In 2015, molybdenum earned the dubious distinction of being the year's worst-performing metal. Plagued by the twin issues of oversupply and low demand, molybdenum prices fell a whopping 49 percent during the period.
Since then, the situation has improved a little. Earlier in the year, Platts reported that molybdenum oxide was changing hands at $5.30 to $5.40 per pound — not overly high, but well above the 12-year low of $4.616 seen in November. What's more, the US Geological Survey's most recent report on molybdenum shows that worldwide output of the metal decreased last year to 267,000 MT; quite a bit lower than the 281,000 MT produced in 2014.
Here's a look at the top molybdenum producers of 2015, as per stats in the US Geological Survey's report. While a price recovery for the metal isn't expected for the next few years, it's encouraging to see that supply seems to be starting to move more in line with demand.
Mine production: 101,000 MT
China produces the vast majority of the world’s molybdenum, and despite a 2,000-MT drop in production between 2014 and 2015, the Asian nation remains the globe’s biggest producer by a large margin.
The molybdenum market is closely tied to China, and not just because the country produces so much of the metal. China also has a massive industrial sector that requires huge amounts of molybdenum to make steel. Unfortunately, the Chinese economy is currently "stumbling" — it's not growing as quickly as was previously expected, and thus the country needs less molybdenum. Indeed, China was largely responsible for the underwhelming demand for the metal seen last year.
Mine production: 56,300 MT
The US produced much less molybdenum in 2015 than it did in 2014 — 56,300 MT compared to 68,200 MT. The metal is often produced as a by-product of copper and other metals, and that's evident when looking at US output stats: in 2015, molybdenum was produced at 10 mines in the country, but was produced as a primary product at just two of them. One of those was Freeport-McMoRan's (NYSE:FCX) Climax mine in Colorado.
According to the US Geological Survey, much of the drop in US molybdenum output last year can be attributed to the lack of production from Thompson Creek Metals Company's (TSX:TCM) Idaho-based Thompson Creek mine. It was put on care and maintenance at the end of 2014, and has not reopened. Production has been suspended at various other US-based molybdenum mines as well.
Mine production: 49,000 MT
Unlike China and the US, Chile's molybdenum production rose slightly in 2015, hitting 49,000 MT; the country produced 48,800 MT in 2014. However, despite that small rise, Chile's 2015 molybdenum output was way off what the country was calling for at the end of 2014 — Reuters notes that at the time, state officials were anticipating output of 61,400 MT.
State-owned miner Codelco produces the bulk of Chile's molybdenum, and KGHM Polska Miedz (WSE:KGH) is also a producer in the country. Australia's Hot Chili (ASX:HCH) is working on bringing its Productora copper project into production in Chile, and intends to produce molybdenum as a by-product.
Mine production: 18,100 MT
Peru also saw a slight uptick in molybdenum production in 2015, reporting output of 18,100 MT in comparison to 17,000 MT in 2014.
Interestingly, according to an EY report, the majority of investment in Peru’s mining industry is directed at copper. That's good news in disguise for molybdenum which, as mentioned, is often produced as a by-product of copper and other metals. Indeed, one major molybdenum-producing mine in Peru is Freeport-McMoRan's Cerro Verde mine, which is primarily a copper producer.
Mine production: 13,000 MT
Molybdenum production in Mexico fell by 1,400 MT last year to reach 13,000 MT. That said, on the whole the country's output has been on the rise since the late 1990s, as per MBendi Information Services. One major molybdenum-producing mine in the country is La Caridad, which belongs to privately owned Grupo Mexico. The mine produces molybdenum as a by-product of copper.
Mine production: 9,300 MT
Canada's molybdenum production clocked in at 9,300 MT in 2015, down from 9,700 MT the previous year. Thompson Creek Metals' British Columbia-based Endako mine used to be a key molybdenum producer for the country, but like the company's Thompson Creek mine it is now on care and maintenance. The company has said it will re-evaluate the status of both mines "as market conditions warrant."
Other Canadian sources of molybdenum include Taseko Mines' (TSX:TCK.B,NYSE:TCK) Gibraltar mine, also located in British Columbia. Meanwhile, Amarc Resources (TSXV:AHR,OTCBB:AXREF) is looking to advance the IKE porphyry copper-molybdenum-silver porphyry with Thompson Creek Metals, announcing that exploration had begun in August. Alloycorp Mining (TSXV:AVT) is moving forward at the Avanti Kitsault molybdenum project.
Mine production: 7,300 MT
Armenia's molybdenum production rose slightly in 2015, bumping up from 7,100 MT to 7,300 MT. CRONIMET Mining subsidiary Zangezur Copper Molybdenum Combine operates Kajaran, the country's largest copper-molybdenum mine. The mine has been in operation since 1951, and has 2.2 billion tons of ore resources.
Mine production: 4,800 MT
The US Geological Survey provides only estimates on Russian molybdenum output. For 2015, it estimates that the country put out 4,800 MT of the metal, unchanged from 2014. A company called SMR that is part of EN+ Group bills itself as Russia's only fully integrated molybdenum producer, and the largest ferromolybdenum producer in the country in terms of volume.
It's also worth noting that Russia retains much of its molybdenum for domestic projects. A report from Emerging Markets notes that Russian nuclear reactors are specifically designed to use a type of molybdenum only produced within the country.
Mine production: 4,000 MT
Iran's 2015 molybdenum production came in at 4,000 MT, flat with the level seen in 2014. Little information is available on molybdenum in Iran, and that may be because in 2012 the Iranian government banned exports of molybdenum concentrate in an effort to "support national production." It banned exports of about 50 aluminum, petrochemical and other products at the same time.
