Post by
ryanacemanMMG12 on May 30, 2019 12:37pm
Why molybdenum could be the next big bet for investors
- Analysts see molybdenum hitting a supply deficit this year, pushing prices up - Cameo Industries Max Mine and Mill in B.C. hosts the richest molybdenum deposit in Canada - The mine is fully permitted and ready to go into production if molybdenum prices continue to increase Molybdenum is a silvery-white metal that is ductile and highly resistant to corrosion. The metal is an essential component in manufacturing high-strength steel alloys, and its most popular uses are in steel making, oil exploration, drilling and production. This metal is also used to make lighter and stronger steel and superalloys that have been in high demand in the aerospace and automotive sectors. It is estimated that 60 per cent of global molybdenum supply comes as a byproduct of copper smelting, with the remainder coming from primary molybdenum mines. The metals prices have risen 77% since year-end 2016 and 25% YTD on the strength of increasing stainless steel production and renewed capital investment by the oil and gas industry. Digging deeper, this recent upswing appears sustainable and could catalyze molybdenum towards price levels the market hasnt seen in years. Moreover, U.S.-based commodities research firm, CPM Group, projects sluggish supply growth and increased demand that is expected to keep the price of molybdenum going up well into 2021. If demand continues to increase as expected, molybdenum could experience a historical resurgence. Chinas dominance of the Molybdenum market China is the worlds largest producer and consumer of minor metals, accounting for 40 per cent of the world's molybdenum supply in 2018. However, the Chinese government has been tightening up its mining standards to meet more stringent environmental regulations, causing supply disruptions with numerous mines either being upgraded or closed. Most recently, the escalating trade war has caused copper prices to go into a tailspin, culminating in the London Metal Exchanges (LME) copper benchmark hitting a 4-month low on May 22, 2019. A reduction in copper production is expected to lead to further molybdenum price increases. As the largest consumer and producer of molybdenum, China essentially sets the global market direction for this mineral. With an escalating trade war, stricter environmental standards and supply shortages, we anticipate a resurgence of primary molybdenum mines in Canada." Nikolai Vassev, Strategic Advisor, Cameo Industries Corp. Highest grade Molybdenum mine in Canada With Chinese molybdenum supply decreasing as a result of stringent economic factors, the door has opened for producers elsewhere to become significant players as demand escalates. Cameo Industries Corp. (TSXV: CRU), a Canadian mineral exploration company, is ideally positioned to become a major producer and supplier of the transition metal. The company holds claim to one of only two primary molybdenum mines in Canada. The companys flagship Max Mine has the highest-grade molybdenum reserve in the country in its most recent year of operation, the project produced close to 400,000 pounds of molybdenum. The Max Mine was first explored by Newmont Exploration in the late 1970s and early 1980s, including development of an underground access adit, rock dump and roads. In 2010, mine production was suspended and was put into care and maintenance in late 2011 due to continued low molybdenum prices. Fortunately, the mine is turn-key and fully permitted with historical investments on the project exceeding $80 million. The Max property covers more than 5,200 hectares near the community of Trout Lake in southeastern British Columbia, and includes an underground molybdenum mine, crushing, milling and concentrating facilities, tailings storage facilities, mineral claims, mining leases, and licenses. Cameo has engaged JDS Energy and Mining Inc. to carry out a comprehensive assessment of the mine to determine the estimated 2019 replacement cost and to receive recommendations for required upgrades to prepare the mine for production. The insights from this report will allow the company to take the right steps towards transforming this asset into a world class mining operation, notes Vassev. The company expects to have the results of this assessment within the next few months. Bottom line Molybdenum was a consistent standout among metals during 2018 and is undergoing a remarkable resurgence. Due to overarching market conditions and economics, and the fact that the metal boasts significant industrial applications, it appears that trend is going to continue over the next 24 months. Cameo Industries is a very undervalued stock, and there are many near-term catalysts that can drive the stock higher, says Vassev. Molybdenum went on a meteoric rise in 2006 and took the previous mine operators market cap to well over $400 million. Cameo Industries is currently valued at $9 million and offers much upside. Anchored by their flagship Max Mine and Mill property, Cameo Industries is positioned to be a leading producer of molybdenum in Canada. If molybdenum prices continue to climb, and the Max Mine goes into production, investors should see a significant increase in Cameo Industries market cap.