Molybdenum sparks interest

What is Moly? ‘Moly’ (short for molybdenum) is a versatile metal. Its alloying properties have ensured it a significant role in industrial technology, which increasingly requires materials that are serviceable under high stress, expanded temperature ranges, and highly corrosive environments [source: U.S. Geological Survey].

You often see MoS2 referenced in research reports. This is the mineral molybdenite. MoS2 must be roasted, however, and once the sulphur is removed you are left with molybdenum oxide (MoO3). Molybdenum prices are quoted in US$/lb of MoO3.

Molybdenum occurs in very low grade percentages, typically ranging from 0.01% to 0.30%. In the geological world, a grade of 0.10% and up is often considered to be high grade.

Molybdenum does not trade on the London Metals Exchange or any other publicly traded commodity exchange. Its price is determined solely by supply/demand in the marketplace and supply contracts. In a report dated Oct. 28, 2005, RBC Capital Markets forecast that 2006 and 2007 molybdenum prices would be approximately US$25/lb and US$15/lb, respectively [source: RBC Capital Markets, Global Base Metal Equity and Commodity Report Card, company reports].

Ryan’s Notes surveyed 17 end users and 20 producers of moly in 2005 about their price predictions. A combined forecast of producers and end users gave US$24.92/lb in mid-June and $15.84 at year-end 2005. Currently moly trades at approximately US$30/lb.

The United States is the top producer of moly, followed by Chile, China, Peru, Canada and Mexico. In the 1980s, the United States was the leading producer of moly and British Columbia was the second largest producer. Canada is now the 5th largest producer. This change can be attributed to the closure of primary producers Boss Mountain and Kitsault in the early 1980s, and to the closure of several large by- and co-product mines (Brenda, Island Copper and Gibraltar [recently reopened]) [source: Mining Review, author Tom Schroeter].

From largest to smallest, the ten top producers of moly in 2004 were Codelco, Phelps Dodge, Jinduicheng (China), Grupo Mexico, Luanchuan (China), Thompson Creek Mining (Endako in Canada and Thompson Creek in the U.S.A.), Antofagasta (Chile), Rio Tinto, Teck Cominco, Zangezur (Armenia) [source: Westwind Partners, Metals Economics].

Currently, there are three primary moly producers in the United States (Phelps Dodge, Thompson Creek, MolyCorp), one in Canada (Endako), one in Russia and two in China. Most likely the next new primary producer of moly will be the MAX mine in British Columbia (Roca Mines). In future years, increases in primary molybdenum production are expected to come primarily from China.

The co-producers in B.C. are Highland Valley Copper – 2004 production of 10.7 million lb Mo; the Gibraltar mine – no moly production in 2004; and the Huckleberry mine – 2004 production of 426,658 lb Mo. There is only one primary producer in B.C.: Endako Mines, owned by Thompson Creek – 2004 production of 10.9 million lb [source: Mining Journal, London, author: Ed Schiller].

The main moly explorers in B.C. and their resource estimates are: Tenajon Resources – 192 million tonnes at 0.074% Mo [historical estimate made by Newmont/Inco]; Adanac Moly Corp. – 205 million tonnes at 0.062% Mo [43-101, source: company website]; Blue Pearl Mining Ltd. – 230 million tonnes at 0.116% Mo [43-101, source: company website]; and Roca Mines – 42.94 million tonnes at 0.12% Mo [43-101, source: company website]. Others include Leeward Capital Corp., Eagle Plains Resources Ltd. and New Cantech Ventures Inc.

Approximately 70% of molybdenum is consumed in the steel industry, principally in low alloy (auto parts, construction equipment, gas/oil transmission pipes) and stainless steels (water distribution systems, food-handling equipment, etc.). Western Europe has been by far the largest consuming region for the last 20 years, followed by the United States and Japan.

Global demand for molybdenum rose by 7.2% in 2004, to 374 million lb. This was the second successive year in which growth exceeded 7%.

China has been the big growth market for moly in recent years. China is a significant consumer of moly and due to the country’s industrialization, demand had been growing rapidly, especially in low alloy steels (pipelines) and chemicals. The Chinese demand for moly is estimated to have grown 13% in 2003 and 17% in 2004, and may continue to be strong for several years to come.

Brad Kopp works in the investor relations department at the Northair Group in Vancouver. For a full copy of his report on molybdenum contact bradk@northair.com.

Tenajon’s exploration program

Tenajon Resources Corp. is focused on aggressive advanced stage exploration of base and precious metals properties. In 2005, Tenajon as operator completed drill programs on its Ajax molybdenum and Summit Lake gold properties near Stewart, northwest B.C.

The Ajax molybdenum property boasts one of the world’s largest undeveloped primary molybdenum deposits. The 2005 drill program proved that historical grades could be increased using modern drilling techniques and that the deposit is open at depth. Two twinned holes together showed an overall increase in grade of 14%, and all three holes drilled ended in significant mineralization. Results included 106.68 m grading 0.185% MoS2 (0.111% Mo) and 33.53 m grading 0.338% MoS2 (0.203% Mo). The property was last drilled by Newmont Mining in the 1960s; that company estimated a geological resource of 192 million tons averaging 0.123% MoS2. (This resource was calculated before implementation of NI 43-101.)

Summit Lake is the site of the formerly producing, high grade Scottie gold mine. The 2005 underground and surface drilling programs included 35 holes that successfully confirmed and expanded known areas of mineralization. Both programs intersected high-grade gold (including 8.0 m of 24.7 g/t Au and 3.6 m of 28.2 g/t Au) and remain open. The surface zones were located 2.5 km northeast of the underground workings, and many unexplored high grade targets remain to be drilled. Plans for the 2006 drilling season are currently underway.

Tenajon’s Kansas crown grant claim and surrounding property in the same region is currently being drilled by the JV partner, with encouraging results.