Moly Poised For Massive Comeback

- January 11th, 2010

Moly has been priced too low as compared to other minerals already traded in the futures market. The added sauce to the coming moly price surge will be a sure-fire winner for speculators. You in?

By Kishori Krishnan Exclusive To Moly Investing News

They are loud and clear and the sweet notes are coming in from different parts of the globe. US molybdenum prices are continuing to rise, as consumer demand increases and traders angle for higher prices.

Market participants put spot prices for molybdic oxide in a range of $12.75 to $13 per pound, up from $11.25 to $11.50 two weeks ago, while ferromolybdenum prices were said to be between $14.75 and $15.25 per pound, up from $13 to $13.50 in mid-December.

If one recalls, uncertainty was the sentiment prevailing in the markets at the end of 2008 and till the first ten months of 2009, with pressures coming in to bear from all sides.

Business was slow in most minor metals. Then there was news of the first long-term contract signed for 2010 using LME cobalt price as a benchmark, between Brazilian producer Votorantim and London trader LN metals.

Votorantim is Brazil’s biggest family business and its biggest industrial conglomerate, with interests in mining and metals, cement, paper and pulp, agribusiness, energy, petrochemicals, banking and venture capital.

As rumours swirled that Votorantim faced losses of up to R$ 6 billion (US$ 3.5 billion), the group closed all derivatives positions and announced a loss of R$ 2.2 billion. It even sold bonds worth $561.5 million at the end of December 2009, to extend its debt maturities.

Though some doubts continued to persist in November about the cobalt and molybdenum futures contracts, Markus Moll, senior market analyst at Steel & Metals Market Research, told Reuters that of 20 producers, traders and consumers polled in the raders and consumers polled in the ferro-alloys market, only nine said they would certainly use the contracts, eight would not, and three were unsure.

Then there was news that the London Metal Exchange (LME) has listed its first molybdenum brands for delivery against the LME’s new molybdenum contract.

The exchange listed roasted molybdenum concentrates from Molymet’s Nos roaster in Chile, from its Molymex roaster in Mexico and from its Sadaci roaster in Belgium.

This provided a much needed impetus and clearly, a bright future for firms that mine molybdenum.

Like Thompson Creek (TC), for instance. The company spooked investors in August when it did a large secondary offering. Investors worried that the company would buy another miner at inflated prices. No one thought the obvious: the company decided to invest in itself.

The firm announced a massive build out of its mining assets.

Some analysts called an Uptrend for Thompson Creek Metals (NYSE:TC) on November 09, 2009 at $12.17. Since then, Thompson Creek Metals returned 13.6 per cent as of January 7’s price of $13.83.

Thompson Creek Metals gained 48 cents, or 3.4 per cent, to finish the week with a gain of 19.5 per cent.

The company also paid a $1 million option payment to US Energy Corpo (Nasdaq: USEG).

Avanti’s gain

It was not all gains though for TC. The firm lost its Chief Operating Officer to rival Avanti Mining, which has acquired an undivided 100 per cent direct interest in the past producing Kitsault Molybdenum mine in Northern British Columbia.

A recently released preliminary feasibility study has estimated operating costs of $4.43/lb of moly and undiscounted net cashflow of $1.5 billion.

Avanti Mining Inc’s (TSX: V.AVT) Kenneth W Collison recently served as Chief Operating Officer of Thompson Creek Metals. His earlier responsibilities included the operations of the Endako and Thompson Creek molybdenum mines.

He was also part of the management group that purchased Thompson Creek in 2006.

At Avanti, Collison will be responsible for the construction and start up of the Kitsault mine.

Roca Mines Inc (ROK: TSX-V), which has a primary asset in the MAX Molybdenum Mine, the first new, primary molybdenum mine in Canada, has posted annual results.

The firm has said Q4 molybdenum prices significantly boosted the company’s treasury since Q3 end and has helped the firm post production revenues of $26 million for the year ended August 31, 2009, on sales of 2,366,321 lbs of molybdenum.

The firm reported operating cash flows of $8.7 million ($0.10/share) for the year ended August 31, 2009.

Moly Mines

Wellington West analyst Catherine Gignac has cut her price target on Moly Mines Ltd by more than half at the start of the month, due to financing uncertainty at its Spinifex Ridge mine in Australia.

The analyst reduced her target from $2 to 75¢ and maintained her “speculative buy” rating, telling clients in a note that Moly Mines would likely need to secure an operating and/or financial partner in order to fund Spinifex, which now fully permitted, requires an estimated capital financing of US$ 1.35-billion.

Clearly, as demand rises, supply shortages should drive molybdenum prices higher. Get ready for the push.

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