Cook warned of the considerable capital costs, reclamation liabilities and operating costs for the behemoth projects. Instead, he pointed to the smaller, higher grade primary molybdenum deposits. It’s where he sees the future of moly production as a complement to byproduct and Chinese production. His emphasis was on “higher” grade deposits. As with other industry experts we interviewed, it is those lower grade deposits which raise the experts’ eyebrows.

Where Does the Price Hysteria Come From?

Molybdenum strongly depends upon stainless steel production. According to the recently published U.S. Geological Survey, Mineral Commodities Summaries, producers of iron, steel and superalloys consumed 74 percent of the molybdenum mined in 2006. Movements in stainless steel demand can impact the moly price.

Before the holiday

We’ve wondered about the price rallies of various metals we’ve been following, hoping to understand some of the emotions behind the excitement. Being skeptical, some of this begins to sound like mob hysteria. On the sunny side of the fence, one could call this exuberance. Cui bono is our question. Who benefits?

For the utilities hoping to obtain nuclear fuel for their reactors, a rising uranium price and lessened available SWU capacity to meet their needs exacerbate the worry about whether not the nuclear renaissance can be realistically sustained. For molybdenum, soaring stainless steel and super alloy demand helps keep the silvery metal well above the actual production costs to mine it. Plans for building more pipelines with stronger anti-corrosive properties adds a sexy energy twist, spicing up what Raymond James mining analyst Bart Jaworski calls a boring story.

With uranium, there is excitement because a very small number of new near-term producers recently signed contracts to sell future U3O8 production with escalating floor price protection, or simply sold production at/near the record uranium price. Obviously, they benefit, and so have their shareholders. For uranium companies hoping to produce within the next five to six years, higher prices are likely to attract deep-pocket joint venture partners to bring their mines into production, or to further their development activities. Or simply to raise more cash for their treasury by selling shares at a price they might never have imagined possible two years ago. To the physical uranium speculator, it has provided a double-, triple-, or higher-digit ‘paper return’ on an investment.

The point of rising metals prices was to encourage new production in the respective sector. In the case of molybdenum, the metal’s price is pretty much dictated by a relatively small number of western hemisphere copper producers, such as Phelps Dodge (PD), BHP Billiton (BHP), Teck Cominco (TCK) and Chilean-state-owned Codelco. And of course, the eastern hemisphere wild card: China. Molybdenum can be a copper mine’s byproduct, which is basically produced for little or no cost. Aside from a very small number of new near-term primary molybdenum producers, where is the excitement in this sector?

It’s not in the price. In a previous interview with Michael Magyar, USGS molybdenum specialist, he told us, “The price is now trending anywhere. It’s just drifting around $25/pound.” Another industry expert agreed the price is likely to stagnate at this new level for a while.

Despite the ranting of some, molybdenum oxide is unlikely to soon return to the May to July 2005 highs circa $40/pound. The price anomaly was just that – an industry caught off guard too quickly and producing too little. And which within a six-month period caught up with itself. Similar to those projects we have been investigating in the uranium sector, those hoping and praying for another supersonic price rise in molybdenum are those backing the more marginal mining projects. After all, if you don’t have economic grades, a parabolic price rise is just the right shade of lipstick for the pig some companies hope to pawn off on the unwary.

Last month, Seeking Alpha published an article we submitted, “In the Case of Uranium Stocks, Smaller May Be Better.” The problem impacting the larger uranium companies, such as Cameco Corp (CCJ) and ERA (Australia) are the legacy contracts whereupon utilities continue to get uranium for less than $30/pound, and in some cases for less than $20/pound. After ERA recently announced record fourth quarter U3O8 production, the Australian media highlighted the Down Under miner had mostly missed out on the record price of uranium because of those long-term contracts.

With molybdenum, the smaller projects may be better with regards to the opportunities investors must choose from. In early November in a two-part series, we interviewed William G. Cook, the North American representative for Derek Raphael & Company – currently the world’s largest molybdenum trader. He advised us, “I do not believe we will see any of the moly mega deposits developed in the foreseeable future.”

