|
Why Does the Molybdenum Price Remain
Buoyant?
by James Finch10-11-2006 |
page 1 |
Article:
The molybdenum price continues to surprise mining analysts by remaining
'remarkably firm' through 2006. And the same should be true in 2007, if Sprott
Asset Management researcher Maria Smirnova is correct. "We see demand growing,
while there are not many new sources of supply," she told us. "In a market where
16-20 million pounds of new supply is required every year to keep up with
demand, we are aware of less than 10 million pounds coming on-stream next year
from new mines."
"New production that was anticipated, particularly during the first half of
2006, has not materialized," William Cook explained. Cook is the North American
representative for Derek Raphael & Co (UK), presently the world's largest
molybdenum trader. "We have yet to see one pound of new production coming from a
number of mines we had anticipated." It's not just delays in new mines coming
on. "A lot of the producing mines are not producing what they had budgeted,"
Cook said.
U.S. Geological Survey molybdenum specialist Michael Magyar pointed to
Kennecott's Bingham Canyon mine in Utah as an example, "They are producing below
their mine plan this year." Magyar explained, "The molybdenum industry does have
the ability to produce more moly, but we can't roast much more moly right now."
He explained that increased molybdenum in steel demand could create another
bottleneck at the roasters. Roasting is the process where molybdenum is brought
up to spec by burning off sulphides. "No one is actively permitting for more
roasting capacity in North America," Magyar warned.
Strong demand, lack of new molybdenum mines and roasting capacity to remove
the sulphides from molybdenum may provide investors with opportunities in the
metal. While it is traded in the cash market among traders, primarily in Europe
and Asia, some believe emerging near-term primary molybdenum producing companies
could be winners if the metal's price remains around the $25/pound level. Most
of the world's moly comes to the market as a byproduct of copper mining.
Smirnova's favorites among near-term primary producers include Blue Pearl (TSX:
BLE), which she says has been catapulted to "one of the largest and most
profitable mining companies in Canada." Another company in which Sprott Asset
Management, through its funds, has invested is Roca Mines (TSX: ROK). "Roca is
one of the very few emerging moly producers that we know of. Roca is still
progressing towards beginning production at the end of this year or early next
year."
COPYRIGHT (C) 2006 by
StockInterview.com ALL RIGHTS RESERVED.
James Finch contributes to
StockInterview.com
and other publications. His archived articles can be found at
http://www.stockinterview.com
|
