in Note 1, the LLC Agreement permits POS-Minerals the option to put itsinterest in the LLC to Nevada Moly upon a change of control, as defined in theLLC Agreement, followed by (i) failure to begin full construction at theLLC by the Company or the surviving entity before December 31, 2010, or(ii) failure to use standard mining industry practice in connection withdevelopment and operation of the project as contemplated by the parties for aperiod of twelve months after December 31, 2010.  As such, thecontingently redeemable noncontrolling interest has continued to be shown as aseparate caption between liabilities and equity (mezzanine section).  Thecarrying value of the contingently redeemable noncontrolling interest reflectsthe investment of the noncontrolling interest, less losses attributable to theinterest.

 

**Estimates**

 

The process of preparingconsolidated financial statements requires the use of estimates and assumptionsregarding certain types of assets, liabilities, revenues and expenses.  Such estimates primarily relate to unsettledtransactions and events as of the date of the consolidated financial statements.  Accordingly, upon settlement, actual resultsmay differ from estimated amounts.

 

**Cash and Cash Equivalents**

 

We consider all highlyliquid investments with original maturities of three months or less to be cashequivalents. The Company’s cash equivalent instruments are classified withinLevel 1 of the fair value hierarchy established by FASB guidance for Fair ValueMeasurements because they are valued based on quoted market prices in activemarkets.  These cash instruments included $13.0 million in U.S. Governmentsecurities at September 30, 2010.

 

**Exploration and Development Stage Activities**

 

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

 

**Basic and Diluted Consolidated Net Loss Per Share**

 

Net loss per share wascomputed by dividing the net loss attributable to General Moly, Inc. bythe weighted average number of shares outstanding during the period.   The weighted average number of shares wascalculated by taking the number of shares outstanding and weighting them by theamount of time that they were outstanding. Outstanding warrants to purchase 7,455,434 and 7,455,434 shares ofcommon stock, options to purchase 2,718,323 and 3,121,656 shares of commonstock, and unvested stock awards totaling 275,001 and 175,000 at September 30,2010 and 2009, respectively, and 614,719 and 529,080 shares under Stock Appreciation Rights (“SARs”) at September 30,2010 and 2009, were not included in the computation of diluted loss per sharefor the three and nine months ended September 30, 2010 and 2009,respectively, because to do so would have been antidilutive.  Therefore, basic loss per share is the sameas diluted loss per share.

 

**Mineral Exploration and Development Costs**

 

All exploration expendituresare expensed as incurred.  Significantproperty acquisition payments for active exploration properties arecapitalized.  If no economic ore body isdiscovered, previously capitalized costs are expensed in the period theproperty is abandoned.  Expenditures todevelop new mines, to define further mineralization in existing ore bodies, andto expand the capacity of operating mines, are capitalized and amortized on aunits-of-production basis over proven and probable reserves.

 

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

 

**Mining Properties, Land and Water Rights**

 

Costs of acquiring anddeveloping mining properties, land and water rights are capitalized asappropriate by project area.  Explorationand related costs and costs to maintain mining properties, land and waterrights are expensed as incurred while the property is in the exploration andevaluation stage.  Development andrelated costs and costs to maintain mining properties, land and water rightsare capitalized as incurred while the property is in the developmentstage.  When a property reaches theproduction stage, the related capitalized costs are amortized using theunits-of-production basis over proven and probable reserves.  Mining properties, land and water rights areperiodically assessed for impairment of value, and any subsequent losses arecharged to operations at the time of impairment.  If a property is abandoned or sold, a gain orloss is recognized and included in the consolidated statement of operations.

 

**Depreciation and Amortization**

 

Property and equipment arerecorded at cost and depreciated using the straight-line method over theestimated useful lives of the assets. Property and equipment are depreciatedusing the following estimated useful lives: field equipment — five  to seven years; office furniture, fixtures,and equipment — five to seven years; vehicles — three to five years; leaseholdimprovements — three years; residential trailers — ten to twenty years; andbuildings and improvements — ten years. At September 30, 2010, and 2009, accumulated depreciation andamortization was $0.9 million and $0.5 million, respectively, of which $0.7million and $0.4 million, respectively, was capitalized.

 

**Provision for Taxes**

 

Income taxes are providedbased upon the liability method of accounting. Under this approach, deferred income taxes are recorded to reflect thetax consequences in future years of differences between the tax basis of assetsand liabilities and their financial reporting amounts at each year-end.  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 and Remediation**

 

Expenditures for ongoingcompliance with environmental regulations that relate to current operations areexpensed or capitalized as appropriate. Expenditures resulting from the remediation of existing conditionscaused by past operations that do not contribute to future revenue generationsare expensed.  Liabilities are recognizedwhen environmental assessments indicate that remediation efforts are probableand the costs can be reasonably estimated.

 

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

 

**Stock-based Compensation**

 

Stock-based compensationrepresents the fair value related to stock-based awards granted to members ofthe Board, consultants, officers and employees.  The Company uses theBlack-Scholes model to determine the fair value

 

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of stock-based awards underauthoritative guidance for *Stock-BasedCompensation*.  For stock-based compensation that is earned uponthe satisfaction of a service condition, the cost is recognized on astraight-line basis (net of estimated forfeitures) over the requisite vestingperiod (up to three years).  Awards expire five years from the date ofvesting.  Further information regardingstock-based compensation can be found in Note 7 — “Equity Incentives.”

 

**Comprehensive Loss**

 

For the three and ninemonths ended September 30, 2010, and 2009, the Company’s comprehensiveloss was equal to the respective consolidated net losses for the periodspresented.

 

**Recently Issued AccountingPronouncements**

 

**Consolidation(Topic 810): Accounting and Reporting for Decreases in Ownership of aSubsidiary — a Scope******Clarification**

 

In January 2010, theFASB issued Accounting Standards Update (ASU) 2010-02, Consolidation (ASC 810):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 Company adopted FAS 160 effective January 1, 2010. The adoptionof FAS 160 and ASU 2010-02 had no material effect on the Company’s financialcondition, results of operation, or cash flows.

 

**Fair Value Measurements and Disclosures (Topic 820):Improving Disclosures about Fair Value Measurements**

 

In January 2010, theFASB issued Update No. 2010-06. Reportingentities will have to provide information about movements of assets amongLevels 1 and 2 of the three-tier fair value hierarchy established by SFAS No. 157,*Fair Value Measurements* (FASB ASC820). Also, a reconciliation of purchases, sales, issuance, and settlements ofanything valued with a Level 3 method is required.  Disclosure regarding fair value measurementsfor each class of assets and liabilities will be required. The guidance iseffective for our first annual reporting period beginning after December 15,2009, and for interim periods within that annual period.  The adoption of ASU 2010-06 did not have amaterial impact on our consolidated financial statements.

 

**Subsequent Events (Topic 855): Amendments to CertainRecognition and Disclosure Requirements**

 

In February 2010, theFASB issued Update No. 2010-09, *Subsequent Events (Topic855): Amendments to Certain Recognition and Disclosure Requirements*.These amendments eliminate contradictions between the requirements of U.S. GAAPand the SEC’s filing rules. The amendments also eliminate the requirement thatpublic companies disclose the date of their financial statements in both issuedand revised financial statements.  Theadoption of ASU 2010-09 did not have a material impact on our consolidatedfinancial statements.

 

**Regulation S-X Rule 3-04,Changes in Other Stockholders’ Equity**

 

In August 2010, the SECissued Update No. 2010-21, Accounting for Technical Amendments to VariousSEC Rules and Schedules.  The Updateamended Regulation S-X Rule 3-04, Changes in Other Stockholders’ Equity,paragraph 505-10-S99-1 to require that an analysis of the changes in eachcaption of other stockholders’ equity and noncontrolling interests presented inthe balance sheets shall be given in a note or separate statement. The updateindicates that the analysis shall be presented in the form of a reconciliationof the beginning balance to the ending balance for each period for which anincome statement is required to be filed with all significant reconciling itemsdescribed by appropriate captions with contributions from and distributions toowners shown separately.  The adoption ofASU 2010-21 did not have a material impact on our consolidated financialstatements.

 

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**NOTE 4 — MINING PROPERTIES, LANDAND WATER RIGHTS**

 

We currently have interestsin two mining properties that are the primary focus of our operations.  The Mt. Hope Project is currently in thedevelopment stage and the Liberty Property is in the exploration and evaluationstage.  The following is a summary ofmining properties, land and water rights at September 30, 2010, and December 31,2009 (dollars in thousands):

 

| **(Dollars in thousands)** | ** ** | **At  September 30,  2010** | ** ** | **At  December 31,  2009** | ** ** |
|--------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| Mt.  Hope Project:                   |       |                             |       |                            |       |
| Development  costs                   |       | $                                | 83,085     |                            | $          | 76,985 |   |
| Mineral,  land and water rights      |       | 10,253                           |       | 10,253                          |       |
| Advance  Royalties                   |       | 3,300                            |       | 3,300                           |       |
| Total  Mt. Hope Project              |       | 96,638                           |       | 90,538                          |       |
| Total  Liberty Property              |       | 9,752                            |       | 9,763                           |       |
| Other  Properties                    |       | 889                              |       | 889                             |       |
| Total                                |       | $                                | 107,279    |                            | $          | 101,190 |   |

 

On June 26, 2009, theCompany and Josephine Mining Corp. (“JMC”), a privately-owned Canadian companywhose president is a related party to one of the Company’s Board members,entered into an Option to Purchase Agreement for the Company’s Turner Goldproperty, a multi-metallic property located in Josephine County, Oregon.  The Company acquired the property in2004.  JMC paid $0.1 million uponentering 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 installment paymentis due December 26, 2010, and the final installment payment of $1.6million 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, theCompany and Ascot USA, Inc. (“Ascot”), a Washington corporation, enteredinto an Option to Purchase Agreement for the Company’s Margaret property, anundivided 50% interest in the reserved mineral rights and all of the Company’sinterest in the 105 unpatented mining claims comprising the Red BonanzaProperty, situated in the St. Helens Mining District, Skamania County,Washington.  The Company acquired theproperty in 2004.  Ascot paid $0.1million upon entering into the agreement, which allows Ascot certainexploratory rights through the option period. Each option is non-refundable. The $0.1 million has been recorded as a deferred gain pending completionof the purchase.  An additional $0.3million installment payment is due June 8, 2011, and the final installmentpayment of $1.6 million is due on or before June 8, 2012.  Each installment payment under the Option toPurchase Agreement is optional, but is non-refundable once made.  If Ascot makes all three of the installmentpayments, ownership of the Margaret property will transfer to Ascot upon thefinal payment.  The Company has alsoretained a Production Royalty of 1.5% of all net smelter returns on futureproduction from the property.

