By Leia Michele Toovey- Exclusive to Moly Investing News
Ferro-molybdenum and molybdic oxide continued their rally this past week, as frightening low stockpiles have traders worried that if the purchases accelerate, there simply won’t be enough moly to go around. As the economy went into a tailspin many producers shut production lines. Now, as the economy improves, buyers may find themselves squeezed in the lag time for production to come back to force.
Molybdenum prices have averaged slightly more than $9/lb so far this year but according to J.P. Morgan Securities analyst Michael Gambardella “expect moly prices to close in on $15/lb over the next several months and to average $18/lb in 2010.” The reason behind this projection is the fact that most Western molybdenum producers have little to no inventory, leaving traders scrambling given the recent increase in demand outside China.
Molybdenum averaged $30/lb in 2007 and 2008; however so far this year the metal has averaged $9.40 per lb. lower purchasing from the stainless steel has depressed moly prices in 2009. Supply has fallen in the face of reduced purchasing. Supply discipline is expected through 2010, and this will in turn drive moly prices higher. It is expected that by the time new moly projects will come online; it will be at least 2011.
Company News
China Molybdenum Co Ltd announced last Thursday that its first-half net profit is expected to fall significantly, due to the current low price of molybdenum. Selling prices for the company’s molybdenum products decreased significantly from January to June, compared with the same period last year.
Freeport-McMoRan Copper & Gold has also reported a rapid drop in Q2 earnings. On Tuesday, the company announced that revenue dropped to $3.68 billion, from $5.44 billion. Consolidated sales from its mines in the second quarter totaled 1.1 billion pounds of copper, 837,000 ounces of gold and 16 million pounds of molybdenum. That production compared with 942 million pounds of copper, 265,000 ounces of gold and 20 million pounds of molybdenum for the second quarter of 2008. The company expects third-quarter sales of about 910 million pounds of copper, 550,000 ounces of gold and 15 million pounds of molybdenum. The full-year estimate is for about 3.9 billion pounds of copper, 2.4 million ounces of gold and 56 million pounds of molybdenum.
Velocity Minerals’ shares soared more than 30 per cent on Tuesday, after the junior miner announced it has started work to develop its Cassiar Moly property in northern British Columbia. Velocity said initial work will consist of surface sampling and testing for mineralization, and computer modeling of the results. The first phase will be followed by a drilling program to begin to define the mineralization. “We are very pleased to finally be able to target this high grade mineralization on surface and in the adit 700 feet below,” Velocity Chairman Kenneth Holmes said in a release.”
He went on to add: “Previous owners of this property never drilled from the surface to the adit to test for the mineralization that we believe connects the two occurrences. Nor, to our knowledge, did they drill below the adit to what we believe could be the source,” Holmes said. The Vancouver-based exploration company’s shares were up 30.8 per cent, or 4 Canadian cents, at 17 Canadian cents on the Toronto Stock Exchange at midday on Tuesday. Velocity also owns the rights to the Mt. Haskin molybdenum property, located near the Cassiar Moly site.