Cook warned of the considerable capital costs, reclamation liabilities and operating costs for the behemoth projects. Instead, he pointed to the smaller, higher grade primary molybdenum deposits. It’s where he sees the future of moly production as a complement to byproduct and Chinese production. His emphasis was on “higher” grade deposits. As with other industry experts we interviewed, it is those lower grade deposits which raise the experts’ eyebrows.

Where Does the Price Hysteria Come From?

Molybdenum strongly depends upon stainless steel production. According to the recently published U.S. Geological Survey, Mineral Commodities Summaries, producers of iron, steel and superalloys consumed 74 percent of the molybdenum mined in 2006. Movements in stainless steel demand can impact the moly price.

Before the holiday

With uranium, there is excitement because a very small number of new near-term producers recently signed contracts to sell future U3O8 production with escalating floor price protection, or simply sold production at/near the record uranium price. Obviously, they benefit, and so have their shareholders. For uranium companies hoping to produce within the next five to six years, higher prices are likely to attract deep-pocket joint venture partners to bring their mines into production, or to further their development activities. Or simply to raise more cash for their treasury by selling shares at a price they might never have imagined possible two years ago. To the physical uranium speculator, it has provided a double-, triple-, or higher-digit ‘paper return’ on an investment.

The point of rising metals prices was to encourage new production in the respective sector. In the case of molybdenum, the metal’s price is pretty much dictated by a relatively small number of western hemisphere copper producers, such as Phelps Dodge (PD), BHP Billiton (BHP), Teck Cominco (TCK) and Chilean-state-owned Codelco. And of course, the eastern hemisphere wild card: China. Molybdenum can be a copper mine’s byproduct, which is basically produced for little or no cost. Aside from a very small number of new near-term primary molybdenum producers, where is the excitement in this sector?

It’s not in the price. In a previous interview with Michael Magyar, USGS molybdenum specialist, he told us, “The price is now trending anywhere. It’s just drifting around $25/pound.” Another industry expert agreed the price is likely to stagnate at this new level for a while.

Despite the ranting of some, molybdenum oxide is unlikely to soon return to the May to July 2005 highs circa $40/pound. The price anomaly was just that – an industry caught off guard too quickly and producing too little. And which within a six-month period caught up with itself. Similar to those projects we have been investigating in the uranium sector, those hoping and praying for another supersonic price rise in molybdenum are those backing the more marginal mining projects. After all, if you don’t have economic grades, a parabolic price rise is just the right shade of lipstick for the pig some companies hope to pawn off on the unwary.

Last month, Seeking Alpha published an article we submitted, “In the Case of Uranium Stocks, Smaller May Be Better.” The problem impacting the larger uranium companies, such as Cameco Corp (CCJ) and ERA (Australia) are the legacy contracts whereupon utilities continue to get uranium for less than $30/pound, and in some cases for less than $20/pound. After ERA recently announced record fourth quarter U3O8 production, the Australian media highlighted the Down Under miner had mostly missed out on the record price of uranium because of those long-term contracts.

With molybdenum, the smaller projects may be better with regards to the opportunities investors must choose from. In early November in a two-part series, we interviewed William G. Cook, the North American representative for Derek Raphael & Company – currently the world’s largest molybdenum trader. He advised us, “I do not believe we will see any of the moly mega deposits developed in the foreseeable future.”

Cook warned of the considerable capital costs, reclamation liabilities and operating costs for the behemoth projects. Instead, he pointed to the smaller, higher grade primary molybdenum deposits. It’s where he sees the future of moly production as a complement to byproduct and Chinese production. His emphasis was on “higher” grade deposits. As with other industry experts we interviewed, it is those lower grade deposits which raise the experts’ eyebrows.

Where Does the Price Hysteria Come From?

Molybdenum strongly depends upon stainless steel production. According to the recently published U.S. Geological Survey, Mineral Commodities Summaries, producers of iron, steel and superalloys consumed 74 percent of the molybdenum mined in 2006. Movements in stainless steel demand can impact the moly price.