 

**Costs Associated with Relinquished Land Lease**

 

At an open public meeting onJuly 6, 2010, the Eureka County Board of Commissioners (“the Commissioners”)signed documents to relinquish a land lease held by the LLC in Eureka County,Nevada (the “County”).  The LLC thusterminated the land lease held in the County. The termination waspredicated on a vote of the Commissioners, which was other than perfunctory andcould not be considered final until the Commissioners voted in a publicmeeting. The Nevada Open Meetings Law requires that all decisions be made inpublic meetings which are properly noticed and convened.

 

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The LLC had planned todevelop housing on the lease after receipt of the ROD in mid-2011.  The relinquishment will make the landavailable for more rapid housing development by the Nevada Rural HousingAuthority and the County.  The LLC had investedapproximately $5.0 million in preliminary development costs for the propertycovered by the relinquished lease.  As aresult of the relinquishment, the Company incurred a charge of $5.0 million inthe third quarter of 2010, of which $1.0 million is attributable to ournoncontrolling interest.  In addition,the County returned a $0.1 million deposit to the Company.

 

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

 

During the three and ninemonths ended September 30, 2010, we issued 58,126 and 221,774 shares ofcommon stock, respectively, pursuant to stock awards under the 2006 EquityIncentive Plan.

 

At September 30, 2010,we had warrants outstanding totaling 7,455,434, of which 6,455,434 areexercisable at $3.75 per warrant and expire in February 2011 and 1,000,000are exercisable at $5.00 per share once General Moly has received financingnecessary for the commencement of commercial production at the Mt. Hope Projectand will expire one year afterwards.

 

CoghillCapital Management and its affiliates (“Coghill”), a significant stockholder inthe Company, provided substantial assistance to the Company with the signing ofthe Consent and Waiver Agreement and the Extension Agreement withArcelorMittal.  In recognition of thatsupport, on April 16, 2010, the Company amended and restated warrantsissued to Coghill to purchase one million shares of the Company’s common stockissued in connection with the November 2007 private placement and originalmolybdenum supply agreement with ArcelorMittal to reduce the price of thewarrants from $10.00 per share to $5.00 per share.  The incremental cost of the reissued warrantsis $0.6 million, which was 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.

 

Pursuant to our Certificateof Incorporation, we are authorized to issue 200,000,000 shares of $0.001par value common stock.  All shareshave equal voting rights, are non-assessable and have one vote per share.  Voting rights are not cumulative andtherefore, the holders of more than 50% of the common stock represented at themeeting of the stockholders could, if they choose to do so, elect all of thedirectors of the Company.

 

**NOTE 6 — PREFERRED STOCK**

 

Pursuant to our Certificateof Incorporation we are authorized to issue 10,000,000 shares of $0.001per share par value preferred stock.  Theauthorized but unissued shares of preferred stock may be issued indesignated series from time to time by one or more resolutions adopted by theBoard.  The directors have the power todetermine the preferences, limitations and relative rights of each series ofpreferred stock.  At September 30,2010, and 2009, no shares of preferred stock were issued oroutstanding.  On March 5, 2010, theBoard adopted a stockholder rights plan. Under the plan, each common stockholder of the Company at the close ofbusiness on March 5, 2010 received a dividend of one right for each shareof the Company’s common stock held of record on that date.  Each right entitles the holder to purchasefrom the Company, in certain circumstances, one one-thousandth of a share ofnewly-created Series A junior participating preferred stock of the Companyfor an initial purchase price of $15.00 per share.

 

Subject to certainexceptions, if any person becomes the beneficial owner of 20% or more of theCompany’s common stock, each right will entitle the holder, other than theacquiring person, to purchase Company common stock or common stock of theacquiring 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.

 

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**NOTE 7 — EQUITY INCENTIVES**

 

In 2006, the Board andshareholders of the Company approved the 2006 Equity Incentive Plan (“2006 Plan”)that replaced the 2003 Equity Incentive Plan (“2003 Plan”).  In May 2010, our shareholders approvedan amendment to the 2006 Plan increasing the amount of shares that may beissued under the plan by 4,500,000 shares to 9,600,000 shares.  The 2006 Plan, as amended and restated,authorizes the Board, or a committee of the Board, to issue or transfer up toan aggregate of 10,030,000 shares of common stock (9,600,000 shares plus430,000 shares carried over from the 2003 Plan, of which 5,084,515 remainavailable for issuance).  Awards underthe 2006 Plan, as amended and restated, may include incentive stock options,non-statutory stock options, restricted stock units, restricted stock awards,and SARs.  At the option of the Board,SARs may be settled with cash, shares, or a combination of cash andshares.  The Company settles the exerciseof other stock-based compensation with common shares.

 

Stock-based compensationcost is estimated at the grant date based on the award’s fair value ascalculated by the Black-Scholes option pricing model and is recognized ascompensation ratably on a straight-line basis over the requisitevesting/service period.  As of September 30,2010, there was $1.0 million of total unrecognized compensation cost related tooutstanding share-based compensation awards, which is expected to be recognizedover a weighted-average period of 0.9 years.

 

**Stock Options and SARs**

 

All stock options and SARsare approved prior to or on the date of grant. Stock options and SARs are granted at an exercise price equal to orgreater than the Company’s stock price on the date of grant.  Both award types vest over a period of zeroto three years with a contractual term of five years after vesting.  The Company estimates the fair value of stockoptions 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                                                                                               |   | 1.13  – 4.96 | %***   |
| Volatility  **                                                                                               |   | 85  - 96          | %***   |
| Dividend  Yields                                                                                             |   | —            |   |
| Weighted  Average Fair Value of Stock Options Granted During the Nine Months Ending  September 30, 2010 |   | None              |   |
| Weighted Average Fair Value of SARs Granted During the Nine Months  ended September 30, 2010            |   | $                 | 2.36   |   |
|                                                                                                              |        |                   |        |  |

 

----

| *      | The expected life is the  number of years that the Company estimates, based upon history, that options  or SARs will be outstanding prior to exercise or forfeiture.                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                              |
| *  *   | The Company’s estimates of  expected volatility are principally based on the historic volatility of the  Company’s common stock over the most recent period commensurate with the  estimated expected life of the Company’s stock options or SARs and other relevant  factors.                     |
|   |                                                                                                                                                                                                                                                                                                              |
| ***    | The interest rate and  volatility used by the Company in calculating stock compensation expense  represent the values in effect at the date of grant for all awards. These  values are periodically updated for stock appreciation rights which may be  settled in cash to reflect the current market conditions. |

 

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At September 30, 2010,the aggregate intrinsic value of outstanding and exercisable (fully vested)options and SARs was $1.5 million and had a weighted-average remainingcontractual term of 1.9 years.  The totalintrinsic value of options exercised during the nine months ended September 30,2010 was nil.

 

**Restricted Stock Units and Stock Awards**

 

Grants of restricted stockunits and stock awards (“Stock Awards”) have been made to Board members,officers, and employees.  Stock Awardshave been granted as performance based, earned over a required service periodor to Board members and the Company Secretary without any servicerequirement.  Incentive based grants forofficers and employees generally vest and stock is received without restrictionto the extent of one-third of the grant for each year following the date ofgrant.  Also, incentive based grants wereoffered to certain employees in connection with the cash conservation plan andare scheduled to 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 that vested over time were recognized over the vestingperiod of one to two years.  Stock Awardsissued to Board members and the Company Secretary that are fully vested at thetime of issue are recognized as compensation upon grant of the award.

 

The compensation expenserecognized by the Company for Stock Awards is based on the closing market priceof the Company’s common stock on the date of grant.  For the nine months ended September 30,2010, the weighted-average grant-date fair value for Stock Awards was $2.69.