Since then, Iran has made molybdenum headlines for the discovery of a new molybdenum deposit in East Azerbaijan. The find is estimated to contain reserves of 21.7 million MT.
Mine production: 2,000 MT
Finally, Mongolia produced 2,000 MT of molybdenum in 2015, the same as in 2014.
Similar to Iran, little information on molybdenum in Mongolia is available. One company with a molybdenum project in the country is Erdene Resource Development (TSX:ERD), which holds the Zuun Mod molybdenum-copper project in the country; it has a measured and indicated resource of 218 MT at 0.057 percent molybdenum and 0.069 percent copper. Tian Poh Resources (ASX:TPO) has an option to acquire an interest in the project.
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This is an updated version of an article originally published on June 21, 2015 on the Investing News Network.
Alloycorp Mining Inc. (TSXV:AVT) announced results from a front-end engineering design (FEED) study completed on its Avanti Kitsault project. President Peter Mah said the project has now been “significantly de-risked … from a constructability perspective.”
West High Yield Resources was the top gainer on the TSXV last week. It was followed by Alloycorp Mining, Goldrock Mines, Tristar Gold and Galway Gold.
Alloycorp Mining Inc. (TSXV:AVT) released an update on its Avanti Kitsault project, commenting that DRA Taggart LLC is in the process of completing a Front End Engineering Design (FEED) study for the project.
Alloycorp Mining Inc. (TSXV:AVT) announced that it has made interest payments worth US$500,000 for the period of April 1, 2015 to June 30, 2015 by issuing 6,201,500 common shares each to Resource Capital Fund IV LP and Resource Capital Fund VI LP.
Alloycorp Mining Inc. (TSXV:AVT) announced that it’s entered into agreements aimed at extending the maturity dates of its existing loan facilities with Resource Capital Funds.
Alloycorp Mining Inc. (TSXV:AVT) released an update on its Avanti Kitsault project, noting that at the end of April, engineering and procurement for it was about 60 percent complete.
Alloycorp Mining Inc. (TSXV:AVT) announced that it’s made changes to the engineering and construction strategy for its Avanti Kitsault project.
Alloycorp Mining Inc. (TSXV:AVT) released an update on its Avanti Kitsault project, noting that there have been developments since the general corporate update it released in November 2014.
Several companies on the TSX Venture Exchange had a promising start to 2015. Samco Gold was the top gainer, followed by Encanto Potash, Sandspring Resources, Tirex Resources and Alloycorp Mining.
Avanti Mining Inc. (TSXV:AVT) announced an update on its Kitsault molybdenum project, commenting that it has achieved some significant milestones since starting construction at the site in June.
Avanti Mining Inc. (TSXV:AVT) announced the approval of its environmental assessment application by the Honorable Leona Aglukkaq, Canadian minister of the environment, on June 27, 2014.
Avanti Mining Inc. (TSXV:AVT) announced that on June 13, 2014, the British Columbia Ministry of Energy and Mines issued an amendment to the company’s existing Mines Act Permit.
Euromax Resources, Bacanora Minerals, Midland Exploration, Nighthawk Gold and Avanti Mining were the top five gainers on the TSX Venture Exchange last week.
Avanti Mining has signed a second offtake agreement for its British Columbia-based Kitsault project, this time with South Korea’s SeAH M&S.
While that atmosphere prompted some market watchers and participants to take to the sidelines, it hasn’t stopped exploration and development company Avanti Mining (TSXV:AVT) from making substantial progress at its Kitsault molybdenum project, located in Northern British Columbia. In fact, in just the last six months or so the company has, among other things, further optimized the feasibility study for the project and signed a memorandum of understanding with the Wilp Luuxhon.
Most recently, however, Avanti revealed that it has entered into an offtake agreement with SeAH M&S, one of the largest steel manufacturers in South Korea. Under the agreement, SeAH will buy, “at prices based on the market price,” as much as 20 percent of Kitsault’s molybdenum concentrate production over a period of 13 years.
Specifically, the agreement “provides for the annual delivery” of 4,200 metric tons (MT) of molybdenum concentrate to SeAh for 12 years, though upon mutual agreement between the two companies that amount “can be adjusted upwards or downwards by 10%.” Further, in the year prior to the start of that 12-year period, an additional 4,200 MT of molybdenum concentrate will be delivered SeAH. That, according to Avanti, represents about US$800 million of potential molybdenum revenue based on price assumptions reported in its updated feasibility study.
Avanti is understandably pleased with the agreement, which is contingent upon a Korean bank or other Korean lender participating in the second tranche of a project debt facility currently being arranged by Avanti. Indeed, Gordon Bogden, the company’s president and CEO, said “is an important step in finalizing a project debt finance facility for Kitsault.”
However, what makes the deal even more noteworthy is the fact that it’s the second offtake agreement Avanti has arranged for Kitsault. The first, which the company entered into back in June 2013, is with Germany’s ThyssenKrupp Metallurgical Products (TKMetPro) and is for 50 percent of Kitsault’s molybdenum production over the course of the mine’s life. It also gives TKMetPro, which operates in 80 countries and recorded sales of 40 billion euros in 2012, the right of first refusal for further molybdenum produced by Avanti at other projects when the agreement is in effect.
Moving forward, investors should look for Kitsault to receive a federal environmental assessment decision “in the near future.” Shares of Avanti are currently selling for $0.07 each, 16.67 percent higher than at close on Friday.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.