Industrial Metals

Q&A with Shaun Dykes, CEO of American CuMo Mining

Industrial Metals

The head of the recently renamed firm talks about its big molybdenum project in Idaho and gives his outlook for moly prices.

Moly Investing News (MIN) recently spoke with Shaun Dykes of American CuMo Mining (TSXV:MLY,OTCQX:MLYCF). In the interview below, Dykes discusses the company’s recent name change, its new management and the progress of its Idaho-based CuMo copper-molybdenum-silver project, which is being advanced toward a feasibility study.

Dykes also tells where he sees moly prices heading and outlines some exciting new applications that could give demand for the metal a shot in the arm.

MIN: Shaun, I want to talk to you a little bit about your project in Idaho as well as American CuMo Mining in general. First of all, American CuMo is the new name of Mosquito Consolidated Gold Mines. Why did you choose to rename and rebrand the company at this time?

Shaun Dykes: The name Mosquito goes back to the old gold mining days, which were basically in the 1980s, and there was no relationship between it and our main project, which is the copper-moly project in Idaho. We wanted to reflect that in the new name of the company and also give it a new start and a new presence as we have just gone through a proxy battle through which the shareholders basically restored proper professional management to the company.

MIN: Can you tell me a little bit about that change in management?

SD: It started around November 2011, when we found some irregularities in the distribution of funds, where funding was being diverted away from the main CuMo project to support a diamond drilling company. That is not what shareholders wanted. When we brought this to the attention of the board, of which I was a member, only one board member was willing to take any action on it. As a result, we were suspended, or kicked off the board, and then we initiated a proxy battle where we informed the shareholders of what was going on and that this was not the proper way to run a company with an asset the size of CuMo. That resulted in a year-long battle where the shareholders voted overwhelmingly to replace the management and bring us back in.

MIN: Tell me about your CuMo project in Idaho.

SD: CuMo is located about 35 miles out of Boise in an area that has been heavily mined, heavily logged and heavily impacted over the last 100 years or so. It is one of the largest — I think it is the largest, actually — molybdenum deposits in the world. It is a molybdenum-copper-silver porphyry consisting of approximately over 4 billion pounds of molybdenum, over 8 billion pounds of copper and 386 million ounces of silver. It is a large-scale project that would also be the lowest-cost producer, we believe. It is an opportunity that only comes around every so often on this type of scale. It matches up with the other large projects in the world, like [the] Bingham [Canyon Mine].

MIN:According to your website, you have received a $3-million loan from International Energy & Mineral Resources Investment Company (IEMR) in Hong Kong. Can you tell me a little about that investment and how you plan to use that cash?

SD: That money was required because the previous management left us with basically no cash in our accounts. IEMR is a major shareholder in the company, so they advanced the funds to us. We are going to be using that for the further development of CuMo, moving the project through feasibility, initiating the environmental baseline work we need to do and continuing some of the drilling on the project in 2013. As we move the project from its exploration stage, which we have just passed, to the development stage, where we are now, we believe the economics are sufficient to justify moving to feasibility.

MIN:What are your plans for 2013?

SD: In 2013, we are going to be looking for additional funds to finance the program. We have several groups interested, and we are having discussions with those groups to fund the program over the next three years. The work will consist of engineering, metallurgic work, diamond drilling and most importantly the environmental baseline information necessary for the feasibility study and to initiate the permitting process.

MIN: We have seen a pullback in molybdenum prices lately, as well as layoffs at the Thompson Creek mine, which is also in Idaho. Can you give me your sense of the molybdenum market and how current prices are affecting your decision making with regard to the project?

SD: That is a good comparison, because Thompson Creek, being so close, is what we call one of the higher-cost producers. They have a hard time making money at the current prices, around $11 to $12 a pound, while we at CuMo feel our operating costs are probably less than $4 a pound, based on the 2009 economic process. Current molybdenum prices, although they are low, are a tremendous advantage for us, because we are trying to move the project forward so we catch the next rise in prices. CuMo is tremendously profitable at these prices.

Probably about 45 percent of the world’s production in the primary minefield is at costs higher than the current price. Therefore, we think the current low prices are unsustainable and that molybdenum prices will move up, probably to the $14 or $15 range, which is what we feel is a sustainable price. The Chinese are one of the big controllers in the market, and as such, their costs are around $12 to $13 a pound for most of their mines. We feel that that is why molybdenum prices in the longer term will probably medium out around $14 to $15. Supply and demand are about even.

Molybdenum is one of these metals that has tremendous uses; stronger molybdenum steel can be used to replace steel in applications like desalination plants and nuclear reactors because of its corrosion resistance. We are also really interested in some of the catalytic uses of molybdenum, for example, to produce hydrogen fuels. The other use that we are looking into is something that has been known for years, but hasn’t been taken into account very much on a larger scale, and that is molybdenum as a natural fertilizer. It acts as a nutrient. By putting molybdenum nutrients on crops, you get a 30-percent increase in yields.

As these uses develop, demand will go up and supply will have to match that. CuMo, being not only the largest, but also a low-cost producer, will be able to sustain itself throughout the many decades of its mine life as molybdenum uses continue to develop.

MIN:Thank you very much for speaking with me today.

SD: Thank you.


Securities Disclosure: I, Chad Fraser, hold no positions in any of the companies mentioned in this article.

Editorial Disclosure: American CuMo Mining is a client of Investing News Network. This article is not paid-for content. 


S&P 5004070.56+10.13


Heating Oil3.19-0.11
Natural Gas3.15+0.21