Sign of the times, molybdenum ETF liquidates

The Sprott Moybdenum fund was a milestone.  Now, the fund is liquidating.

The Sprott Moybdenum fund was a milestone. Now, the ETF is liquidating.

By Leia Michele Toovey- Exclusive to Moly Investing News

In April 2007, when the Sprott molybdenum fund was created, the minor metal was on a fast track.

When the fund was created the metal was trading consistently at US$25 per lb; after the ETF was up and running moly cruised to US $ 40 per lb. Eric Sprott, a Canadian commodities expert and creator of the fund, was banking on even higher prices.

Despite the ETF’s initial gains, the price was swept away in the commodity sell-off last fall, plunging by about 27 per cent to $23.25 a pound during October alone, and averaging only $9.63 a pound last month. Sprott Molybdenum, which raised-$189-million in its IPO, said its net asset value fell to $1.75 a share, with $1.51 of that held in cash and short term securities, net of liabilities. Last week shares on the TSX traded as low as $1.39.

But, was the move taken hastily?

In the first week of 2009, the entire base metals a got a little boost. The reason?  The optimism surrounding the incoming American administration, and reports that China was going to embark on stockpiling valuable metals. This week Platt’s metals confirmed that a handful of steelmakers in Asia appeared to have started purchasing molybdenum oxide and ferromolybdenum in the first week of January 2009, in anticipation of higher prices. Steelmakers are nervous that the spot moly supply will tighten as miners announce output cuts. These traders also said that the market has not hit the bottom yet, due to a few aggressive sellers who appear to have large stocks. They added that it “is not bottoming out; it is now hitting what we hope to be the bottom.”

Company news

Adanac Molybdenum Corporation (TSX:AUA) announced that it had obtained creditor protection, granted by the Supreme Court of British Columbia. The company’s board of directors authorised the company to take this action as the best alternative for the long-term interests of the Company, its employees, creditors and other stakeholders.  Adanac has sought protection under the CCAA as its current cash in hand would not allow it to meet its financial obligations. The protection will prevent creditors from enforcing any rights against the Company and will afford the Company the opportunity to restructure its affairs. Protection has been afforded to the company for a 28 day period, expiring January 16, 2009 unless extended. If by that date Adanac has not filed a Plan of Arrangement or obtained an extension of the CCAA protection, creditors and others will no longer be stayed from enforcing their rights. While under CCAA protection Adanac’s management remains responsible for the day-to-day operations of the Company, under the supervision of KPMG Inc.

Thompson Creek Metals (TSX:TCM) has received a $1 million payment by US Energy Corporation.  The payment is pursuant to the Exploration, Development and Mine Operating Agreement signed in August 2008. “Thompson Creek is one of the world’s largest publicly traded, pure molybdenum producers and we are pleased with their involvement and oversight of the project,” stated Mark Larsen, President of U.S. Energy Corp. “We continue to work closely with them on the Mt. Emmons Project and intend to provide further updates in the future as they continue their review and planning process and additional information becomes available,” he added.

Avanti Mining has reported encouraging drilling results from its historic Kitsault molybdenum property, in British Columbia, and plans to complete an updated resource study on the project during the first quarter of this year. Of 30 holes that were assayed and compiled, 26 encountered promising mineralization.  Highlights from the results include hole K08-13, which contained 292.6 meters grading 0.103 per cent molybdenum, and hole K08-20, which contained 318 m grading 0.101 per cent molybdenum. Avanti Chief Eexecutive Officer Craig Nelsen said that the results confirmed historical data on the property, which produced 30-million pounds of molybdenum until it was closed in 1982, because of low metal prices. The company’s next step is to complete a more quantitative assessment of results and an updated resource study in the first quarter of 2009. The updated resource will then form the basis of a preliminary feasibility study.