| Potential Junior Molybdenum Producers - An Independent Analysis |
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| Written by John W. Robbins, Ph.D. | ||||
| Tuesday, 07 March 2006 | ||||
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With the rise in the price of molybdenum (moly), from $3/lb to $40/lb over the last few years, there has been an understandable rush to production to take advantage of the current high price of moly ($25/lb to $27/lb). During this time, two companies have emerged with tremendously powerful marketing campaigns. It is my belief that their marketing blitz has muddied the investment waters of the moly juniors to the point where the typical moly investor may be confused. This objective analysis will enable us to regroup and ask the important questions so as to clarify the investment process. An impressive body of work has been done by Ken Reser to help investors realize the potential future demand of moly. Below are several of his reports that paint a glowing picture of moly’s expanding role in industry.
On the other hand, there are widely touted analysts that project that the price of moly could drop to the $10 to $15 range in the foreseeable future. I truly hope that Mr. Reser is correct and that future demand forces the price of moly to stay in the current range or even move higher. However, I do realize that one can never be sure, so in choosing a potential moly producer I place a premium on the one with the earliest possible production date. I think it was Civil War General Nathan Bedford Forrest who used the term: “Get there firstest with the mostest.” When it comes to the current high price of moly I believe this statement to be relevant today when considered in the context of choosing a future moly producer. This leads us to ask six simple questions of any company we look at: 1) Estimated date of production? 2) Is there a need to raise more capital prior to production? If so how much? As an investor we obviously want to avoid shareholder dilution as well as any delays that may occur while funds are being raised. 3) Are there any potential permitting issues? 4) How many tons per day (tpd) will the proposed mill process? 5) What is the average undiluted grade of the ore that you will mine in the first year of production? 6) Is the project located close to all necessary infra-structure such as roads, water, and power? Using these questions, lets take a look at the two highly promoted companies: Adanac Ruby Creek Project Symbol: ANCGF (Pick Sheets) 1) Production expected late 2007 or early 2008 2) Needs to raise over $400 million CAD 3) No foreseen issues at this time 4) 20,000 tpd 5) 0.136% grade, from their starter pit 6) Ruby Creek will need significant road improvement and power remains a major problem as they are currently planning on using diesel generators. Idaho General Mines Mount Hope Project Symbol: IGMI (OTCBB) 1) Production expected in 2009 2) Needs to raise over $400 million USD 3) Questionable, as it may be difficult to get approval to basically remove a mountain top in Nevada. 4) 40,000 tpd 5) 0.118% grade 6) Infra-structure is in place. These numbers look impressive until compared with the following company: Golden Phoenix Minerals Symbol: GPXM (OTCBB) Ashdown Project Note: Ashdown project is a joint venture project between Golden Phoenix Minerals (60%) and Win-Eldrich Mines (40%). 1) Production scheduled for April 2006 2) All funding is in place 3) Waiting for the last major permit, according to a BLM source this permit will likely be issued in April 2006. 4) 100 tpd 5) 8% grade, from the Sylvia Vein 6) Infra-structure is in place. By nearly two years, Golden Phoenix Minerals will be the first to production and the first to capitalize on the current high price of moly. Golden Phoenix has the necessary funding and the final permits will likely be received in the spring of THIS year. Until that point in time, they are approved to remove and mill a 1000-ton bulk sample. But you ask, how can they compete with only a 100 ton per day mill? Well this is where the grade of the ore deposit really comes into play. The Sylvia Vein of Golden Phoenix Minerals may be the richest known moly deposit in existence. In fact, the ore is so rich in moly content that it will take 59 truckloads of Adanac’s richest ore and 68 truckloads of Idaho General’s richest ore to equal the value of just one truckload of ore from Ashdown. Now that is impressive. But don’t forget to figure in the cost savings that also benefits Golden Phoenix. The other companies have to do nearly 70 times the work to generate the same amount of revenue. That requires a lot of extra manpower, equipment, maintenance and fuel, and that explains why the other companies have to build mills that process 20,000 to 40,000 tons of ore. Otherwise they could never keep up with the profits generated from Golden Phoenix’s “little” 100 ton per day mill. Considering what we now know when it comes to choosing a moly producer, I think we have to update General Nathan Bedford Forrest’s statement to: “Get there firstest with the richest” moly deposit. With this in mind, it seems clear that Golden Phoenix Minerals (GPXM) stands head and shoulders above the rest. Accordingly, I have established a position in GPXM. John W. Robbins, Ph.D. |
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