By David Bond, Editor
The Silver Valley Mining Journal
With all the internet hype, gold show gossip and chat room chatter about molybdenum, it was inevitable that racket about this miracle base metal would seep up through the fissures of the Osburn Fault and reach the ears of even this lowly silver bug. Moly makes a pretty good case for itself: it's up more than eighteen-fold in price (from $2 to $38.50/lb) over the past three years and this year could achieve a dollar trade volume approaching one-third of that of the entire world copper market.
Moly makes paint, lubricants and high grades of steel possible. Moly is a pollution disinfectant in coal plant scrubbers the way silver is a bacteria disinfectant. In such roles moly is pretty much irreplaceable, and, like silver, it constitutes such a small component of finished-product value that the from-the-mine price of molybdenum doesn't have much of an impact on the retail price of the product, or, hence, its demand. Even at its current stellar $40-a-pound price, moly constitutes only about 3 percent of the cost of an elbow of finished high-grade stainless. Another aspect of moly similar to silver: It's mostly a by-product of other base-metal mining - copper mining byproduct accounts for about 65 percent of all new molybdenum. It seems pure moly mines, like primary silver mines, are rare indeed. The beauty of the property we are about to discuss is that it doesn't produce anything except moly. There are no byproducts, no smelter penalties.
Moly has one huge one-up on silver and gold: It trades in a cash market and cannot be manipulated by the short ghosts of Darth Vader, Walter Frankland and Alan Brownspan, or the gold and silver cartels. A pretend futures play on moly would be to forecast the number of kilometers of oil and gas pipeline slated to be built in the near future. Last time moly showed a pulse was during construction of the Trans-Alaska Pipeline in the late 1970s, when it got up to $10 USD/lb in current (1998) dollars. Pipelines use a lot of moly. That new Sino Kazakhstan oil line under way now will gobble up between 70 and 80 million pounds of moly before it's completed in 2011. That right there is a year's worth of planet-wide moly production.
No rational person expects the moly boom to continue past its current dizzying heights, or even to hold a steady course at these levels. A "collapse" back to $10/lb or so is foreseeable because there's not a huge shortage of moly underground; unlike silver, it's not buried deep and it's not getting scarce. The problem is, no new moly production has been brought on-line, or is slated to come on-line, in the near-term. Yet (here we go with the silver comparison again) countries like China recently have become net importers of the stuff to meet internal demand, instead of net exporters to the more "advanced" civilizations. Car-makers are using more moly to step on the steel they're already using to lighten the weight of the finished product and its use in jet turbines (see neo-con military industrial complex buildup) is on the rise. Moly is in a solid fundamental situation. It can crater and still land on its feet. Tne New World Order hath thus decreed.
Turns out one of our Silver Valley guys-made-good, Robert Russell, former super at Sunshine and at Bunker Hill (back in the honest, pre-Texan days - thankfully these mines are in honest hands again but there were a few nasty decades) has roped together a serious moly prospect. It's not one of those two holer speculative plays being hyped by the pump-and-dumpers. This baby is drilled out and blocked out. Russell's Idaho General Mines' (IGMI: OB) property a few klicks from Eureka, Nevada, will be the next world-class moly mine, and it's a mere four years out from production. Russell makes his residence nowadays in Spokane, but still maintains the family home near the post office off South Division Street in Kellogg, which in Sleepless-ville puts him points ahead of the competition. He has the ruddy face of a Jim Striker and the steely eyes and craggy voice of a Harry Magnuson. He is quick to get a joke; not a guy you'd want to mess with, unless you'd whipped Lovon Fauset in a bar brawl.
IGMI obtained a long-term lease on the Mount Hope property 23 miles northeast of Eureka, Nevada in November 2004, inheriting US $30 million of exploration data generated by previous lease-holder Exxon from 226,000 feet of diamond drilling in 35 holes Exxon performed in the 1990s. Idaho General anticipates total moly production of 700 million pounds from open-cast operations commencing 4 years hence; two years for permitting and two years for mine and mill production, Russell said in an interview this week over lunch in Coeur d'Alene.
The company has completed its extensive Mount Hope feasibility study and will begin the permitting process for placing a 40,000 metric tonne of ore per day open pit molybdenum mine, concentrator and related processing facilities into production. The Mount Hope project, once financing is obtained and construction completed, will have an estimated 30 year life. It is planned that a total of 700 million pounds of molybdenum will be recovered over the 30 year mine life.
During the first 20 years of operation Idaho General will mine and concentrate 300 million metric tonnes (330 million short tons) of ore at a grade of 0.098 % molybdenum. Production of technical grade molybdenum oxide is expected to recover 571 million pounds of contained molybdenum over the initial 20 year period. During years 21 to 30 an additional 134 million tonnes (147 million short tons) of stockpiled material at a grade of 0.048 % molybdenum will be processed, producing an additional 130 million pounds of molybdenum. In total the Mount Hope Deposit will produce over 700 million pounds of molybdenum during its productive life - twice the world's current annual consumption.
Since the lease, IGMI located more than 400 adjoining claims. All that Exxon data amounts to grand larceny on Robert's part - you can't buy that kind of info for what Idaho General paid for it. The company has been in Russell family control for nearly a century; last year they reorganized, did a backwards split, and got serious.
