General Moly Makes Presentation to Goldman Sachs Investors

 

          On Thursday May 26th, CEO, Bruce Hansen presented a Power Pointpresentation to Goldman Sachs investors and from my sources in Nevada it was a stunning success. Bruce Hansen seems to be able to take the most complex concepts and distill them down into very clear lucid thoughts.




A look at the chart on Wednesday May 25th led me to conclude that GMO would not last long at $3.50 or $4.00. It closed on Thursday May 26th above the 200 day moving average and on Friday May 27th it broke the intra day $5.00 level and closed at $4.92. When I studied the chart it scared me to see how close this stock came to the feared “Death Cross.” For some of my readers who don’t know what the “Death Cross” is, it is when the 50 day moving average crosses under the 200 day moving average. It is almost always a sign of bad news.

          Well, what a difference a couple of days make! To be honest I never feared it because as I have been drilling into my readers as Professor Newcomb drilled it into Bernard Baruch – it is the law of supply and demand. China used to export 97% of the world’s Rare Earth Elements (REE’s). Now we are not sure how much they export as they stockpile these ores, maybe rightfully so, for their own use. First they were cutting their exports by 37% and then it was 50%. It changes every day.  The Chinese are very fine people but when it comes to the Chinese government they do not do anything that is not in their best interests. So while they are exporters of REE’s to the world they are actually net importers of molybdenum.

When I first learned about General Moly I could not even pronounce molybdenum (mo-Liden-um). Then I learned what molybdenum was and what it was used for. I learned that General Moly had a first class management team led by Bruce Hansen. [Ed. Note: when I look for companies to buy one of the first things I find out is if the company has a first rate management team.] I learned that you can have all of the iron ore in the world but to make steel molybdenum needs to be introduced into the mix. Then I learned that General Moly was in Nevada and that Nevada just happens to be one of the world’s most friendly mining jurisdictions. Then I learned that while the Chinese had an abundance of REE’s, what they didn’t have was molybdenum. Finally after careful study I knew that the Chinese would not let this undiscovered gem escape their grasp.

          General Moly, between their Mt. Hope project and their Liberty project sits atop the largest undeveloped deposit of molybdenum in the world and the Chinese, South Koreans and Japanese need a lot of molybdemum. It was not long before China and lest we forget their equally industrious neighbors South Korea and Japan sank millions of dollars into the empty coffers of General Moly. So now General Moly has three “partners.” In China they have the Hanlong Bank. In South Korea they have the giant steel company Posco and in Japan they have a major trading company, Sojitz. Even CEO, Bruce Hansen, has been picking up shares on the open market and last week bought 25,000 shares when the stock dipped below the $4.00 level and is now approaching ownership of close to 800,000 shares.

          China is getting a taste of their own medicine as institutions that know of China’s shortage of molybdenum  have them scrambling to find vital molybdenum assets.  

The chart above shows that GMO returned to a $5.00 level of support for the fourth time on Friday May 27th. While, as expected, there has been some short term profit taking, I expect that when the permitting process is concluded by the year’s end this stock will easily be trading between $7.50 to $10.00. Once the company begins production in 2014, if we use today’s price of molybdenum of $16.50 per pound the stock should be trading in the $17.00 range. If the price of molybdenum was to rise the price of the stock would trade proportionally higher.

 

Disclosure: I am long GMO.