Dr. John Faessel
ON THE MARKET
Commentary and Insights
A NATIONAL TREASURE, A WORLD NECESSITY & A SUPPLY DEFICIT
The world's largest still undeveloped open pit molybdenum deposit & “to be” the world’s low cost producer and possibly one of the world’s most profitable mines*
· China adds Molybdenum to its “Protected” status
· CONSIDERS STOCKPILING
· Per LONDON TIMES; Micro Cap’s “world's largest untapped open pit molybdenum deposit” and as just highlighted in a NEW YORK TIMES feature story
· Plus; “continuing to negotiate with parties interested in partnering” ― Read China here!
Mosquito Consolidated Gold Mines Limited
(TSX-V: V.MSQ) - NASDAQ bulletin board: MQCMF
10-29-2010 - China's Ministry of Land and Resources classifies molybdenum as a protected mining status and impose quotas on its production.
11-3-2010 – China studies starting strategic reserves / stockpiling of molybdenum and 9 other metals. (Bloomberg news)
10-21-2010 - China curbs exports of rare-earth metals, a group of metallic elements used in petroleum refining, fiber- optic transmission, and military radar and missile-guidance systems. China produces about 95 percent of the world's rare earth metals. Rare-earth prices jumped following the move.
11-8-2010 – More important color: “China’s Sure Bet”, BARRON’S cover story (November 8th): “As the Dollar wobbles, China is pulling back from U.S. Treasury securities and buying up hard assets around the world.” Striking, is that China’s 3-year total of foreign hard asset deals is near $150 billion. And that Chinese companies have invested over $25 billion in acquiring stakes in 19 iron ore start-ups and producers over the past three years.
Now with a “protected status” and looming “stockpiling” by the major consumer China, molybdenum has to be elevated to the realm of strategic metals and thought of in an entirely elevated status.
Rarely do the stars align in such a fashion for a micro-cap company with a minuscule market-cap of about $60 million. Possibilities abound!
Below the hilly landscape of southern Idaho lies a yet untapped gargantuan deposit of molybdenum and other minerals said to be worth as much as $80 billion. In fact, its entire footprint is yet to be fully determined as it is only 25 percent explored.** (Recent core drillings suggest that the asset is well in excess of original estimates made by global engineering and project management leader Ausenco***; importantly the new cores suggest coarse grained molybdenum bearing veins much closer to the surface.) These impact of the new cores may now be best characterized by saying; current drilling is designed to convert blocks that were calculated as waste in all economic calculations into ore which will have a dynamic impact as expense converts to revenue - a double whammy. As it is, and it’s said by the London Times to be the world's largest still undeveloped open pit molybdenum deposit***, this treasure will bring untold billions of dollars to not only the United States and Canada, but certainly to the state of Idaho and its environs. Most notably, the massive infusion of money into that poor county in Idaho will occur long before Mosquito will see any output from the mine as these enormous projects take several years to begin production. The positive economic impact to the region will be immediate, profound, and lasting; indeed billions of dollars will be spent there. Talk about a stimulus plan―this is a REAL stimulus plan that will provide jobs for over 100 years.
* Re: “the world’s low cost producer and one of the world’s most profitable mines” See: CORPORATE PRESENTATION (Power Point) Update Nov. 2010 page 35. Mine Profitability i.e. Total recovered value / ton divided by total cost per ton. See Mosquito’s CUMO vs. the world’s major mines. http://www.mosquitogold.com/s/Home.asp
Key public disclosures relating to the mines size and concentrations of mineralization has already been completed–referred to as Ni 43-101, Canada's necessary public disclosure. *****
In these days of deep uncertainty, economic stagnation and high unemployment, the development of this major resource will inject a continuum of huge funding to a mining-friendly region in Idaho where unemployment is high and the region’s largest mine, the Thompson Creek Mine ****** , is nearly played out after 30 years of production. From what I hear, miners from the region and its adjoining states are said to be making plans for a new “forever” job at the site.
The importance of this mining project to not only Idaho, the United States, and Canada, but globally cannot be understated; it's indeed an astonishing resource in a world where molybdenum use is growing by orders of magnitude. Think China, that is a major importer of molybdenum and all the country’s steel needs and all the new uses like those in desalination and nuclear facilities that are beginning to manifest in the metals use. And, by the way molybdenum is not recyclable.
