NOTE 3 — MINING PROPERTIES, LAND AND WATER RIGHTS

We currently have interests in two mining properties that are the primary focus of our operations, the Mt. Hope Project and the Liberty Project. We also have certain other, non-core, mining properties that are being evaluated for future development or sale.

The Mt. Hope Project. We are currently in the process of developing the Mt. Hope Project, and have recently obtained all permits required for construction. In January 2014, the Company published an updated Technical Report on the Mt. Hope Project using Canadian Instrument NI 43-101 guidelines, which provided data on the viability and expected economics of the project. In early 2017, we re-examined the Mt. Hope proven and probable mineral reserves and updated the reserve and resource estimates using an $8.40/lb molybdenum (“Mo”) three-year backward average price. No further adjustments were required during 2018 and 2019.

The Company has identified a potential high-grade, copper-silver exploration target along with a significant zinc mineralized area at the Mt. Hope Project site, southeast of the Mt. Hope’s molybdenum deposit in central Nevada (the “Cu-Ag Target”).

A high-intensity, ground-based Induced Polarization (“IP”) survey completed in February 2018 by Quantec Geoscience indicates a fairly continuous group of high chargeability anomalies that appear aligned with the recently identified Cu-Ag Target. These anomalies lie between 100 feet and 1,000-plus feet from the surface and trend northeast for over 1,000 feet. The IP survey indicates that the anomalies could continue further to the north-northeast and to the south where they appear to dip to the east.

The preliminary Cu-Ag Target exploration work was undertaken solely at the expense of General Moly. The Company has presented the promising findings to its 20% EMLLC joint venture partner at the Mt. Hope Project, POS-Minerals, and the parties are discussing value-sharing investment options. Any mining operation to exploit economic mineralization at the Mt. Hope Project site will require the approval of POS-Minerals.

Geological review of historic logs and core was completed by Mine Mappers, LLC of Tucson, Arizona to update the geologic interpretation of the skarn area. Mine Mappers reviewed the geologic interpretations in conjunction with the IP results and recommended a 10-hole, 9,400 foot drilling confirmation and exploration program.

In September 2018, the Company commenced a 10-hole drill program on the patented claims at the Mt. Hope Project. The drilling program is focused on copper-silver-zinc mineralized skarns and designed to confirm and extend the target defined by historical drilling as well as test for extensions of zinc mineralization horizons which were historically mined. The drill program was completed in late 2018 and the Company concluded that this mineralization may have economic potential but requires further drilling and analysis and may be best explored in conjunction with or after the moly project.

Liberty Project. We continue to evaluate opportunities at the Liberty Project as they arise. The Liberty Project remains in care and maintenance at this time. In July 2014, the Company published an updated NI 43-101 compliant pre-feasibility study, which more closely examined the use of existing infrastructure and the copper potential of the property.

In February 2017, Liberty Moly, LLC (“Liberty Moly”) entered into a lease agreement with WK Mining Ltd. (“WK”) for the lease of water rights for the purpose of mining and milling. The term of the lease is six years which WK can extend for an additional four years. As compensation for the leased water rights, WK has issued $124,000 in common shares to Liberty Moly, consisting of $100,000 at signing of the agreement and shares equal to $12,000 in both its first and second annual installments, and is required to pay an annual fee on the anniversary date of the lease in either cash or WK common shares.

In December, 2019, Liberty Moly, LLC (“Liberty Moly”) entered into a lease agreement with SR Minerals, Inc. (SRM) for the lease of water rights for the purpose of mining and milling. The term of the lease is five years, after which SRM can extend annually for an additional five years. As compensation for the leased water rights, SRM has paid $16,000 in cash to Liberty Moly, and is required to pay an annual fee on the anniversary date of the lease in cash.

The Nevada Division of Environmental Protection (NDEP) has identified environmental concerns with some Liberty Project facilities acquired with the property. NDEP’s concerns are related to aspects of previously approved closure plans required by Nevada regulation. We have proposed options to NDEP to address these concerns. In July 2018, we addressed one of those concerns by successfully completing a program, as approved by NDEP, to neutralize the acidic Liberty pit lake by adding hydrated lime to raise the pH. Since October of 2018, we have been actively managing process solutions draining from the pre-existing leach pad to resolve the second concern. We will continue to work with NDEP to evaluate ongoing options to address these issues, and additional costs may be required to meet NDEP’s closure requirements. However, a reasonable estimate cannot be determined at this time as it is not possible to reasonably predict the outcome of resolution with NDEP.

Other Mining Properties. We also have had other mining claims and land purchased prior to 2006 which consisted in part of (a) six patented mining claims known as the Chicago-London group, located near the town of Murray in Shoshone County, Idaho, (b) 34 unpatented mining claims in Marion County, Oregon, known as the Detroit property, and (c) 83 unpatented claims in Sanders and Madison County, Montana. Historically, our efforts at these properties were minimal and consumed no significant financial resources. The total book value of these properties was approximately $0.1 million and the Company has retained production royalties of 1.5% of all net smelter returns on future production from two undeveloped properties in Skamania County, Washington and Josephine County, Oregon, which were sold in 2012 and 2013, respectively. The Chicago-London property ((a) above) was sold in January 2020. As a result of ongoing cash conservation efforts, we allowed the annual claim payments for the 83 unpatented claims in Sanders and Madison County, Montana ((c) above) to lapse and no longer hold rights to these claims.

Summary. The following is a summary of mining properties, land and water rights at December 31, 2019 and 2018 (in thousands):


	At		At
	December 31,		December 31,
	2019		2018
Mt. Hope Project:
Development costs	$	179,356	$	176,292
Mineral, land and water rights		23,423		11,324
Advance royalties		32,988		31,800
Total Mt. Hope Project		235,767		219,416
Total Liberty Project		8,370		9,678
Other Properties		0		81
Total	$	244,137	$	229,175

Development costs and Deposits on project property, plant and equipment

Development costs of $179.4 million as of December 31, 2019 include hydrology and drilling costs, expenditures to further the permitting process, capitalized salaries, project engineering costs, and other expenditures required to fully develop the Mt. Hope Project. Deposits on project property, plant and equipment of $88.0 million as of December 31, 2019 represent ongoing progress payments on equipment orders for the custom-built grinding and milling equipment, related electric mill drives, and other processing equipment that require the longest lead times.