Adanac Molybdenum CorporationThe race is on! The price of molybdenum has increased ten-fold since 2003. The principal driving forces behind this incredible run-up in price are: (1) increased demand from steel manufacturers especially those concerned with high-pressure pipes associated with oil production, (2) used in many lubricants, (3) nuclear reactors require molybdenum due to the high temperatures at which they operate, and (4) lastly from inelastic supply.
Molybdenum is primarily produced as a by-product of copper mining. As such, the link between supply and demand was somewhat stretched because of the long start-up time to construct a mine. Prices for the metal have exploded and companies were unable to adjust their molybdenum production since they were dependent upon the copper market.
Companies are scrambling to be able to take advantage of the high price of molybdenum. Mining giant Phelps Dodge has only one principal molybdenum mine and Golden Phoenix Minerals has recently started a small 100 tonne per day mill for a high-grade molybdenum mine in Nevada. Roxmark Mines Limited plans on beginning to mine molybdenum before the end of 2006 and Idaho General Mines expected to commence production in 2009. Blue Pearl Mining recently completed a successful bid for Thompson Creek Mines, a private molybdenum producing company in September and its stock doubled in the process.
Adanac Molybdenum Corporation has completed its bankable feasibility study and is planning to begin construction next May. Production is to commence on Oct 2008. Adanac has a complete timeline posted on its website showing all of the important milestones.
Adanac's flagship property is the Ruby Creek project located near Atlin, BC. The mine is to be able to mine and mill 20,000 tonnes per day for 20+ years. Proven & Probable reserves stand at 38.9 million tonnes at 0.077% Mo and 73.5 million tonnes at 0.06% Mo respectively. Recent angled drill results reported in August have indicated encouraging results as they sucggest that vertical veining was not captured in the earlier vertical drill tests.
The average operating costs are estimated to be US$5.87/lb Mo for the first five years that would give a payback of capital costs of only 2.9 years. A large portion of this cost is associated with the use of diesel generators providing power for the initial years.
Adanac has a market capitalization of only CDN$76.4 million (62.1 million shares fully diluted) that is far below the value of the deposit, which using today's market price of US$26.25/lb would be valued at US$4.29 billion!
Adanac is currently working on acquiring the necessary permits required to begin construction. A recent document (dated Oct 18, 2006) from the Department of Fisheries (DFO) outlines some environmental concerns that face the Ruby Creek project. The primary concerns outlined by the DFO are sediment and erosion issues, water demands of the mill and its effect on lower Ruby Creek, and details of the proposed Arctic grayling relocation from upper Ruby Creek to Surprise Lake. Many of Adanac's proposals described within the report were supported by the DFO.
Additional Resources:
Molybdenum and More
Moving Toward Molybdenum Production
Revisiting Miss Moly
Molybdenum: Pipe Dreams or Reality
Molybdenum and Green Economics
Molybdenum, the '21st Century & Beyond' Metal
Commentary by Secular Bull
eResearch Profile on Adanac Moly Corp
Roskill Consulting Group - Molybdenum
SmartStox Online Talkshow Interview
Good Golly, Miss Moly
Disclaimer: The opinions expressed above are not intended to be taken as investment advice. It is to be taken as opinion only and I encourage you to complete your own due diligence when making an investment decision. I personally own shares of AUA.