 

**Summary of Equity Incentive Awards**

 

The following tablesummarizes activity under the Plans during the nine months ended September 30,2010:

 
| ** **                              | ** ** | **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                         |       | —                                 |       | —                                            |       | 4.22                                 |       | 93,830 |   | 2.69 |   | 200,217 |   |
| Awards  Exercised or Earned             |       | 2.78                                   |       | (20,000                                           | )          | —                               |       | — |   | 4.23 |   | (212,331 | ) |
| Awards  Forfeited                       |       | 11.45                                  |       | (26,667                                           | )          | 4.35                                 |       | (7,117 | ) | 2.44 |   | (2,910 | ) |
| Awards  Expired                         |       | 6.98                                   |       | (306,666                                          | )          | —                               |       | — |   | 2.31 |   | (5,000 | ) |
| Balance  at September 30, 2010     |       | $                                      | 5.33       |                                              | 2,718,323  |                                 | $          | 1.92 |   | 614,719 |   | $ | 3.54 |   | 658,111 |   |
|                                    |       |                                   |       |                                              |       |                                 |       |   |   |   |   |   |   |
| Exercisable  at September 30, 2010 |       | $                                      | 5.11       |                                              | 2,433,321  |                                 | $          | 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 Nine  Months Ended September 30 (Dollars in thousands):** | ** ** | **2010** | ** ** | **2009** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Stock  Options                                                                                                                                                                                                                                      |       | $        | 91         |     | $          | 1,167 |   |
| SARs                                                                                                                                                                                                                                                |       | 591      |       | 568      |       |
| Forfeitures  related to the restructuring                                                                                                                                                                                                           |       | —   |       | (567     | )          |
| Stock  Awards:                                                                                                                                                                                                                                      |       |     |       |     |       |
| Vesting  over time                                                                                                                                                                                                                                  |       | 582      |       | 302      |       |
| Board  of Directors                                                                                                                                                                                                                                 |       | 390      |       | 574      |       |
| Total                                                                                                                                                                                                                                               |       | $        | 1,654      |     | $          | 2,044 |   |
| Included  in:                                                                                                                                                                                                                                       |       |     |       |     |       |
| Capitalized  as Development                                                                                                                                                                                                                         |       | 714      |       | 714      |       |
| Expensed                                                                                                                                                                                                                                            |       | 940      |       | 1,330    |       |
|                                                                                                                                                                                                                                                |       | $        | 1,654      |     | $          | 2,044 |   |

 

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**Taxes**

 

A portion of the Company’sgranted options are intended to qualify as incentive stock options (“ISO”) forincome tax purposes.  As such, a taxbenefit is not recorded at the time the compensation cost related to theoptions is recorded for book purposes due to the fact that an ISO does notordinarily 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.

 

**NOTE 8 — CHANGES IN CONTINGENTLYREDEEMABLE NONCONTROLLING INTEREST AND EQUITY**

 
| ** **                                                                                                                | ** ** | **Activity for  Nine Months Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| **Changes in Contingently Redeemable Noncontrolling  Interest (Dollars in thousands)** | ** ** | **September 30,  2010**                       | ** ** | **September 30,  2009** | ** ** |
| Total  Contingently Redeemable Noncontrolling Interest December 31,  2009, & 2008, respectively             |       | $                                                  | 99,761     |   | $ | 100,000 |   |
| Less:  Net Loss Attributable to Contingently Redeemable Noncontrolling Interest                                           |       | (1,007                                             | )          | (239 | ) |
| Total  Contingently Redeemable Noncontrolling Interest September 30,  2010, & 2009, respectively            |       | $                                                  | 98,754     |   | $ | 99,761 |   |

** **
| ** **                                                            | ** ** | **Activity for  Nine Months Ended** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| **Changes in Equity (Dollars in thousands)** | ** ** | **September 30,  2010**                       | ** ** | **September 30,  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 |   |
| Awards  exercised                                                     |       | 55                                                 |       | 99 |   |
| Warrant  Repricing                                                    |       | 585                                                |       | — |   |
| Stock  based compensation                                             |       | 1,402                                              |       | 1,534 |   |
| At  end of period                                                     |       | 189,332                                            |       | 186,812 |   |
|                                                                  |       |                                               |       |   |   |
| Accumulated  deficit:                                                 |       |                                               |       |   |   |
| At  beginning of period                                               |       | (82,442                                            | )          | (72,203 | ) |
| Net  loss                                                             |       | (12,366                                            | )          | (8,103 | ) |
| At  end of period                                                     |       | (94,808                                            | )          | (80,306 | ) |
|                                                                  |       |                                               |       |   |   |
| Total  Equity September 30, 2010, & 2009, respectively  |       | $                                                  | 94,597     |   | $ | 106,578 |   |

 

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**NOTE 9 — INCOME TAXES**

 

At September 30, 2010,and December 31, 2009, we had deferred tax assets principally arising fromthe net operating loss carry forwards for income tax purposes multiplied by anexpected rate of 35%.  As management ofthe Company cannot determine that it is more likely than not that we willrealize the benefit of the deferred tax assets, a valuation allowance equal tothe net deferred tax asset has been established at September 30, 2010, andDecember 31, 2009.  The significantcomponents of the deferred tax asset at September 30, 2010, and December 31,2009, were as follows (in thousands):

 

**DeferredTax Asset Valuation**

 
| **(Dollars in thousands)**              | ** ** | **September 30,  2010** | ** ** | **December 31,  2009** | ** ** |
|---------------------------------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Operating  loss carry forward                     |       | $                            | 109,672    |                        | $          | 92,086 |   |
| Unamortized  exploration expense                  |       | 12,649                       |       | 10,899                      |       |
| Fixed  asset depreciation                         |       | 171                          |       | (105                        | )          |
| Deductible  stock based compensation              |       | 1,874                        |       | 902                         |       |
| Deductible  temporary difference                  |       | $                            | 124,366    |                        | $          | 103,782 |   |
| Taxable  temporary difference - development costs |       | (40,721                      | )          | (32,502                     | )          |
| Net  deductible temporary difference              |       | $                            | 83,645     |                        | $          | 71,280 |   |
| Deferred  tax asset                               |       | $                            | 29,276     |                        | $          | 24,948 |   |
| Deferred  tax asset valuation allowance           |       | $                            | (29,276    | )                           | $          | (24,948 | ) |
| Net  deferred tax asset                           |       | $                            | —     |                        | $          | — |   |

 

At September 30, 2010,and December 31, 2009, we had net operating loss carry forwards ofapproximately $109.7 million and $92.1 million, respectively, which expirein the years 2023 through 2030.  Thechange in the allowance account from December 31, 2009, to September 30,2010, was $4.3 million.

 

**NOTE 10 — COMMITMENTS ANDCONTINGENCIES**

 

**Mt. Hope Project**

 

The Mt. Hope Lease may beterminated upon the expiration of its 30-year term, earlier at the election ofthe LLC, or upon a material breach of the agreement and failure to cure suchbreach.  If the LLC terminates the lease,termination is effective 30 days after receipt by Mount Hope Mines, Inc. (“MHMI”)of written notice to terminate the Mt. Hope Lease and no further payments wouldbe due to MHMI.  In order to maintain thelease, the LLC must pay certain deferral fees and advance royalties asdiscussed below.

 

The Mt. Hope Lease Agreementrequires a royalty advance (“Construction Royalty Advance”) of 3% of certainconstruction capital costs, as defined in the Mt. Hope Lease.  The LLC is obligated to pay a portion of theConstruction Royalty Advance each time capital is raised for the Mt. HopeProject based on 3% of the expected capital to be used for those certainconstruction capital costs defined in the lease.  Through September 30, 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 $1.2million of the LLC’s remaining Construction Royalty Advance will be paid in2010, and the remaining $21 million will be paid in 2011, however, as discussedabove, this would only be paid if Hanlong financing becomes available.  In the event there are any remaining unpaidConstruction Royalty Advance amounts on October 19, 2011, due to a delayin achieving expected project financing, the remainder must be paid 50% onOctober 19, 2011, and 50% on October 19, 2012.

 

Once the ConstructionRoyalty Advance has been paid in full, the LLC is obligated to pay an advanceroyalty (“Annual Advance Royalty”) each October 19 thereafter in theamount of $0.5 million per year.  TheConstruction Royalty Advance and the Annual Advance Royalty are collectivelyreferred to as the “Advance Royalties.” All 

 

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Advance Royalties arecredited against the MHMI Production Royalties (as hereinafter defined) oncethe mine has achieved commercial production. After the mine begins production, the LLC estimates that the ProductionRoyalties will be in excess of the Annual Advance Royalties for the life of theproject and, 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 September 30, 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 primary transformersand substation, a primary crusher, a semi-autogenous mill, two ball mills, andvarious motors for the mills.  TheCompany has taken receipt of certain of these assets that are fully fabricatedin storage facilities at its Liberty Property, including the mill motors.  We have suspended fabrication on 16 flotationcells, lime slaking equipment, hydrocyclones, and other smaller milling processequipment with the ability to re-initiate fabrication at any time.  We have completed negotiations with themanufacturer of two multi-hearth molybdenum roasters to terminate itsfabrication of this equipment and receive fully-fabricated components of theorder.  We plan to re-establish a newpurchase order with this manufacturer as additional financing is finalized andequipment procurement is restarted under the current market terms andconditions.

 

The following table setsforth cash commitments under mining and milling equipment contracts(collectively, “Purchase Contracts”) for the LLC at September 30, 2010 (inmillions):

 

| **Year  (Dollars in millions)** | ** ** | **As of  September 30,  2010** | ** ** |
|-------------------------------------------|------------|------------------------------------------|------------|
| 2010  – Remainder                    |       | $                                        | 0.2        |   |
| 2011                                      |       | 21.7                                     |       |
| 2012                                      |       | 21.1                                     |       |
| 2013                                      |       | 2.4                                      |       |
| 2014                                      |       | —                                   |       |
| Total                                     |       | $                                        | 45.4       |   |

 

**Obligations under capital and operating leases**

 

We have contractualobligations under capital and operating leases that will require a total of$0.9 million in payments over the next four years.  Our expected payments are $0.2 million, $0.4million, $0.2 million and $0.1 million for the years ended December 31,2010, 2011, 2012 and 2013, respectively.

