MSQ hoax explained for new investorsHave you ever wondered why MSQ claims 16 billion net present value while other as big projects can barely come up with billion or two? Too good to be true? Yes.
Let's compare MSQ with GMO's Mt Hope project :
Mt Hope NPV is $1 billion when using $15/lb Molybdenum price. IRR (internal rate of return) is 24.7%.
At $10/lb Mo price NPV is $83 million and IRR 11.3%.
Mt Hope resource is 1 billion tonnes at 0.068% Mo.
With similar Molybdenum equivaled grade MSQ has roughly 1.75 Bn tonnes. Only 75% more than Mt.Hope. Rest is low grade and does not contribute much to economic value.
Mt. Hope has superior deposit geometry compared to Cumo. The highest grades are near surface while MSQ has them at the bottom. Is Cumo that much better deposit? The answer is NO. It's worse. MSQ is doing everything to mislead you fellow investor:
1. MSQ base case NPV is using $16/lb molybdenum oxide price. That is not the same as molybdenum price. Moly oxide contains only 66.6% of pure molybdenum. Infact MSQ is using outrageous $24/lb Molybdenum price for their base case.
2. GMO is using conservative 10% discount for their NPV. MSQ is using outrageous low (not bankable for moly deposit) discount rate of 5%.
Simple as that. GMO has more robust project, while MSQ has nerve to show 16 x the NPV.
Most of the banks forecast $10-13/lb long term Mo price. And most reputable companies base their studies on that price range as well. Let's look how MSQ manages at $11.25/lb Mo price, which happens to be their low price case. (11.25/lb Mo = 7.5/lb Mo oxide):
For production rates of 50000 tpd, 100000 tpd, 150000 tpd, 200000 tpd
Internal Rate of Returns are 3% 9% 12% 15%
At 11.25/lb Mo price MSQ needs to come up with $3.4 BILLION capex and still the project produces only 15% pre-tax IRR. That's not enough to be a minor metal mine. Cumo is not unique or robust project. Instead it's large but mediocre.
There's plenty of proof that MSQ is the only company mixing up Molybdenum and Molybdenum oxide prices. (molybdenum oxide is just the substance changing hands, valued by it's contained molybdenum)
This reads in LME molybdenum contract specification:
"Lot size of 6 tonnes of molybdenum delivered in 10 tonnes of roasted molybdenum concentrates (RMC)
Traded in $US per tonne (Molybdenum: $US per tonne of molybdenum contained) "
Lot size 6 tonnes of Mo delivered in 10 tonnes of moly oxide. Price is for tonne Molybdenum like you already admitted. Latest price is $40000/tonne. 40000/2200 = $18.18/lb Molybdenum. Moly oxide price is $12.12/lb, since pound of oxide contains only 0.66 pounds of pure Mo.
https://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=27954480&l=0&r=0&s=MSQ&t=list
https://www.stockhouse.com/Bullboards/MessageDetail.aspx?s=MSQ&t=list&m=27963039&l=0&pd=0&r=0
And Naturally all the producing moly companies financials concurr. TCM among others:
Below are numbers from TCMs Q3 financials. Revenues match the price of Molybdenum not Molybdenum oxide. (In that case the revenues would have been $168 million instead of $111.8. I.e. 50% higher.
https://www.thompsoncreekmetals.com/i/pdf/2009_Q3_MDA.pdf
Molybdenum production from mines (000’s lb) 6,221
Cash cost ($/lb produced) $ 5.67
Thompson Creek Mine and Endako Mine production 7,445
Product purchased, processed and resold 1,324
Total 8,769
Average realized price ($/lb) $ 12.75
Molybdenum sales $ 111.8
produced pounds of Mo x price per Mo = sales = $111.8.
https://www.stockhouse.com/Bullboards/MessageDetail.aspx?s=MSQ&t=list&m=27968518&l=0&pd=0&r=0
https://www.stockhouse.com/Bullboards/MessageDetail.aspx?s=MSQ&t=LIST&m=27957030&l=0&pd=0&r=0
Ausenco can't be held liable of this. MSQ decided they want to use X price per moly oxide. Ausenco dis as their client requested. They also presented scenarios with two other price assumptions, but did not say what's their take on current spot prices.
Some links about Mo prices:
https://www.metal-pages.com/metalprices/molybdenum/
https://www.texreport.co.jp/xenglish/eng-genryou/201001/201001191035Tue-4.html
And finally a QA session with biotite, who will anyways answer to this post.
https://www.stockhouse.com/Bullboards/MessageDetail.aspx?s=MSQ&t=list&m=27979703&l=0&pd=0&r=0
There usually is lots of noise generated on the board after this. If you still are of any doubt about moly pricing, just pick up the phone and call LME or TCM they will readily answer your questions. It will save you few bucks.