The race is on! The prices of molybdenum has increased ten-fold since 2003. The principal driving force behind this incredible run-up in price is two-fold. Increased demand from steel manufacturers especially those concerned with high-pressure pipes associated with oil production and secondly, from inelastic supply.

Molybdenum is primarily produced as a by-product of copper mining. As such, the link between supply and demand was somewhat stretched because of the long start-up time to construct a mine. Prices for the metal have exploded and companies were unable to adjust their molybdenum production since they were dependent upon the copper market.

Companies are scrambling to be able to take advantage of the high price of molybdenum. Mining giant Phelps Dodge has only one principal molybdenum mine and Golden Phoenix Minerals has recently started a small 100 tonne per day mill for a high-grade molybdenum mine in Nevada. Taseko Minies produces some molybdenum as a by-product on its Gibraltar property in BC. Roxmark Mines Limited plans on beginning to mine molybdenum before the end of 2006 and Idaho General Mines expected to commence production in 2009.

Adanac has completed its feasibility study and is planning to begin construction next month. Production is to commence on July 2007. Adanac has a complete timeline posted on its website showing all of the important milestones. To date, despite the aggressiveness of the development schedule they have met all of them.

Adanac’s flagship property is the Ruby Creek project located near Atlin, BC. The mine is to be able to mine and mill 20,000 tonnes per day for 20+ years. Proven & Probable reserves stand at 38.9 and 73.5 million tonnes respectively using a Mo cutoff of at 0.02%.

The average operating costs are estimated to be US$5.87/lb Mo for the first five years that would give a payback of capital costs of only 2.9 years. A large portion of this cost is associated with the use of diesel generators providing power for the initial years.

Adanac has a market capitalization of only $100.6 million (62.1 million shares fully diluted) that is far below the value of the deposit, which using today’s market price of US$26.25/lb would be valued at US$4.29 billion for the Proven & Probable. If we throw in the Measured & Indicated that number rises to US14.5 billion.

With the recent correction in base metal prices, the stock price of AUA-X has dropped from $2.70 to $1.62.

goldbull
Website: http://dollardaze.blogspot.com/

Dollar daze, you may want to check out Golden Phoenix, (GPXM).  GPXM is an exploration company with the richest assay results in the world and sitting on a mountain of Molybdenum.  They plan to start mining in September.

I've looked at Golden Phoenix but found their website to be severely lacking. It mentions a high-grade Mo vein but there are no details regarding it's size. It seems to me that these guys just got their 100tpd mill and are starting it up. I believe that they are in limited production now.

Till I see some actual numbers I'll just keep watching it but nothing more.