 

**Creation of AgriculturalSustainability Trust**

 

On August 19, 2010, Eureka Moly LLC, theCompany’s 80% owned subsidiary, entered into an agreement with the EurekaProducers’ Cooperative (the EPC) whereby Eureka Moly will fund a SustainabilityTrust (the “Trust”) in exchange for the cooperation of the EPC with respect toEureka Moly’s water rights and permitting of the Mt. Hope Project.  The Trust will be tasked with developing andimplementing programs that will serve to enhance the sustainability andwell-being of the agricultural economy in the Diamond Valley Hydrographic Basinthrough reduced water consumption, which may include the Trust purchasing andrelinquishing water rights in Diamond Valley to help bring the Diamond Valleybasin into a more sustainable water balance.  The Trust’s activities willbe governed by a five member Board including one Eureka Moly representative.

 

The Trust may be funded by Eureka Moly andcould range between $8.0 million and $12.0 million, contributed to the Trustover several years, contingent on the achievement of certain milestones. The amount of the Trust will depend on the timing of the publication of theCompany’s DEIS and receipt of the Record of Decision (ROD), with higher paymentamounts corresponding with faster permit receipt.  These base totalamounts can be reduced by 25% 

 

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or 50% if Eureka Moly obtains its water rightsand other permits, but delays are caused by certain other protestants or acurrent appellant continuing to protest or appeal the water applications oroppose the permits for the Mt. Hope Project.  In all cases, at least 50%of the contributions would be provided upon receipt of full financing and theCompany’s Board of Directors’ decision to proceed with construction.  Theremaining payments would be split evenly with one payment due not later than150 days from the commencement of production at the Mt. Hope Project and theremaining payment due one year thereafter.

 

**Environmental Considerations**

 

Our mineral propertyholdings in Shoshone County, Idaho include lands contained in miningdistricts 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 was located.  However, because of the extent ofenvironmental 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**

 

On October 26, 2010,the Company and Hanlong executed an amendment to the Hanlong agreement settingthe closing of Hanlong’s purchase of the first tranche of equity in the Companyon December 20, 2010.  The partieshave agreed that the publication of the Mt. Hope Project’s DEIS is no longer acondition precedent to Hanlong’s first tranche equity investment.  Timely publication of the DEIS does, however,remain a requirement of the entire agreement, and, in conjunction with thisamendment, the required date for DEIS publication has been extended to May 31,2011 from February 28, 2011, although the Company does not currentlyestimate the additional time to be required.

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

 

References made in thisQuarterly Report on Form 10-Q to “we,” “our,” “us,” or the “Company,”refer to General Moly, Inc.

 

The following discussion andanalysis of our financial condition and results of operations constitutesmanagement’s review of the factors that affected our financial and operatingperformance for the nine months ended September 30, 2010, and 2009.  This discussion should be read in conjunctionwith the consolidated financial statements and notes thereto containedelsewhere in this report and in our Annual Report on Form 10-K for theyear ended December 31, 2009, which was filed on March 5, 2010.

 

We routinely post importantinformation about us on our Company website. Our website address is www.generalmoly.com.

 

**Overview**

 

We are a development stagecompany and began the development of the Mt. Hope Project on October 4,2007.  During the year ended December 31,2008, we also completed work on a pre-feasibility study of our LibertyProperty.  The Liberty Property continuesin a care and maintenance mode, and we do not expect to spend appreciableamounts of capital there until market conditions warrant its development.

 

The development of the Mt.Hope Project has a Project Capital Estimate of $1,154.0 million includingdevelopment costs of $1,039.0 million (in 2008 dollars) and $115.0 million incash financial assurance requirements 

 

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and pre-payments.  These amounts do not include financing costsor amounts necessary to fund operating working capital.  Through the nine months ended September 30,2010, we have spent approximately $168.6 million and have $17.3 millionremaining cash on hand for use in the development of the Mt. Hope Project andother cash requirements.

 

The Company remains in acash conservation plan implemented in March 2009 designed to reduceexpenditures and conserve cash in order to maximize financial flexibility.  In addition to conserving cash, the planseeks to retain critical employees and the ability to start construction at theMt. Hope Project pending the availability of the Hanlong financing.

 

Once we have received themajor operating permits and the Record of Decision (“ROD”) from the United StatesBureau of Land Management (“BLM”) and loan procurement efforts are complete, itis expected that Mt. Hope can be constructed and in production within 20months.  In the interim, our permittingefforts are continuing full-time.  TheCompany has maintained its orders for grinding, milling, and other specialtylong lead equipment, although other engineering, administrative and third-partywork has been slowed or suspended.

 

The worldwide molybdenumprice has fluctuated between $5.33 per pound in 2003 to over $40.00 per poundin 2005.  In 2009, molybdenum pricesaveraged $11.12 per pound.  Molybdenumprices fell substantially between October 2008 and April 2009 fromapproximately $33.50 per pound to $7.70 per pound.  Following April 2009, prices generally roseand finished 2009 at approximately $12.00 per pound.  In the first quarter of 2010 molybdenumprices trended upward, and by the end of March 2010 prices were at$17.10.  During the second quarter prices peaked at $17.92 in mid-April 2010,and then retreated to $14.75 by the end of June 2010. The third quarterprices ranged from a high of $16.03 at the beginning of September 2010to a low of $13.88 in mid July 2010. The market ended the third quarter of2010 with a price of $15.35.

 

**Restructuring and Suspension ofProject Development**

 

As discussed above, in March 2009,we implemented a cash conservation plan to reduce expenditures and conservecash in order to maximize financial flexibility.  Engineering efforts, approximately 60%complete, were largely suspended pending the finalization of financing.  Some engineering that is critical forpermitting or project restart readiness has continued at a slower pace.

 

The Company has purchaseorders for two types of equipment; milling process equipment and miningequipment.  Most equipment orders for thecustom-built grinding and other milling process equipment will be completed bythe manufacturers and stored.  Thegrinding and milling process equipment require the longest lead times andmaintaining these orders is critical to the Company’s ability to re-start thedevelopment of Mt. Hope rapidly. Fabrication of less critical equipment has been suspended with somemanufacturers. With respect to the remaining milling process equipment, whereschedule is not critical, the manufacturers have agreed to suspend fabricationof the equipment.  The Company hascompleted negotiation with other equipment manufacturers to suspend orterminate fabrication of other milling equipment and to determine the equipmentfabrication costs incurred to date, storage costs, and the expected timing ofrestarting fabrication.  As financingbecomes available and equipment procurement is restarted, agreements that weresuspended or terminated will be renegotiated under the then current market termsand conditions, as necessary.

 

The drills and loaders forthe mine operation have been cancelled, and discussions for the purchase of theelectric shovels are complete and this order was amended and remains ineffect.  An agreement has been reached witha truck manufacturer to hold production slots for timely delivery.  Once financing becomes available, the Companyanticipates placing orders for the cancelled mining equipment again.  The Company will continue to evaluate alloptions to facilitate a timely restart of the Mt. Hope Project development.

 

**Permitting Update**

 

The Mt. Hope Project willrequire both Federal and State permits before it can commence construction andoperations.  Major permits required forthe Mt. Hope Project include the ROD, a BLM issued permit, the water pollutioncontrol permit and reclamation permit from the Nevada Division of EnvironmentalProtection—Bureau of 

 

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Mining Regulation andReclamation (“BMRR”), and an air quality permit from the Nevada Division ofEnvironmental Protection— Bureau of Air Pollution Control (“BAPC”).

 

The BLM is preparing anenvironmental impact statement (“EIS”) analyzing the environmental impacts ofthe Mt. Hope Project and alternatives in accordance with the NationalEnvironmental Policy Act.  Uponcompletion and approval of the EIS, the BLM will issue the ROD for the Mt. HopeProject.  The ROD will be effective onthe date the BLM has recorded its decision to approve the EIS and plan ofoperations for the Mt. Hope Project.  In September 2006,the BLM determined that the plan of operations met the regulatory requirementswith respect to completeness and comprehensiveness.  Since that time, baseline technical reportshave been submitted and plan of operations updates have been submitted toaccommodate additional detail based on progression of project design.

 

The Preliminary DraftEnvironmental Impact Statement (“PDEIS”) was completed and provided toCooperating Agencies on August 18. These Agencies provided comments on the PDEIS to the BLM on September 23.  The BLM and its independent EIS contractorare currently in the process of reviewing and incorporating the comments into aDraft EIS (“DEIS”).   Once the DEIS iscomplete, the BLM will advance the DEIS through the Notice of Availability (“NOA”)process, which is the procedural step to publishing the document.  The Company continues to expect the DEIS tobe published later this year, but delays to the BLM’s review process, which theCompany does not control, could push publication into early 2011.  Following publication of the DEIS, the publicwill be allowed to review and comment on the DEIS and a Final EIS will bedrafted prior to the issuance of the ROD, which the Company continues toanticipate receiving by mid-2011.

 

The other time-criticalState permits have also been submitted for agency review and approval at thetime of this filing.  We believe these othermajor operating permits will be received on or prior to the effective date ofthe ROD.

 

Although we currently aretargeting the effectiveness of the ROD and the receipt of all major operatingpermits to occur by mid-2011, circumstances beyond our control, includingreviewing agency delays or requests for additional information or studies, andappeals 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, theNevada 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.  All filings with the NevadaState Engineer have been made by a wholly owned subsidiary of the Company. On April 24,2009, two appeals of the ruling were filed by Eureka County, Tim Halpin, EurekaProducers’ Cooperative and Cedar Ranches, LLC (“Petitioners”) with the SeventhJudicial District Court of the State of Nevada challenging the State Engineer’sdecision.  On April 21, 2010, theDistrict Court entered 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 District Court’s decisionis separate from and does not affect the Federal permitting process and thework associated with the Company’s EIS.