Key in the Mosquito story is that its veteran management is experienced, savvy, and has the skills to parlay this project to its next level of a major financing. Evidenced by the fact that China-based International Energy and Mineral Resources Investment Company Limited and Ivy Mining, another China-controlled company, have already acquired 21 percent ownership of (MSQ) in June 2009 lends credence to the proposition that management has the necessary acumen to achieve this kind of deal; and I believe that there is another whopper of a deal in the mix. A recent press release (August 17, 2010) confirms this, “Mosquito is also continuing to negotiate with parties interested in partnering with Mosquito on funding the ongoing development of the CuMo project.”
In addition: On September 17, 2010 in the New York Times Business Day section, reporter Phil Taylor from Greenwire and E and E Publishing penned an extensive (1,683 words) article entitled, “Molybdenum Exploration Sparks Debate Over Idaho Watershed.” It gives you a pretty good handle on the necessary permitting that needs to be received from the Boise National Forest Service agency. It's definitely worth a read.
Molybdenum demand is expected to increase between five and seven percent annually during the next decade with demand forecasted to outstrip supply for several years to come. Global demand calls for an additional 21 million pounds by 2011, rising to 85 million pounds by 2015. Also key is that global inventories of molybdenum are very near historic lows and there is a supply deficit. In January, JP Morgan analysts said that they saw a likely rise of 55 percent in molybdenum prices to a possible $24 per pound by Q4, 2011.
Molybdenum [Mo, atomic number 42] is a refractory metallic element used principally as an alloying agent in steel, cast iron, and superalloys to enhance hardenability, strength, toughness, as well as wear and corrosion resistance. Ideal for tough environments where heat, pressure, and corrosion are factors, it makes steel stronger and lighter and makes stainless steel more resistant to corrosion. Due to its low-toxicity, it is used as a catalyst in energy production. Molybdenum currently trades on the London Metals Exchange.
I strongly encourage you to spend some time on Mosquito’s Web site, which is extremely comprehensive. The corporate presentation, fact sheet, and the CUMO interactive models are particularly informative and engaging in viewing the scope and size of the project: http://www.mosquitogold.com/s/Home.asp.
** Recent 2010 core drillings have just been announced (August 17, 2010) and the southern boundary of the resource has been expanded by a third of a mile. This new exploratory hole confirms yet more coarse grained molybdenum bearing veins nearer the surface and adds a huge increase in scope to the yet-to-be defined perimeters of the resource. Obviously it multiplies by an enormous factor the value of the Mosquito’s CUMO asset.
*** The Ausenco Group (ASX: AAX) [Market-cap AUD$300 million], headquartered in Brisbane, Australia, is a leading provider of engineering, project management, and operation solutions for the global resources and energy sectors and employs around 2,200 people in 13 countries around the world.
**** Mosquito’s wholly owned, Idaho-based CUMO deposit is thought to be the world’s largest and still undeveloped open-pit molybdenum deposit (according to a London Times article reported by Dow Jones on January 19, 2010).
***** The Ni 43-101 disclosure states Mosquito holds confirmed resources of 4.13 billion pounds of molybdenum oxide, 5.43 billion pounds of copper, 234.6 million ounces of silver, and 282.4 million pounds of tungsten. The molybdenum and other mineralization are said to be worth perhaps as much as $80 billion. With a discounted present value of $16 billion (using a 40-year mine life at 150,000 tons per day), the CUMO mine appears to be able to produce for somewhat over 100 years. Also noteworthy is that the "limits" of the mine have yet to be totally delineated, as only about 25 percent of the property has been core-sampled and assayed. It’s an enormous resource.
****** The fourth-largest primary molybdenum mine in the world, the Thompson Creek Mine, which is 75 percent owned by Thompson Creek Metals Company Inc. (NYSE: TC), is the largest mine in Idaho and is located about 60 miles from Mosquito’s CUMO asset.
I have purchased shares in Mosquito Consolidated Gold Mines on the open market.
For my list of Best Ideas for 2010, please send an e-mail request to Dr.Faessel@onthemar.com.
Disclosure: Long MSQ