^[1]

Consumers are wary about LME contracts, but investors are excited about the potential for hedge funds.

By Leia Michele Toovey- Exclusive to Moly Investing News

Molybdenum has been a strong performer in 2008; in fact it is only recently that the metal experienced a little downside. The dip in prices could be attributed to the negative market sentiment, as moly's fundamentals are still strong.  On the back of what has been record prices for moly in 2008, Jinduicheng Molybdenum Company, Asia's largest producer of the metal, announced that its nine month net revenue is up by 11 per cent in 2008, compared to the same time period in 2007.

The upcoming addition of moly contracts to LME trading has some consumers worried about the introduction of volatility to the market. LME trading kicks of in 2009 and certain consumers fear giving up the control they hold over the market; right now, all the negotiating power is solely held by consumers. Concerns about volatility have been reinforced by LME prices this year, particularly for copper ^[2] which hit a record high of US$8,940 a tone in July, and then slumped to less than half that peak value. Molybdenum prices have risen and fallen with changes in fundamentals over the past few years, sometimes quite sharply, but overall price volatility is relatively low.

Hedge funds eyeing the technological innovations using moly and potential profits have recently been looking for ways to get exposure to the market. Some have bought stocks of companies that produce minor metals; others have taken private equity stakes in new ventures with proven deposits. However, LME contracts would open up a whole new game for hedge funds, which make no permanent commitments to any market.  This is the root of concern for consumers, who have to live with the consequences of wild price swings. On the positive note, LME trading hopefully will provide the capability for forward sales contracts and price hedging of future mine production would stabilize cash flow for new projects or expansions to existing mines.

Company news

Adanac Molybdenum ^[3] (TSX:AUA) has released new information pertaining to capital and operating costs for its proposed Ruby Creek Mine. The updated costs in the bankable feasibility study propose a 23,000-t/d project carrying a $647-million capital cost and life-of-mine average operating costs of US$9.75/lb of molybdenum produced. These estimates are 8 per cent and 32 per cent more, respectively, than an earlier study completed in December 2007.Adanac also studied the alternative of building a 30,000-t/d operation. That option carries the same capital cost, but total site operating costs would be lower, US$7.63/lb of moly produced. The company based its numbers on a long-term molybdenum price of US$16.50/lb; with molybdenum currently selling for between US$33.50 and US$34.00 per pound, and stable at that rate, there is a high likelihood that Adanac will have higher profit margins.  Construction at the Ruby Creek mine is expected to begin in February 2009 with production to start Q4 2010. The measured and indicated resource has also been updated (at a 0.04 per cent Mo cutoff grade) to 212.9 million tonnes grading 0.064 per cent Mo plus proven and probable reserves of 157.7 million tonnes grading 0.058 per cent Mo.

Russian molybdenum miner SMR ^[4], controlled by billionaire Oleg Deripaska, has delayed a planned share offering in Hong Kong due to the global financial crisis. According the SMR's CEO Geoffrey Cowley, it is not rational to sell shares in a company with such promise in the current economic climate.  However, once there is greater understanding of the financial crisis as well as an end in site, the company will reconsider the listing. SMR had planned to raise roughly $200 million in Hong Kong by floating at least 25 percent of its shares.