 

In June 2010, theCompany filed change applications with the State Engineer’s office requestingpermits to withdraw water at well locations matching those incorporated in theCompany’s final hydrology models now approved by the BLM.  The applications previously granted by theState Engineer’s office contained proposed well locations that the Company nolonger intends to utilize based on additional groundwater modeling andexploration.  Filing new changeapplications to match those incorporated in the Company’s final hydrologyreports submitted to the BLM eliminates one issue raised by the County ofEureka in their appeal of the Company’s water rights.  The Nevada State Engineer’s office has set ahearing for December 6th to the 10th to consider the Company’s water 

 

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applications.  The Company anticipates the State Engineer’soffice to issue its ruling approximately three months following the conclusionof the hearing.  The Company is alsocontinuing work with the Commissioners of Eureka County to find a solution totheir opposition of the Company’s water applications.  The Company’s scientific studies continue toindicate that Mt. Hope’s water pumping in Kobeh Valley will have virtually noimpact to water in Diamond Valley.

 

On August 19, 2010, Eureka Moly LLC, theCompany’s 80% owned subsidiary, entered into an agreement with the EurekaProducers’ Cooperative (the EPC) whereby Eureka Moly will fund a SustainabilityTrust (the Trust) in exchange for the cooperation of the EPC with respect toEureka Moly’s water rights and permitting of the Mt. Hope Project.

 

Based on the agreement, the EPC dismissed itsjudicial appeal and has withdrawn its protests to Eureka Moly’s water applicationsand will not file any further protests to any change applications Eureka Molyfiles prior to production from the Mt. Hope Project.  Additionally, theEPC has agreed not to oppose, delay, or protest any of Eureka Moly’s mining andmilling plans set forth in the Plan of Operations filed with the BLM, includingefforts to obtain permits for the Mt Hope Project from federal, state and localauthorities and agencies.  The EPC will support Eureka Moly in its effortsto cause other Protestants or Appellants to end their protests or appeals toany permits or approvals required for the Mt. Hope Project.

 

The Trust will be tasked with developing andimplementing programs that will serve to enhance the sustainability andwell-being of the agricultural economy in the Diamond Valley Hydrographic Basinthrough reduced water consumption, which may include the Trust purchasing andrelinquishing water rights in Diamond Valley to help bring the Diamond Valleybasin into a more sustainable water balance.  The Trust’s activities willbe governed by a five member Board including one Eureka Moly representative.

 

The Trust may be funded by Eureka Moly andcould range between $8.0 million and $12.0 million, contributed to the Trustover several years, contingent on the achievement of certain milestones. The amount of the Trust will depend on the timing of the publication of theCompany’s Draft Environmental Impact Statement (DEIS) and receipt of the Recordof Decision (ROD), with higher payment amounts corresponding with faster permitreceipt.  These base total amounts can be reduced by 25% or 50% if EurekaMoly obtains its water rights and other permits, but delays are caused bycertain other protestants or a current appellant continuing to protest orappeal the water applications or oppose the permits for the Mt. HopeProject.  In all cases, at least 50% of the contributions would beprovided upon receipt of full financing and the Company’s Board of Directors’decision to proceed with construction.  The remaining payments would besplit evenly with one payment due not later than 150 days from the commencementof production at the Mt. Hope Project and the remaining payment due one yearthereafter.

 

**The Mt. Hope Project**

 

Effective as of January 1,2008, we contributed all of our interest in the assets related to the Mt. HopeProject, including our lease of the Mt. Hope Project into a newly formedentity, Eureka Moly, LLC, a Delaware limited liability company (“LLC”), and in February 2008(“Closing Date”) entered into an agreement (“LLC Agreement”) for thedevelopment and operation of the Mt. Hope Project (“Project”) with POS-MineralsCorporation (“POS-Minerals”) an affiliate of POSCO, a large Korean steelcompany.  Under the LLC Agreement,POS-Minerals owns a 20% interest in the LLC and General Moly, through awholly-owned subsidiary, owns an 80% interest. These ownership interests and/or required contributions under the LLCAgreement can change as discussed below.

 

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 Mt. Hope Project,that the ROD from the BLM for the Mt. Hope Project has become effective, andany administrative or judicial appeals with respect thereto are final.  We are currently targeting the effectivenessof the ROD and the satisfaction of the ROD Contribution Conditions to occur bymid-2011, but circumstances beyond our control, including reviewing agencydelays or requests for additional 

 

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information or studies, andrequests for review or appeals of the BLM decision, could cause theeffectiveness of the ROD and/or satisfaction of the ROD Contribution Conditionsto be delayed.

 

To maintain its 20% interestin the LLC, POS-Minerals will be required to make an additional $56.0 millioncontribution plus its 20% share of all Mt. Hope Project costs incurred from theClosing Date to the ROD Contribution Date within 15 days after the RODContribution Date.  If POS-Minerals doesnot make its additional $56.0 million contribution when due after the RODContribution Date, its interest will be reduced to 10% and the return ofcontributions (as defined below) will be zero.

 

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 a portion of its contributions to theLLC, with no corresponding reduction in POS-Minerals’ ownershippercentage.  Based on our current planand expected timetable, Mt. Hope Project will not achieve commercial productionby December 31, 2011.  AsPOS-Minerals has elected to retain its 20% interest and make its additional$56.0 million contribution, the return of contributions will be $36.0 millionon or prior to January 27, 2012. Our wholly-owned subsidiary and 80% owner of the LLC, Nevada Moly, isobligated under the terms of the LLC Agreement to make capital contributions tofund the return of contributions to POS-Minerals, if required.  If Nevada Moly does not make these capitalcontributions, POS-Minerals has an election to either make a secured loan tothe LLC to fund the return of contributions or receive an additional interestin the LLC of approximately 5%.  In thelatter case, our interest in the LLC is subject to dilution by a percentageequal to the ratio of 1.5 times the amount of the unpaid contributions over theaggregate amount of deemed capital contributions (as determined under the LLCAgreement) of both parties to the LLC (“Dilution Formula”).  At December 31, 2009, the aggregateamount 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 theLLC to Nevada Moly after  a change ofcontrol of 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 per annum.

 

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.

 

**Liquidity, Capital Resources andCapital Requirements**

 

*For the period from December 31,2009 to September 30, 2010*

 

Our total consolidated cashbalance at September 30, 2010, was $17.3 million compared to $48.6 millionat December 31, 2009.  The decreasein our consolidated cash balances for the nine months ended September 30,2010, was due primarily to development costs incurred of $10.5 million,deposits on property, plant and equipment totaling $24.9 million, and generaland administrative costs of $5.9 million offset by bridge loan funding of $10.0million.  Deposits on property, plant andequipment relate primarily to scheduled payments for long lead time equipmentfor the Mt. Hope Project.  See “ContractualObligations” below.

 

With our cash conservationplan, our non-equipment related cash requirements have declined toapproximately $1 million per month, inclusive of maintenance costs at theLiberty Property.  Based on our currentplan and expected timetable, we expect to make additional payments ofapproximately $0.2 million under milling process 

 

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equipment orders through theend of 2010, and $13.4 million in 2011. As the Hanlong financing becomes available and equipment procurement isrestarted, agreements that were suspended or terminated will be renegotiatedunder current market terms and conditions, as necessary.  The anticipated sources of financingdescribed below, combined with funds anticipated to be received from POS-Mineralsin order to retain its 20% share, provide substantially all of our currentlyplanned funding required to construct and place the Mt. Hope Project intocommercial operation.

 

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

 

On March 4, 2010, theCompany signed a Securities Purchase Agreement (“Purchase Agreement”) withHanlong (USA) Mining Investment, Inc. (“Hanlong”), an affiliate of SichuanHanlong Group, a large privately held Chinese company.  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$80.0 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 commitment byHanlong to use its commercially reasonable efforts to procure a $665.0 millionbank loan for the Company (“Term Loan”) from a prime Chinese bank that will beguaranteed by an affiliate of Hanlong, a $20.0 million bridge loan fromHanlong to the Company, and a long-term molybdenum supply off-take agreementpursuant to which a Hanlong affiliate will agree to purchase a substantial partof the molybdenum production from the Mt. Hope Project at specified prices.

 

*Stock Purchase*.  ThePurchase Agreement provides, subject to terms and conditions of the PurchaseAgreement, for the purchase by Hanlong for an aggregate price of$80.0 million, of approximately 27.8 million shares of our common stockwhich will equal 25% of our outstanding common stock on a fully-diluted basisfollowing the purchase, or approximately 38.3% of our outstanding common stockon March 4, 2010.  Fully diluted means all of our outstanding commonstock plus all outstanding options and warrants, whether or not currentlyexercisable.  Hanlong is obligated to purchase the first 12.5% of ourfully-diluted shares, or approximately 11.9 million (“Tranche 1”) for$40.0 million, or approximately $3.36 per share, following satisfaction ofcertain conditions, including receipt of stockholder approval of the equityissuances in connection with the transaction (received at the Annual Meeting ofStockholders held on May 13, 2010), publication of the notice ofavailability of the DEIS concerning the Mt. Hope Project by the BLM, receipt ofnecessary Chinese government approvals for certain portions of the transaction,assurances from Hanlong as to the availability of the Term Loan, approval ofthe shares for listing on the New York Stock Exchange Amex (“NYSE Amex”) andabsence of certain defaults.  The actual number of shares and price pershare will be adjusted for any change in the number of fully diluted sharesbefore the closing of Tranche 1.  The parties may waive the conditions totheir respective obligations.

