RE: KidsAnd even if CUMO went on the market at current demand levels, price drop would only be temporary as CUMO is the lowest cost producer and as such other more expensive mines would have to cut back and price would rise again.
This is absolutely asinine. Now I dont know the Moly market and have no clue as to the size and scope of it. But strictly on an economics point of view what you just said is totally incorrect.
If CUMO went on the market and saturated it, the price would drop, correct. And if CUMO was the lowest cost producer they would be able to continue to reap profits at the lower prices, but there would be no basis for price to come back to current levels because then you have Current Production + CUMO on the supply end. No one would be out of the moly business. More likely scenario, assuming that CUMO is too big for the moly market would be the price would drop to the point that enough supply would be taken off to meet production.
Therefore, you would have a lower price, slightly higher demand thanks to the lower price and a new supply demand equilibrium.
Good news for MSQ is that it will continue churning profits at various price points. If CUMO is too big, it would be the death nail to some of the higher cost producing moly companies as they are the ones that will have to exit before the price would stabilize.
Now the big question is what the lowest margin on Moly. For example, if the highest cost producer is $9, well if moly slipped from 15 to 12, they might keep production running until prices fall to $10.
Now this is all speculation as I dont know how big this market is, how much it will grow by and how much demand would increase for every dollar the price of moly decreases by.
BUT there would be no way that the price would stay flat, if CUMO is too big for the market, prices would drop to reach a new equilibrium and the only way $15 would come back is if demand increased equal to CUMO production and no other production comes online.