Fri, Aug 29, 2008

Moly prices steady as supplies remain tight

By Leia Michele Toovey- Exclusive to Moly Investing News

A fluctuating greenback coupled with fears of a global recession has sent many of the metals on a tailspin.

In just a few months, the spot prices for base metals copper, zinc, and nickel are down 12 per cent, 30 per cent, and 42 per cent, respectively. The sell-off has hit precious metals just as hard. Gold, silver, and platinum prices are off 20 per cent, 30 per cent, and 35 per cent from their recent highs. But not Moly; its prices have held steady despite all the other metals wavering.

Molybdenum has gone up more than five-fold since 2004. The 2008 reports indicate that China will have a year-end demand increase of 24 per cent. Since 2002, moly’s price run has seen it go up 700 per cent. The supply side of the equation is also helping to keep moly prices buoyant. Last year, 187,000 tonnes of moly were produced globally; that’s only 3,000 more tonnes than was produced in 2006. With a supply increase of only 2 per cent, and a demand picture that analysts conservatively estimate to increase by 10 per cent per annum- and you have a supply that is unable to meet demand.

Moly is used as a super alloy and has novel uses including as a catalyst. It is a key ingredient in making steel for oil and natural gas transporting pipelines. Think of the new oil and natural gas reserves being tapped into to support the globe’s thirst for energy and you have an excellent outlook for moly demand.

Currently, there are over 30 nuclear power plants under construction or slated to begin construction in the next few years. The construction of these plants alone would add a total of about 1.5 million pounds of moly consumption to an already tight market. China, Chile, and the United States produced 78 per cent of the world’s moly last year.

China Molybdenum Company has seen profits shoot up, supported by moly’s high market value. This week they announced that their first half profit rose by 13 per cent. Net income rose to US$181 million between January-June 2008 compared to US$160 million a year ago. Sales rose by 16 per cent compared to the same period last year, to US$482 million. Executive Director of China Molybdenum Wu Wenjun said that in his opinion, moly prices will remain high as a global shortfall will last while there is a time gap for mining expansion to take effect.

Although there is a great deal of moly to be mined in North America- strict environmental and permitting applications mean that less mines are expected to come on stream in this region. Both China and Chile are operating moly mines, and many copper producers are increasing their moly operations to capitalize on the metal’s high price. Moly is often discovered in conjunction with copper.

Los Andes Copper (TSX:LA) announced this week the completion of its US$7.5 million private placement. Los Andes sold a total of 15,000,000 units at a price of US$0.50 per unit for aggregate gross proceeds of US$7,500,000. Each unit issued under the private placement consisted of one common share and one common share purchase warrant. Funds raised will be used to develop the Vizcachitas Project in Chile - a low strip, open pit operation in an area of low elevation with excellent infrastructure. The Vizcachitas deposit occurs in the same metallogenic belt as the large copper-molybdenum porphyries Rio Blanco-Los Bronces, Los Pelambres-El Pachon and El Teniente. The project contains a sulphide mineral indicated resource of 515 million tonnes grading 0.39 per cent copper and 0.011per cent molybdenum, and an inferred resource of 572 million tonnes grading 0.34 per cent copper and 0.012 per cent molybdenum at a 0.30 per cent copper cut-off for a total of 8.72 billion pounds of copper and 276 million pounds of molybdenum. This resource estimate is an update over the previously released NI43-101 technical report completed by A.C.A. Howe International Limited dated February 7, 2007.

Proof that North America will still be the seat of some mining operations; Sirios Resource Inc. (TSX.V:SOI) has commenced a diamond drilling program on their molybdenum-copper-gold property in James Bay, Quebec. The program totaling a minimum 1,500 meters, will allow the testing of at least 12 targets. These targets were determined via spectrometric, magnetometric and induced polarization ground surveys as well as the geological studies completed this summer. Between 1997 and 2001, SIRIOS realized, on its TILLY property, the first significant molybdenum discovery in the James Bay area in Quebec, while discovering at the same time an important porphyry complex.