 

On October 26, 2010,the Company and Hanlong executed an amendment to the Hanlong agreement settingthe closing of Hanlong’s purchase of the first tranche of equity in the Companyon December 20, 2010.  The partieshave agreed that the publication of the Mt. Hope Project’s DEIS is no longer acondition precedent to Hanlong’s first tranche equity investment.  Timely publication of the DEIS does, however,remain a requirement of the entire agreement, and, in conjunction with thisamendment, the required date for DEIS publication has been extended to May 31,2011 from February 28, 2011, although the Company does not currently estimatethe additional time to be required.

 

Hanlong and the Companycontinue to work toward achievement of Tranche 1 Conditions.  The Company received overwhelming supportfrom stockholders at the Company’s Annual General Meeting and is continuing toprogress toward publication of the DEIS. Hanlong received Chinese Government approvals for the equity investmentfrom the National Development and Reform Commission (NDRC) and the Ministry ofCommerce (“MOFCOM”) on October 8 and October 12, 2010, respectively.  Hanlong filed the MOFCOM approval with theState Administration of Foreign Exchange (SAFE) on October 12, 2010,fulfilling Hanlong’s Chinese Government approval obligations.

 

On July 30, the Companyand Hanlong executed an amendment to the Hanlong agreement extending thedeadline for obtaining Chinese Government approvals by two months to October 13,2010, which approvals have now been received, as well as extending the Company’sdeadlines for publishing its DEIS and receiving its ROD to 

 

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February 28, 2011 and November 30,2011, respectively, although the Company currently does not anticipateutilizing the additional time permitted for the publication of the DEIS orreceipt of the ROD.

 

The second tranche (“Tranche 2”)will involve the purchase of an additional 12.5% of our fully diluted shares,or approximately 15.9 million additional shares, for an additional $40.0 million,or approximately $2.52 per share.  The actual number of shares and priceper share will be adjusted for any change in the number of fully diluted sharesbefore the closing of Tranche 2.  Significant conditions to the closing ofTranche 2 include issuance of the ROD for the Mt. Hope Project by the BLM,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 March 31, 2011(subject to extension until June 30, 2011 under certain circumstances),and December 31, 2011, respectively, subject to extension under somecircumstances to March 31, 2012.

 

Hanlong will have the rightto purchase a portion of any additional shares of common stock that we issue sothat it can maintain its percentage ownership unless its ownership is at thetime below 5%.  It may also acquire additional shares so that it maintainsa 20% indirect interest in the Mt. Hope Project if our interest in the LLCis reduced below 80%.  If we issue shares to fund our obligation to fundthe Mt. Hope Project under certain circumstances and Hanlong exercises itsrights to maintain its percentage interest, we will be obligated to refund toHanlong the cost of such shares over a three-year period up to an aggregate of$9.0 million.

 

*Break Fees*.  A breakfee is payable by both the Company and Hanlong if the Purchase Agreementterminates because of the failure of certain conditions to the closing ofTranche 1 or Tranche 2.  A break fee of $10.0 million ispayable to the Company if the Purchase Agreement is terminated because Hanlongfails to obtain necessary Chinese government approvals or to give itsassurances about the availability of the Term Loan.  The Company hasagreed to pay $5.0 million to Hanlong if the conditions concerning our stockholderapproval, the publication of the DEIS or the ROD are not timely satisfied orwaived and the Purchase Agreement is terminated.  The Company break feemaybe increased by $5.0 million if the Purchase Agreement is terminated andthe Company has violated the “no-shop” provisions of the Purchase Agreement andmay be increased in other circumstances not to exceed an additional $3.0million if the Company requests and Hanlong grants certain extensions ofdeadlines concerning the DEIS and up to an additional $2.0 million if theCompany requests and Hanlong grants certain extensions concerning theROD.  In addition, the Company must pay a $2.0 million fee to Hanlong ifit grants the extension concerning the ROD, which fee can be credited againstthe arrangement fee described above.  The break fee payable by the Companyto Hanlong 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.

 

*Chinese Bank Loan*. Pursuant to the Purchase Agreement, Hanlong is obligated to use itscommercially reasonable efforts to procure the Term Loan in an amount of atleast $665.0 million with a term of at least 14 years after commercialproduction begins at the Mt. Hope Project.  The Term Loan is expectedto bear interest at a rate of LIBOR plus a spread of between 2% and 4% perannum.  The Purchase Agreement provides that the Term Loan will havecustomary covenants and conditions; however, the terms of the Term Loan havenot been negotiated with the lender and we have no assurance as to the finalterms of the Term Loan.  Hanlong or an affiliate is obligated to guaranteethe Bank Loan.  When funds can be drawn by the Company under the TermLoan, the Company will pay a $15.0 million arrangement fee to Hanlong whowill pay all fees and expenses associated with the Term Loan before the TermLoan Closing, including those charged by the Chinese bank.

 

**Bridge Loan**

 

Hanlong has also agreed toprovide a $20.0 million bridge loan (“Bridge Loan”) to the Company in twoequal $10.0 million tranches.  On April 28, 2010, we drew downtranche 1 in the amount of $10.0 million.  The second loan tranche becameavailable five business days after receipt of stockholder approval and issubject to the satisfaction of customary conditions.  The first tranche ofthe 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

 

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weighted average of theCompany’s shares on the NYSE Amex for a five-day period after publicannouncement of the event that required repayment.  The Company may offsetits right to receive the break fee against its obligations to repay borrowingsunder the Bridge Loan.  If not sooner repaid, the Bridge Loan will matureon the earliest of 120 days after the issuance of the ROD, the date on whichthe Purchase Agreement terminates, and March 31, 2012.  The BridgeLoan and our obligation to pay a break fee to Hanlong under the PurchaseAgreement are secured by a pledge by us of a 10% interest in the LLC.

 

**Results of Operations**

 

*Three months ended September 30,2010, compared to three months ended September 30, 2009*

 

For the three months ended September 30,2010, we had a consolidated net loss of $7.3 million compared with aconsolidated net loss of $2.4 million in the same period for 2009, due to thefactors noted below in the disclosure associated with exploration andevaluation expenses, and general and administrative expenses.

 

For the three months ended September 30,2010, and 2009, exploration and evaluation expenses were $0.2 million and $0.3million, respectively, as costs associated with the Liberty Property continuedto decline as a result of reduced activity.

 

For the three months ended September 30,2010, and 2009, writedowns of development and deposits were $5.0 million and$0.4 million, respectively, due to the relinquishment of the annex lease toEureka County during the third quarter of 2010 and the forfeiture of depositspaid on long-lead equipment during the third quarter of 2009.

 

For the three months ended September 30,2010, and 2009, general and administrative expenses were $2.0 million and $1.7million, respectively, as the cash conservation efforts initiated by theCompany in the second quarter of 2009 remained in effect during the thirdquarter of 2010.

 

Interest income was nil forthe three months ended September 30, 2010 and 2009, as a result ofsubstantially lower interest rates and lower consolidated cash balances in 2010and 2009.  Interest expense was $0.1million and nil for the three months ended September 30, 2010 and 2009, asa result of the bridge loan taken out in the second quarter of 2010.

 

*Nine months ended September 30,2010, compared to nine months ended September 30, 2009*

 

For the nine months ended September 30,2010, we had a consolidated net loss of $13.4 million compared with aconsolidated net loss of $8.3 million in the same period for 2009, due to thefactors noted below in the disclosure associated with exploration andevaluation expenses, and general and administrative expenses.

 

For the nine months ended September 30,2010, and 2009, exploration and evaluation expenses were $0.5 million and $0.6million, respectively, as costs associated with the Liberty Property continuedto decline as a result of reduced activity.

 

For the nine months ended September 30,2010, and 2009, writedowns of development and deposits were $5.0 million and$0.4 million, respectively, due to the relinquishment of the annex lease toEureka County during the third quarter of 2010 and the forfeiture of depositspaid on long-lead equipment during the third quarter of 2009.

 

For the nine months ended September 30,2010, and 2009, general and administrative expenses were $7.7 million and $7.3million, respectively, as the cash conservation efforts initiated by theCompany in the first half of 2009 were offset in the first half of 2010 bycosts associated with the Hanlong financing transaction, inclusive of bridgeloan interest expense, and the incremental cost of the reissued warrants toCoghill.

 

Interest income was nil forthe nine months ended September 30, 2010 and 2009, as a result ofsubstantially lower interest rates and lower consolidated cash balances in 2010and 2009.  Interest expense for the ninemonths ended September 30, 2010 and 2009 was $0.1 million and nil,respectively, as a result of the bridge loan taken out in the second quarter of2010.

