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RI: Are there any specific base metals that you feel
are under priced?
R
esource Intelligence: In 2009, there were enor- Annual data, projected through 2012
mous jumps in the prices of working metals. Million lbs. Million lbs.
Lead was up 135%, copper 134%, and so 660 660
on. Are we going to continue to see this trend? Expected Projected
600 Pre-Recession 600
Production
Catherine Virga: We are forecasting that we are going 540 540
Actual
to continue to see strength in industrial metals in 480 480
2010. In 2009, there was a rather linear approach 420 420
to the recovery and that should be expected, given
360 360
base metals historic trends during an economic
300 Primary 300
downturn.
240 240
For 2010 I think it’s going to be a more inter-
180 180
esting year for your savvy investor, because there
120 By-product 120
are going to be periods of profit taking that are
going to lead to buying opportunities for other 60 60
investors. It won’t be as attractive for your long- 0 0
2001 2002 2003 2004 2005 2006 2007 2008 2009p 2010 2011 2012
18 See page 96 for Disclosure, Disclaimers & Info on Mineral Resource and Reserves
...The Case For Molybdenum
ducers? Now that we’ve had this rise in base metals prices,
moly that are used in the energy industry, so as we
we are seeing there is potentially more financing
see oil prices tick up we will continue to see the
CV: For molybdenum historically about 60% of out there for base metal companies. However,
increased demand for infrastructure that typically
the production is from byproduct producers. That base metals projects tend to have much higher ex-
contains molybdenum bearing material.
is primarily copper producers that produce mo- penditure cost projects, so it’s primarily the lower
RI: What about the use of molybdenum in nuclear lybdenum as a byproduct and the remaining 40% cost projects that are going to make it on line.
waste repositories? is primary producers. The latter are companies
like Thompson Creek and Freeport-McMoRan. We’re also seeing some mine expansion plans go-
CV: This is something that is going to continue So there are opportunities to play on the equity ing forward, which could be companies that al-
to present growth opportunities for molyb- side and primary producers have full exposure to ready have existing cash flows.
denum. Molybdenum can be used in the steels the molybdenum prices.
RI: Will there be
that are used in
any significant new
the waste facilities.
316 stainless steel Event-Driven Molybdenum Prices mines coming on,
or mothball mines
contains molyb-
Platts Mean Molybdenum Prices coming into the
denum and that
market that are go-
is one of the most Monthly, Through Dec. 2009
China imposes tighter ing to all of a sud-
common steels export quotas & a
US$/Lb. US$/Lb. den take the air out
out there. Other decline in by-product
output of prices?
specialty steels will
Mine closures in the
potentially contain Huludao area in CV: There have been
molybdenum and China projects that were
that would be of Fiscal stimulus not attractive 20
course, very bullish Temporary mine closure,
fuels restocking years ago that are
for molybdenum & China
increased demand from
becomes a net more positive to-
demand prospects. Chinese steel producers &
importer of day. So, there are
delay in Chinese exports Sharp increase in steel demand
molybdenum. opportunities for
RI: You’ve said that & insufficient roasting capacity De-stocking in Followed by
the steel market weak demand some larger scale
the price of moly
& high grading and a seasonal projects to come on
is event driven. A surge in copper mine production by-product slump in steel
and satiate some of
Could you elabor- producers production.
the demand needs.
ate on that?
Forced inventory selling Again, this could
& weak steel production be two to three
CV: Well, molyb-
denum is actually a 1992 1994 1996 1998 2000 2002 2004 2006 2008 years out from
very small market. where we are right
We are seeing a shift in the market fundamen-
Compared with nickel, which is also primarily now. Industrial metals and base metal projects are
tals in the sense that we’re going to have 50% of
used in the steel market, moly is roughly 1/6 the very capital intensive. We can have projects that
the market produced from byproduct and 50%
size, with only 422 million pounds mined last exceed $1 billion and require a significant amount
produced from primary molybdenum players. So
year. As a result, particular events on the supply of work to even receive the project financing to
increased market share for primary producers as
and demand side can have a significant impact. move forward on these projects. So again, it’s
we become more dependent on their supply, but
We have seen from the industrialization and build these smaller expansions that are expected in the
you have the opportunity for full exposure to the
out of emerging markets, particularly in China, a next two to three years. The larger projects might
commodity prices when you do invest in these
real boost in molybdenum prices and that is be- start to trickle in by 2014 or 2013 possibly.
primary operations.
cause these markets command such a significant
RI: Dr. Copper had a huge gain in 2009. Some
share of the molybdenum market. In the past we Copper is a little bit different. There are such di-
people are saying $4 per pound for the coming
have seen particular changes in Chinese policy versified players. There are juniors that primarily
year. Do you agree?
that have been market drivers for molybdenum rely on copper fundamentals and prices, but that
prices. Last year China produced about 38% of is a market that you are able to have some physical CV: We are bullish on the copper market because
the world’s molybdenum supply, so when China exposure through futures or ETFs. These are not there are strong fundamentals, particularly with
makes changes to the supply and demand of mo- as popular for base metals as they are for precious supply. We are expected to be approaching a very
lybdenum it’s going to have a significant impact metals, but they do afford some opportunity to narrow balance between supply and demand. We
on prices. have retail exposure into base metals. see a very small surplus in 2010, but I do know
some analysts are forecasting a deficit already oc-
RI: So you’re really calling for moly to continue go- RI: Are you witnessing new mines coming into
curring. We are starting to see that demand is
ing north? production?
picking up in developed economies, but supply
CV: We are forecasting continued strength in mo- CV: We’ve already seen investment flowing into can’t respond quite the same. There is really a lag
lybdenum prices. We have the market moving precious metal projects and that should eventu- in the supply response. So in that case we are go-
into a tighter surplus this year and then a multiple ally be the case for base metals, as well, but new ing to see inventory drawdowns and some pres-
year deficit starting in 2011. It could be quite in- project financing for base metal companies is still sure on supplies in both scrap and primary supply.
teresting for the molybdenum market. fairly limited. There are a couple of projects that We are looking to have a firmer price in 2010, not
will be trickling out, but a lot of this has been quite $4, but we do think that prices could get up
RI: Would you be buying shares in juniors or pro- to about $3.30 for the year on the annual average.
pushed out several years.
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