Companies plot new strategies in the wake of moly's price drop
By Leia Michele Toovey- Exclusive to Moly Investing News
The market volatility over the past two weeks has finally hit moly. The alloying metal has held its own for months, while most of the other metals declined rapidly as news about the downturn in the economy permeated the markets. Just recently, molybdenum oxide and ferromolybdenum markets were driven down as poor market sentiment and the global financial crisis won out over strong moly fundamentals.
Trading of the metal has dropped off; and analysts predict that many are ‘waiting it out”. Traders offered different accounts of what the metal was actually selling for with one trader in Europe proclaiming that Chinese material was being offered in the US $70 to US $71 per kilogram range. However, several sources said that Chinese suppliers had become extremely aggressive sellers in the wake of the financial crisis with prices as low as US $62 per kilogram FOB.
The Platts assessment for European ferromolybdenum fell by 70 per cent to $69.50 to $71.50 per kilogram, down from $73 to $74.50 a week earlier. Molybdenum oxide prices also fell this week, with the $30 per pound mark being breached for the first time this year. Prices declined the most in Europe and were relatively stable in the US.
There was a slew of news over the past weeks pertaining to mining companies changing the blueprints of their business plans in the face of dropping moly prices. Nevada-based Golden Phoenix Minerals Inc. (GPXMOB), a company focused on the exploration and development of strategic metals announced the initiation of a comprehensive cost-cutting program. The program is designed to conserve operating cash reserves in the face of the current financial upheavals and involves measures including: trimming the corporate staff, rescheduling non-essential projects, and voluntary deferral of salaries. Production at the company’s Ashdown Molybdenum Mine will not be affected by the measures.
Avanti Mining Corp. (CNQ:AVT) has obtained a secured bridge loan in the amount of $20 million from Resource Capital Fund for the purpose of acquiring a 100 per cent direct interest in the mineral tenures comprising the former Kitsault molybdenum mine. The terms of the loan include a 15 per cent interest charged per annum, and if the loan has not been paid by July 15 2009 it will automatically become a convertible debenture with a maturity date of June 15 2012.
Avanti issued three million shares to Resource Capital Fund as a facility fee. An additional three million shares will be issued if the loan is not repaid in 180 days from closing. Avanti will have the right to prepay the loan in whole or in part at any time without penalty. As security for the loan, Avanti will grant to Resource Capital Fund a security interest in the Kitsault Property and a pledge of securities in a subsidiary and guarantees.
A new discovery
A large field containing rich deposits of rare molybdenum has been found in south China’s island province of Hainan. The proven reserves of the mine in Baoting County are estimated at 254,000 tonnes worth an estimated US $14.6 billion. Hainan Jinzhoucheng Molybdenum Co. Ltd, which received the exploration rights of the mine last year, is expected to invest 1.5 billion Yuan to build it into a top five molybdenum company in China with an annual production capacity of 10 million tonnes. The mine is expected to produce 7,000 tonnes of molybdenum annually with sales revenue of 1.3 billion Yuan.
An update from The London Metal Exchange
The London Metal Exchange has scheduled a listing of molybdenum in to July 2009 as a trial case, with substantial dealings of molybdenum oxide to commence in October 2009. The item to be listed on LME is molybdenum oxide, containing 59.5 per cent of Mo with allowance of 2.5 per cent of up-and-down and 0.5 per cent of Copper, and the unit to deal is 2 tonnes. The terms for dealing are for cash on delivery, for three month futures and for fifteen month futures.
