RE: From Yahoo BoardPart 2
3. What would the ideal scenerio for financing be for the remainder of construction cost for the Mt. Hope project? nd would you consider the issuance of more stock the last case scenerio?
Stock issuance, particularly at these prices, is not our focus. We remain focused on building the balance sheet by attracting debt financing, which I discussed above. In an ideal world, we would target a minimum of 50% of Mt. Hope’s construction costs coming from debt and the rest from cash/equity, much of which we have already raised and spent.
4. Finally, with the introduction of more moly mines coming online worldwide in the next few years, is (GMO) still relatively confident in the $15.00 lb. price projection?
What moly mines are you seeing coming online? In fact, we see almost none, which is one of the attractive features of the Moly market. Some moly projects were shelved during the most recent price decline (FCX’s Climax and TC’s Davidson) and others went bankrupt (AUA’s Ruby Creek). Still others are wildly uneconomic (MOL’s Spinifex Ridge has production costs in excess of US$15/lb) and many others are very early stage (CMS’s Creston, AVT’s Kitsault, MSQ’s CuMo, TC’s Mt. Emmons). TC’s Endako expansion fights declining grades as much as anything, bringing only about 4M lbs per year in new production, but is completely off-set by a huge drop in mined grades at TC’s Thompson Creek mine beginning in 2012.
We just don’t see a ton of new production coming from primary producers. We feel that Climax will come on at some point, but other than GMO’s production, we don’t see a lot of incremental production that is economically viable and relatively near-term.
Further, our macro thesis is that by-production production is on the decline. One of our slides in our IR presentation illustrates this feature of the Copper market. New copper mines in Africa produce Cobalt as a by-product, not Moly. Large copper mines in the Americas are all old and on the decline. Thus, the impact that by-product mining will have on the molybdenum market is anticipated to decline over time requiring more supply from the primary mines I have listed above.
From the demand side, clearly moly demand suffered last year with the complete collapse of the steel industry. However, global steel production is essentially at pre-crash levels, primarily driven by continued rapid expansion in the developing world (Brazil, China, India). CPM Group, a commodity economics group out of NYC that we utilize, forecasts Moly demand rebounding to 6% in 2010 and averaging 5.5% CAGR between 2010 and 2018. This is driven by two factors: 1) that emerging economies need lots of steel; and 2) that steel producers everywhere are finding moly more useful in nearly every application as they strive to develop stronger, lighter, more corrosive resistant steels. These two factors should compound to drive demand growth above that of normal steel and above that of GDP growth.
Thanks again..
Good luck