 

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**Contractual Obligations**

 

Our contractual obligationsas of September 30, 2010, were as follows:

 
| ** **                                              | ** ** | **Payments due by period  (Dollars in millions)** | ** ** |
|---------------------------------------------------------|------------|---------------------------------------------------|------------|
| **Contractual obligations**                        | ** ** | **Total**                                         | ** ** | **2010** | ** ** | **2011** | ** ** | **2012 - 2015** | ** ** | **2016 &  Beyond** | ** ** |
| Long-Term  Debt (Capital Lease) Obligations             |       | $                                                 | 0.3        |   | $ | 0.1 |   | $ | 0.1 |   | $ | 0.1 |   | $ | — |   |
| Operating  Lease Obligations                            |       | 0.6                                               |       | 0.1 |   | 0.3 |   | 0.2 |   | — |   |
| Purchase  Contracts                                     |       | 45.4                                              |       | 0.2 |   | 21.7 |   | 23.5 |   | — |   |
| Advance  Royalties and Deferral Fees (1)                |       | 23.2                                              |       | 1.2 |   | 22.0 |   | — |   | — |   |
| Provision  for post closure reclamation and remediation |       | 0.6                                               |       | — |   | — |   | — |   | 0.6 |   |
| **Total**                                               |       | $                                                 | 70.1       |   | $ | 1.6 |   | $ | 44.1 |   | $ | 23.8 |   | $ | 0.6 |   |

 

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(1)         Assumes that full project financing is obtainedduring 2011

 

At September 30, 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. The Company has taken receipt of certain of these assets that are fullyfabricated in storage facilities at its Liberty Property, including the millmotors.  We have suspended fabrication on16 flotation cells, lime slaking equipment, hydrocyclones, and other smallermilling process equipment with the ability to re-initiate fabrication at anytime.  We have completed negotiationswith the manufacturer of two multi-hearth molybdenum roasters to terminate itsfabrication of this equipment and receive finished goods of the partiallycompleted order.  We plan to re-establisha new purchase order with this manufacturer as additional financing is securedand equipment procurement is restarted under the current market terms andconditions.

 

The following table setsforth the LLC’s remaining cash commitments under purchase contracts at September 30,2010, resulting from the re-negotiation and cancelation of Purchase Contractsas discussed above:

 
| **Period** | ** ** | **(Dollars in millions)** | ** ** |
|------------|------------|-------------------------------------|------------|
| 2010       |       | $                                   | 0.2        |   |
| 2011       |       | 21.7                                |       |
| 2012       |       | 21.1                                |       |
| 2013       |       | 2.4                                 |       |
| 2014       |       | —                              |       |
| Total      |       | $                                   | 45.4       |   |

 

Cash commitments underpurchase contracts are inclusive of $13.6 million under milling processequipment orders, and $31.8 million in mining equipment orders.  Based on our current plan, we expect to makeadditional payments of approximately $0.2 million under these milling processequipment orders through the end of 2010, and $13.4 million in 2011.  As our additional financing becomes availableand equipment procurement is restarted, agreements that were suspended orterminated will be renegotiated under the then current market terms andconditions, as necessary.

 

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If the Company does not makepayments required under the purchase contracts, it could be subject to claimsfor breach of contract or to cancellation of the purchase contract.  In addition, we may proceed to selectivelysuspend, cancel or attempt to renegotiate additional purchase contracts if weare forced to further conserve cash.  See“Liquidity and Capital Resources” above. If we cancel or breach any contracts, we will take all appropriateaction to minimize any losses, but could be subject to claims or penaltiesunder the contracts or applicable law. The cancellation of certain key contracts would cause a delay in thecommencement of operations, have ramifications under the LLC Agreement withPOS-Minerals and would add to the cost to develop our interest in the Mt. HopeProject.

 

**ITEM 3.                QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK**

 

**Commodity Price Risk**

 

We are a development stagecompany in the business of the exploration, development and mining ofproperties primarily containing molybdenum. As a result, upon commencement of production, our financial performancecould be materially affected by fluctuations in the market price of molybdenumand other metals we may mine.  The marketprices of metals can fluctuate widely due to a number of factors.  These factors include fluctuations withrespect to the rate of inflation, the exchange rates of the U.S. dollar andother currencies, interest rates, global or regional political and economic conditions,banking environment, global and regional demand, production costs, and investorsentiment.

 

In order to better managecommodity price risk and to seek to reduce the negative impact of fluctuationsin prices, we have entered into long term supply contracts.  On December 28, 2007, we entered into amolybdenum supply agreement with ArcelorMittal that provides for ArcelorMittalto purchase 6.5 million pounds of molybdenum per year, plus or minus 10%, oncethe Mt. Hope Project commences commercial operations at minimum specifiedlevels. The supply agreement provides for a floor price along with a discountfor spot prices above the floor price and expires five years after thecommencement of commercial production at the Mt. Hope Project.  Both the floor and threshold levels at whichthe percentage discounts change are indexed to a producer price index.  On April 16, 2010, we and ArcelorMittalentered into an Extension Molybdenum Supply Agreement (“Extension Agreement”),providing ArcelorMittal with a five-year option to make effective an agreementto purchase from us three million pounds of molybdenum per year for ten yearsfollowing the expiration of the original molybdenum supply agreement.  The additional optional off-take will bepriced in alignment with our existing supply agreements.  In order for ArcelorMittal to exercise thisoption and make the Extension Agreement effective, ArcelorMittal must havebeneficial ownership of more than 11.1 million shares of our common stock on orprior to April 15, 2015. ArcelorMittal currently owns approximately 8.3 million shares of ourcommon stock.

 

On May 14, 2008, weentered into a molybdenum supply agreement with SeAH Besteel Corporation (“SeAHBesteel”), Korea’s largest manufacturer of specialty steels, which provides forSeAH Besteel to purchase 4.0 million pounds of molybdenum per year, plus orminus 10%, once the Mt. Hope Project commences commercial operations at minimumspecified levels. Like the ArcelorMittal supply agreement, the supply agreementwith SeAH Besteel provides for a floor price along with staged discounts forspot prices above the floor price and expires five years from the date of firstsupply under the agreement.  Both thefloor and threshold levels at which the percentage discounts change are indexedto a producer price index.

 

On August 8, 2008, theCompany entered into a molybdenum supply agreement (“Sojitz Agreement”) withSojitz Corporation.  The Sojitz Agreementprovides for the supply of 5.0 million pounds per year of molybdenum for fiveyears, beginning once the Mt. Hope Project reaches certain minimum commercialproduction levels.  One million annualpounds sold under the Sojitz Agreement will be subject to a per-poundmolybdenum floor price and is offset by a flat discount to spot moly pricesabove the floor.  The remaining 4.0million annual pounds sold under the Sojitz Agreement will be sold withreference to spot moly prices without regard to a floor price.  The Sojitz Agreement includes an option forcancellation in the event that supply from the Mt. Hope Project has not begunby January 1, 2013.

 

On March 4, 2010, theCompany 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 

 

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expiration of certainexisting molybdenum 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 16.0 million pounds and 70% of the Company’s share of Mt. Hopeproduction.  Following the originalscheduled maturity date of the Term Loan, or if the Company elects not to enterinto the Term Loan, 14 years after commencement of commercial production fromthe Mt. Hope Mine, Hanlong must purchase a percentage of the Company’s share ofMt. Hope production equal to 2.5 times Hanlong’s fully-diluted percentageownership of our common stock.  Subjectto certain exceptions, the Supply Agreement will terminate once Hanlong’sfully-diluted percentage ownership of the Company falls below 5%. As long asHanlong continues to guarantee the Term Loan, the Supply Agreement will notterminate even if Hanlong’s ownership falls below 5%.  If Hanlong ceases to guarantee the Term Loan,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 Companyelects not to enter into the Term Loan, and Tranche 2 does not close, Hanlong’sobligation to purchase the Company’s share of Mt. Hope production in each ofthe periods described 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 price perpound subject 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 havefixed-floor prices ranging from $13.00 to $13.75 per pound and incrementaldiscounts above the floor price.  For theremaining 75% of the production Hanlong receives, it will pay spot prices formolybdenum, 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 half of which will containfloor price protection to help support the Company’s ability to service itsdebt 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 operation Hanlongis committed to purchase a minimum of 70% of production with 25% of thatcovered under floor price protection. ArcelorMittal has an option to commit to 3.0 million pounds ofproduction 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.

 

All four long term supplyagreements provide for supply only after commercial production levels areachieved, and no provisions require the Company to deliver product or make anypayments if commercial production is never achieved, or declines in laterperiods.  The agreements require thatmonthly shortfalls be made up only if the Company’s portion of Mt. Hopeproduction is available for delivery, after POS-Minerals has taken itsshare.  In no event do these requirementsto make up monthly shortfalls become obligations of the Company if productiondoes not meet targeted levels.

 

Furthermore, each of theagreements have take-or-pay provisions that require the buyers to either takedelivery of product made available by the Company, or to pay as though they hadtaken 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.

 

While we have not usedderivative financial instruments in the past, we may elect to enter intoderivative financial instruments to manage commodity price risk.  We have not entered into any market risksensitive instruments for trading or speculative purposes and do not expect toenter into derivative or other financial instruments for trading or speculativepurposes.

 

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**Interest Rate Risk**

 

As of September 30,2010, we had a balance of cash and cash equivalents of $17.3 million.  Interest rates on short term, highly liquidinvestments have not changed materially since December 31, 2009 andcontinue to be 1% or less on an annualized basis. If and to the extent thatthese funds were invested in interest bearing instruments during the entirenine month period ended September 30, 2010, a hypothetical 1% pointdecrease in the rate of interest earned on these funds would reduce interestincome to nil for the nine month period ended September 30, 2010.

 

**ITEM 4.                CONTROLS AND PROCEDURES**

 

An evaluation was performedunder the supervision and with the participation of our management, includingour principal executive officer and principal financial officer, of theeffectiveness of our disclosure controls and procedures (as defined inRules 13a-15(e) and 15d-15(e) under the Securities Exchange Actof 1934) as of the end of the period covered by this Quarterly Report onForm 10-Q.  Based on the foregoing,our management concluded that our disclosure controls and procedures areeffective to ensure that information required to be disclosed by us in reportsthat we file or submit under the Exchange Act is recorded, processed,summarized and reported within the time periods specified in the Securities andExchange Commission rules and forms and such information is accumulatedand communicated to our management, including our principal executive officerand principal financial officer, to allow timely decisions regarding requireddisclosure.