Before the holiday

It’s not in the price. In a previous interview with Michael Magyar, USGS molybdenum specialist, he told us, “The price is now trending anywhere. It’s just drifting around $25/pound.” Another industry expert agreed the price is likely to stagnate at this new level for a while.

Despite the ranting of some, molybdenum oxide is unlikely to soon return to the May to July 2005 highs circa $40/pound. The price anomaly was just that – an industry caught off guard too quickly and producing too little. And which within a six-month period caught up with itself. Similar to those projects we have been investigating in the uranium sector, those hoping and praying for another supersonic price rise in molybdenum are those backing the more marginal mining projects. After all, if you don’t have economic grades, a parabolic price rise is just the right shade of lipstick for the pig some companies hope to pawn off on the unwary.

Last month, Seeking Alpha published an article we submitted, “In the Case of Uranium Stocks, Smaller May Be Better.” The problem impacting the larger uranium companies, such as Cameco Corp (CCJ) and ERA (Australia) are the legacy contracts whereupon utilities continue to get uranium for less than $30/pound, and in some cases for less than $20/pound. After ERA recently announced record fourth quarter U3O8 production, the Australian media highlighted the Down Under miner had mostly missed out on the record price of uranium because of those long-term contracts.

With molybdenum, the smaller projects may be better with regards to the opportunities investors must choose from. In early November in a two-part series, we interviewed William G. Cook, the North American representative for Derek Raphael & Company – currently the world’s largest molybdenum trader. He advised us, “I do not believe we will see any of the moly mega deposits developed in the foreseeable future.”

Cook warned of the considerable capital costs, reclamation liabilities and operating costs for the behemoth projects. Instead, he pointed to the smaller, higher grade primary molybdenum deposits. It’s where he sees the future of moly production as a complement to byproduct and Chinese production. His emphasis was on “higher” grade deposits. As with other industry experts we interviewed, it is those lower grade deposits which raise the experts’ eyebrows.

Where Does the Price Hysteria Come From?

Molybdenum strongly depends upon stainless steel production. According to the recently published U.S. Geological Survey, Mineral Commodities Summaries, producers of iron, steel and superalloys consumed 74 percent of the molybdenum mined in 2006. Movements in stainless steel demand can impact the moly price.

Before the holiday

Last month, Seeking Alpha published an article we submitted, “In the Case of Uranium Stocks, Smaller May Be Better.” The problem impacting the larger uranium companies, such as Cameco Corp (CCJ) and ERA (Australia) are the legacy contracts whereupon utilities continue to get uranium for less than $30/pound, and in some cases for less than $20/pound. After ERA recently announced record fourth quarter U3O8 production, the Australian media highlighted the Down Under miner had mostly missed out on the record price of uranium because of those long-term contracts.

With molybdenum, the smaller projects may be better with regards to the opportunities investors must choose from. In early November in a two-part series, we interviewed William G. Cook, the North American representative for Derek Raphael & Company – currently the world’s largest molybdenum trader. He advised us, “I do not believe we will see any of the moly mega deposits developed in the foreseeable future.”

Cook warned of the considerable capital costs, reclamation liabilities and operating costs for the behemoth projects. Instead, he pointed to the smaller, higher grade primary molybdenum deposits. It’s where he sees the future of moly production as a complement to byproduct and Chinese production. His emphasis was on “higher” grade deposits. As with other industry experts we interviewed, it is those lower grade deposits which raise the experts’ eyebrows.

Where Does the Price Hysteria Come From?

Molybdenum strongly depends upon stainless steel production. According to the recently published U.S. Geological Survey, Mineral Commodities Summaries, producers of iron, steel and superalloys consumed 74 percent of the molybdenum mined in 2006. Movements in stainless steel demand can impact the moly price.