A slice of Bob Russell's resume is in order. Let me plagiarize from the company's reports:
Mr. Russell has been a director of Idaho General Mines, Inc. since 1967 and has served as the President from 1979 to 1980 and since 1984. With over 45 years of experience in high production underground and open pit mines, Mr. Russell has managed world class operations on three continents for the following companies: ASARCO, Gulf Resources-Bunker Hill, Sunshine Mining, Exxon, Freeport McMoRan, and Zambia Consolidated Copper. As General Manager for the Nchanga Division of Zambia Consolidated Copper from 1995-1998, Mr. Russell was responsible for all functions of two operating mines and several metallurgical facilities, which produced over 150,000 tons of copper and 12% of world cobalt production per year with 8,700 employees. From 1988 to 1995, Mr. Russell served as Vice President of Mining for Freeport McMoRan and acted as the General Manager of Freeport's Indonesian operations, which has become the largest gold mine in the world. Mr. Russell directed the building of over $1.5 billion in capital assets at Freeport. While working for ASARCO, Mr. Russell was a senior exploration geologist in British Columbia, Yukon, Alaska, and the western United States. In addition to operational work, Mr. Russell has several inventions relative to mining and processing to his credit. Mr. Russell is a director of Mines Management, Inc. (And we do like the Dobbs guys.)
Had enough? There's more . . .
Robert's son Matt Russell, another IGMI principal, ain't no slouch, either: Matt has 12 years of project management experience in the mining sector and has managed the following: mine feasibility studies, mine plant design, development of a new hydrometallurgical process, coal preparation plant construction, and design and construction of mobile and overland conveyors. Matt's work with the design and manufacture of heap leach stacking systems from 1994-1998 for El Abra, Radimiro Tomich, Chuquicamata, and Escondida in Chile helped revolutionize copper and gold recovery in heap leaching. In addition to project management, he has designed coal preparation plants while working for The Daniels Company between 1999 and 2001. Matt was also instrumental in patenting and designing mechanized equipment for concrete ore storage and process structures.
Oh, and there's ol' Norm Radford, Gene Pierson, Lee Chapman, Richard Nanna, and John Benjamin. We're running out of space here, so just google-'em up and you'll find their places in the pantheon of mine design, metallurgy, and mine engineering.
The biggest beauty of Idaho General is that they're a total sleeper. Despite the fact that they have hauled the company out from the dregs of the Spokane Stock Exchange, from a nickel to over a buck in the space of 12 months, nobody has heard of them. Yet. Everyone's focused on the pump-and-dumpers' Canadian hustles on six-hole moose pastures. Here's a solid play right in the backyard, local boys, American property in user-friendly Nevada, flotation milling, and by any odds the next world-class moly producer to come on-line on the whole planet, and a Climax-grade deposit at that. Want sloppy seconds? Go for that moose pasture under Denali (Mt. McKinley) National Park in Alaska, or the one under a Colorado ski resort, or the one under the Colville Indian Tribe, or maybe Molycorp's Superfund site in New Mexico. There are no other pure moly plays even near to Idaho General's horizon.
Again, nobody expects the price of moly to stay at $40, or $30 or even $20. The planet's big copper mines are cranking back up and there will be plenty of the stuff - although not so much as you'd think. Chile's Codelco generates a mere 0.007 pounds of moly per pound of copper mined. Internal costs at Mount Hope are $3.40/lb; tack on to that a cap-ex of $406 million over the life of the mine, or about a buck a pound. The sweet spot for IGMI is about $7/lb.
Expect IGMI to go to the markets for another $20-$30 million to take its feasibility work to the bankable stage - after which they'll return to the markets or, more likely, seek out a JV to bring the $400 million project fully on-line. It won't take a rocket scientist among the majors to snap Mount Hope up and fast-track it to production.
Here, Amazon.com-style, are the pro's and the con's.
Con's: You've never heard of IGMI. They're just getting started on IR.
Pro's: You've never heard of IGMI. It's ground-floor time, baby. Limited float on market cap of $16.7 million basic, $31.6 million fully diluted; $2 million in the bank, no debt.
Caveats and conflicts: We own no stock in IGMI nor can we, though absent contractual obligations to our publishers, we certainly would.
Editor's Note: David Bond is editor of The Silver Valley Mining Journal, www.silverminers.com. Bond covers gold and silver mining equities for a number of national and international publishers, including Platts Metals Week, a division of McGraw-Hill. He lives in Wallace, Idaho, heart of the planet's richest silver fields, the Coeur d'Alene Mining District. He is former editor of the Wallace Miner, and holds regional and national firsts in investigative journalism from the Atlantic City Press Club (National Headliner) and from the Society of Professional Journalists (SDX/SPJ) and has edited or written for newspapers on both coasts, Canada and Alaska. Dave Bond will be hosting Silver Summit 2005, Investment Conference, September 22-24, 2005, Templin's Resort, Post Falls, Idaho. The Silver Summit gathers experts and the general public to discuss the issues of silver mining, silver stocks, silver investments, silver strategies, silver currency, silver medicine, and the future of silver in society. As one CEO puts it, "the best investors forum on silver anywhere in the world." Visit www.TheSilverSummit.com for information on the Silver Summit 2005 Conference.