 

There was no change in ourinternal control over financial reporting that occurred during the quarterended September 30, 2010, that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

**PART II - OTHER INFORMATION**

 

**ITEM 1.                LEGAL PROCEEDINGS**

 

The Mt. Hope Project isprimarily centered between two water basins: the Kobeh Valley Basin and theDiamond Valley Basin.  Operation of theMt. Hope Project is expected to require 7,000 gpm of fresh water that willbe sourced from wells located in Kobeh Valley, west of the Mt. Hope Project.  The Company has purchased from existing waterrights holders essentially all available water rights in the Kobeh ValleyBasin, totaling more than 16,000 acre feet annually.  The Company believes it has sufficient waterrights for its planned mining and milling operations.

 

On March 26, 2009, theNevada 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.  All filings with the NevadaState Engineer have been made by a wholly owned subsidiary of the Company. On April 24,2009, two appeals of the ruling were filed by Eureka County, Tim Halpin, EurekaProducers’ Cooperative and Cedar Ranches, LLC (“Petitioners”) with the SeventhJudicial District Court of the State of Nevada challenging the State Engineer’sdecision.  On April 21, 2010, theDistrict Court entered 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 District Court’s decisionis separate from and does not affect the Federal permitting process and thework associated with the Company’s EIS.

 

In June 2010, theCompany filed change applications with the State Engineer’s office requestingpermits to withdraw water at well locations matching those incorporated in theCompany’s final hydrology models now approved by the BLM.  The applications previously granted by theState Engineer’s office contained proposed well locations that the Company nolonger intends to utilize based on additional groundwater modeling andexploration.  Filing new changeapplications to match those incorporated in the Company’s final hydrologyreports submitted to the BLM eliminates one issue raised by the County ofEureka in their appeal of the Company’s water rights.  The Nevada State Engineer’s office has set ahearing for December 6th to the 10th to consider the Company’s water 

 

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applications.  The Company anticipates the State Engineer’soffice to issue its ruling approximately three months following the conclusionof the hearing.  The Company is alsocontinuing work with the Commissioners of Eureka County to find a solution totheir opposition of the Company’s water applications.  The Company’s scientific studies continue toindicate that Mt. Hope’s water pumping in Kobeh Valley will have virtually noimpact to water in Diamond Valley.

 

On August 19, 2010, Eureka Moly LLC, theCompany’s 80% owned subsidiary, entered into an agreement with the EurekaProducers’ Cooperative (the EPC) whereby Eureka Moly will fund a SustainabilityTrust (“the Trust”) in exchange for the cooperation of the EPC with respect toEureka Moly’s water rights and permitting of the Mt. Hope Project.

 

Based on the agreement, the EPC dismissed itsjudicial appeal and has withdrawn its protests to Eureka Moly’s waterapplications and will not file any further protests to any change applicationsEureka Moly files prior to production from the Mt. Hope Project. Additionally, the EPC has agreed not to oppose, delay, or protest any of EurekaMoly’s mining and milling plans set forth in the Plan of Operations filed withthe BLM, including efforts to obtain permits for the Mt Hope Project fromfederal, state and local authorities and agencies.  The EPC will supportEureka Moly in its efforts to cause other Protestants or Appellants to endtheir protests or appeals to any permits or approvals required for the Mt. HopeProject.

 

The Trust will be tasked with developing andimplementing programs that will serve to enhance the sustainability andwell-being of the agricultural economy in the Diamond Valley Hydrographic Basinthrough reduced water consumption, which may include the Trust purchasing andrelinquishing water rights in Diamond Valley to help bring the Diamond Valleybasin into a more sustainable water balance.  The Trust’s activities willbe governed by a five member Board including one Eureka Moly representative.

 

The Trust may be funded by Eureka Moly andcould range between $8.0 million and $12.0 million, contributed to the Trustover several years, contingent on the achievement of certain milestones. The amount of the Trust will depend on the timing of the publication of theCompany’s Draft Environmental Impact Statement (DEIS) and receipt of the Recordof Decision (ROD), with higher payment amounts corresponding with faster permitreceipt.  These base total amounts can be reduced by 25% or 50% if EurekaMoly obtains its water rights and other permits, but delays are caused bycertain other protestants or a current appellant continuing to protest orappeal the water applications or oppose the permits for the Mt. HopeProject.  In all cases, at least 50% of the contributions would beprovided upon receipt of full financing and the Company’s Board of Directors’decision to proceed with construction.  The remaining payments would besplit evenly with one payment due not later than 150 days from the commencementof production at the Mt. Hope Project and the remaining payment due one yearthereafter.

 

**ITEM 1A.             RISK FACTORS.**

 

Our Annual Report on Form 10-Kfor the year ended December 31, 2009, including the discussion under theheading “Risk Factors” therein, and this report describe risks that maymaterially and adversely affect our business, results of operations orfinancial condition.  The risks describedin our Annual Report on Form 10-K and this report are not the only risksfacing us. Additional risks and uncertainties not currently known to us or thatwe currently deem to be immaterial also may materially adversely affect ourbusiness, financial condition and/or operations.

 

**Special Note RegardingForward-Looking Statements**

 

Certain statements in thisreport may constitute forward-looking statements, which involve known andunknown risks, uncertainties and other factors, which may cause actual results,performance or achievements of our Company, the Mt. Hope Project, LibertyProperty and our other projects, or industry results, to be materiallydifferent from any future results, performance or achievements expressed orimplied by such forward-looking statements. We use the words “may,” “will,” “believe,” “expect,” “anticipate,” “intend,”“future,” “plan,” “estimate,” “potential” and other similar expressions toidentify forward-looking statements. These forward-looking statements are subject to a number of risks,uncertainties and assumptions that could cause actual results to differ materiallyfrom those in the forward looking statements. Such risks, uncertainties andassumptions are described in the “Risk Factors” section 

 

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included in our AnnualReport on Form 10-K for the year ended December 31, 2009, and thisreport, and include, among other things:

 

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

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

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

·                  investments byHanlong and a loan from a Chinese bank are subject to significant consents,approvals and conditions precedent which may not be obtained or met;

·                  negotiation ofacceptable loan terms with a Chinese bank in connection with the Hanlong transaction;

·                  risks relatedto the failure of POS-Minerals to make contributions pursuant to the LLCAgreement;

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

·                  the estimationand realization of mineral reserves and production estimates, if any;

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

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

·                  requirementsfor additional capital and the possible sources of such capital;

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

·                  title disputesor claims; and

·                  limitations ofinsurance coverage;

·                  our investorsmay lose their entire investment in our securities;

·                  the disruptionsof 2008 and 2009 in the overall economy and financial markets may continue toadversely impact our business;

·                  counter partyrisks;

·                  inherentoperating hazards of mining;

·                  climate changeand climate change legislation for planned future operations;

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

·                  losing keypersonnel or the inability to attract and retain additional personnel;

·                  reliance onindependent contractors, experts, technical and operational service providersover whom we have limited control;

·                  increased costscan affect our profitability;

·                  shortages ofcritical parts, equipment, and skilled labor may adversely affect ourdevelopment costs;

·                  legislation maymake it difficult to retain or attract officers and directors and can increasecosts of doing business;

·                  adverse resultsof internal control evaluations could result in a loss of investor confidenceand have an adverse effect on the price of the common stock;

·                  our commonstock has a limited public market which may adversely affect the market priceof our shares and may make it difficult for our shareholders to sell theirshares;

·                  we do notanticipate paying cash dividends in the foreseeable future; and

·                  provisions ofDelaware law and our charter and bylaws may delay or prevent transactions thatwould benefit shareholders.

 

You should not place unduereliance on these forward-looking statements, which speak only as of the dateof this report.  These forward-looking statementsare based on our current expectations and are subject to a number of risks anduncertainties, including those set forth above. Although we believe that the expectations reflected in theseforward-looking statements are reasonable, our actual results could differmaterially from those expressed in these forward-looking statements, and anyevents anticipated in the forward-looking statements may not actuallyoccur.  Except as required by law, weundertake no duty to update any forward-looking statements after the date ofthis report to conform those statements to actual results or to reflect theoccurrence of unanticipated events.  Wequalify all forward-looking statements contained in this report by the foregoingcautionary statements.

 

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**ITEM 2.                UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS**

 

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**                                                                                                                                                                         |
|---------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                         |
| 10.1                |       | Amendment No. 1 to  Securities Purchase Agreement, dated July 30, 2010, between the Company and  Hanlong (USA) Mining Investment, Inc.                                                                       |
| 10.2                |       | Amendment No. 1 to Bridge  Loan Agreement, dated July 30, 2010 between the Company and Hanlong (USA)  Mining Investment, Inc.                                                                                |
| 10.3†          |       | Cooperation Agreement,  dated August 10, 2010, by and between Eureka Moly, LLC and the Eureka  Producers Cooperative (Filed as Exhibit 10.1 to our Current Report of Form  8-K/A, filed on August 26, 2010.) |
| 10.4+               |       | Form of Restricted Stock  Unit Agreement under 2006 Equity Incentive Plan of the Company.                                                                                                                    |
| 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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† Previously filed asindicated and incorporated herein by reference.

 

+ Management contract.

 

**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: October 29, 2010

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

 

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