Before the holiday

Cook warned of the considerable capital costs, reclamation liabilities and operating costs for the behemoth projects. Instead, he pointed to the smaller, higher grade primary molybdenum deposits. It’s where he sees the future of moly production as a complement to byproduct and Chinese production. His emphasis was on “higher” grade deposits. As with other industry experts we interviewed, it is those lower grade deposits which raise the experts’ eyebrows.

Where Does the Price Hysteria Come From?

Molybdenum strongly depends upon stainless steel production. According to the recently published U.S. Geological Survey, Mineral Commodities Summaries, producers of iron, steel and superalloys consumed 74 percent of the molybdenum mined in 2006. Movements in stainless steel demand can impact the moly price.

Before the holidays, the highly respected MEPS consulting firm forecast higher movement in stainless steel prices. Increasing nickel prices on the London Metal Exchange (LME) during December were cited for the likely higher transaction values for stainless steel into the second quarter of this year.

As of this week, the nickel division of the world’s fourth largest copper miner, Swiss-based mining giant Xstrata (XSRAF), faces a mining strike in Sudbury, Ontario if the company doesn’t come to terms with a union of 1,000 workers, which voted on Tuesday to strike by the end of the month. In a similar type of strike nearly two years ago, copper production dropped by 9.6 percent in a quarter at a Falconbridge processing plant (Xstrata acquired Falconbridge since then).

On Thursday, nickel touched a record $36,050/tonne because of those strike concerns. About two-thirds of the world’s nickel mining is used to make stainless steel. Some analysts forecast stainless steel production to grow by 7.5 percent this year. Concern in the trading markets is the 87 percent drop in available nickel stocks in LME warehouses from a year ago. A bit more than one day’s global consumption is now warehoused by the LME. Clearly, a short squeeze is roiling the nickel market. And that impact could spread as a price panic perception moves into other alloys required by the stainless steel production markets.

But where does one find the substance with regards to molybdenum pricing? The market has tightened up in January because of China’s new export licensing system. That may just be a temporary blip in the trader’s food chain.

In a July 2005 article written for Colorado Central Magazine, author and former molybdenum miner Steve Voynick wrote, “… there is always concern about the economic validity of price spikes, those sudden, short-term jumps that stand apart from long-term price rises.” In his article, Voynick argued for the re-opening of the primary moly mine Climax, but he warned about price stability for this metal, “Historically, moly-market price spikes have shown little stability. Unlike long-term price trends, they are not based so much on true supply and demand as they are on fears of a moly shortage that spur speculative buying.”

During the last moly price boom, primary molybdenum mines produced 75 percent of the world’s supply. Because of the rise of copper prices, the majority of moly production comes as a byproduct of the world’s leading copper mines. Primary producers are now the swing producers, filling the supply gaps when there is increased demand for molybdenum.

We would imagine companies planning to bring molybdenum mines online by the end of this decade carefully study the price trend of copper as well as molybdenum. Australia’s Olympic Dam faces a similar dilemma with their massive uranium forecasts. Should the price of copper not sustain above a certain level, the low-grade uranium might not be economically mined. In this case, BHP could likely spend $5 billion in construction costs to expand the company’s uranium production.

Part of the fidgeting we’ve heard from the emerging moly companies about the metal’s price is not about how much higher molybdenum’s price will rise. Their twitches are accompanied by the anxiety over how economic their projects will remain should moly dive as it has in the past. Previous moly price rallies were sharp spikes followed by mercurial descents. Breathtaking on an historical chart, but not the slap-on-the-knee kind of laugh if one was mining during that era. Jobs were lost, mines closed and assets gobbled up by those less dependent upon the moly price.

Why should molybdenum’s price sustain this time, and why should this chart later look different from the one of the past three decades? Yes, yes, yes, of course we are in a commodity super cycle. But even during a secular bull market there are catastrophic plunges washing out the weaker management teams, the less-well-financed and those with more dubious projects.

Should Molybdenum Sustain at Current Levels?

Current developments in the molybdenum and energy markets may offer strong hope for many of the primary producers proposing or planning projects through 2010