That was an excellent article you posted (entitled "a caution on juniors"). It ends with a paragraph about molybdenum, which I show again below. In the late seventies, moly peaked at $32 per lb in a similar shortage situation. What follows has nothing to do with precious metals, but could be interesting if moly continues to climb as the article suggests is possible.
I believe there are only two producers of molybdenum in Canada currently; the Highland Valley mine of TeckCominco (et al) and the Huckleberry Mine of Imperial metals. Teck also enjoys molybdenum production through its interest in Antamina.
The ratio of Copper production to Molybdenum production for both the HV mine and Antamina suggests for TeckC that a $1 increase in the price of Molybdenum is equivalent to a one cent increase in the price of copper. The recent unexpected $5 jump in the price of Moly seems to be as significant to Teck as a 5 cent increase in the price of copper....
For the Huckleberry mine, the ratio is even more significant. The unexpected jump in the price of moly seems to be equivalent to a ten cent increase in the price of copper, based on production ratios of the first quarter. And Imperial metals has another mine on standby... the Mount Polly copper/gold mine. Two mines for under a buck !! However, the Huckleberry Miine is in default of its project debt (non-recourse to Imperial) so it is possible that the mine could be taken over by the Japanese creditors.
Going back to Teck and the HV mine, reminds me of the old Highmont mine whose ore was richer in moly than the Lornex ore. This mine closed just three years after it was built because of a decline in copper and molybdenum prices. When it closed, copper was about .62 cents a lb and moly about $5 per lb (from memory only). The Highmont mill was moved down the hill and amalgamated with the HV mill. The moly rich orebodies are about 5k from the HV milling complex and about 1,000 ft higher, and they are almost adjacent to the HV pit, I believe. Will HV increase its Moly production by using this ore ?
Here's that excerpt again
Here's an interesting tidbit as well:
From the Financial Times, June 14, 2002.
Market takes stock of molybdenum rally
mine too
Molybdenum prices have stabilised in recent days as the European market takes stock of a rally that sent prices soaring to their highest since 1995 based on tight supply and steady demand.
Production cuts and curtailments at major copper producers in North and South America and reduced Chinese exports have affected molybdenum, a by-product metal. Molybdenum's main use is as an alloying addition to enhance strength, hardness, and corrosion resistance in alloy and stainless steel.
"To produce one more unit of moly to sell at $8.00 a pound they'd [copper miners] have to produce 10 more units of copper at a fairly poor price. It's not going to happen," said a trader. END
The last sentence I couldn't have said better myself. In fact, I did say it, as it applies to silver, in Straight Talk #8 (take a look on my website). Base metal producers won't ramp up production if the silver price rises. The moly supply is clearly being squeezed - if the silver market was more transparent we'd probably see similar behaviour. |
