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Overview of Potential Primary Molybdenum Producers

A few junior molybdenum developers were brought to our attention during our research in the molybdenum market over the past six months. Not all were included in this overview. We reviewed each and are reporting them alphabetically, not according to their merits.

Adanac

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The principal project of the Adanac Molybdenum Corporation (AUAYF) is a low grade bulk molybdenum deposit located less than 100 miles southeast of Whitehorse in Canada's Yukon Territory. Since the early 1970s, the Ruby Creek property has shown promise of, but only of an historical (Non 43-101 compliant) resource of more than 100 million tons with an average grade of 0.16 percent MoS2. The Adanac website boasts of 220 million pounds of Molybdenum, but no mining has taken place since a 1971 feasibility report was submitted on the property.

Various mining companies have proposed mining and milling operations on the property, including Kerr Adison, Climax Molybdenum of BC, Placer Development Ltd and the original Adanac Mining and Exploration company. In a May 2005 NI 43-101 report, using a cut-off grade of greater than 0.10 percent moly, the company reported a measured and indicated resource of 24.2 million pounds of moly.

Adanac Chairman Larry Reaugh optimistically reported in an interview on January 17th, "I would estimate that somewhere between 12 and 15 million pounds of moly a year would be produced from that mine for the first five years. The company is hoping for a partner to put up about $400 million to bring this project into production. Adanac offers a copy of its bankable feasibilities on the company website.

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In an email from Ken Reser, a highly respected molybdenum commentator, we were told Larry Reaugh has discussed the company's Ruby Creek project with at least five major corporations, which Reser reported have approached Reaugh about bringing the project online. Several newsletters have praised this company's efforts. Reser also consults for Adanac. He also told us the Ruby Creek project is a short while away from permitting.

Blue Pearl Mining

The Blue Pearl Mining (BLEFF) company bills itself as "The World's Largest Publicly Traded Pure Molybdenum Producer" on its website. No surprise there. In December, the company was chosen by Standard :%$amp; Poor's/Toronto Stock Exchange Composit Index to join its list of market benchmark companies. The Index accounts for about 70 percent of the market capitalization for companies listed on the TSX.

This past Wednesday, Blue Pearl increased its production estimates over the next three years. By 2009, the company hopes to produce 29 million pounds of molybdenum. Late last year, Blue Pearl bought Idaho's Thompson Creek moly mine, a 75-percent interest in British Columbia's Endako mine and the Langeloth Metallurgical Complex in Pennsylvania. This supplemented the company's Davidson molybdenum deposit, which it also hopes to develop before the decade ends.

Idaho's Thompson Creek mine is expected to produce more 148 million pounds of molybdenum over its ten-year mine life at an average operating cost of US$3.68/pound. Of particular interest to us is the company's roasting capacity of 35 million pounds at the metallurgical complex in Pennsylvania, which converts the concentrates to molybdenum oxide. It houses six multiple-hearth roasters required for the conversion process. As the company approaches the 29 million-pound production level, other near-term molybdenum producers may need to look elsewhere to convert their concentrates.

In a recent interview, the company's executive chairman Ian McDonald said, "We think the price of moly looks good here for the next year or two at least - probably longer - because there's been an under-investment in the moly business for the last 20 years." We couldn't agree more with Mr. McDonald, who is nobody's fool.

Idaho General Mines

According to the company's website, Idaho General Mines Inc. (GMO) "plans to become a major world molybdenum producer with the beginning of mining of Mount Hope in 2009. Idaho General holds the Mount Hope Project in central Nevada which contains one of the largest molybdenum-porphyry deposits in the world, a nearly one-billion ton ore body that will produce approximately 1.3 billion pounds of recoverable molybdenum during its 53-year lifetime. A feasibility study has been completed and the project is now currently being permitted for operations in Nevada."

This is probably the largest molybdenum property on our radar. We have wondered over the course of various email exchanges with the army of Idaho General Mines proponents (and possibly promoters) whether this property is too big. So far, it has held up to scrutiny. In an email exchange with David Michaud, a metallurgical engineer with whom we routinely consult (and who is also a technical advisor for United Bolero, a smaller molybdenum exploration company), we played devil's advocate.

Michaud, who is intimately familiar with United Bolero's property, explained the metallurgy for their Bald Butte moly property in Montana, "At a flotation feed sizing of about 135:%$micro;m K80, the liberation of the molybdenite, when assessed in two dimensions, was 56 percent. When compared to similar ores now being processed worldwide, this level of liberation is sufficient to allow successful flotation recovery of most of the molybdenite bearing particles into a rougher concentrate. There is some evidence from mineral fragmentation studies, which suggests that still coarser flotation feed sizings could be used to achieve much the same molybdenite liberation levels; and hence, very similar metallurgical performances."

He added, "Liberated grains of molybdenite were 91 percent captured into the final concentrate. Approximately 11 percent of the molybdenite bearing binary composites were captured - predictably these composites contained significant amounts of molybdenite, probably accounting for their enhanced floatability."

When we questioned him about Idaho General's property, Michaud gave the tentative thumbs up, stating, "I don't think GMO (company's ticker symbol on the American Stock Exchange) will be much different." He explained the closeology between Montana, where Bald Butte is located, and Idaho would likely carry over, metallurgically speaking. The one question Michaud had concerned the 'grind size," which was not found on the company's website and in our preliminary research. Further investigation would require studying the drill cores. He said, "No drill samples, no DNA." Which is fair.
In a recent email from someone knowledgeable about the property and its chemistry, he brought up was a conversion plant. He wrote to us, "Other operations have insurmountable logistics and environmental hoops to overcome, Mt. Hope is located 65 miles to a rail head and proposes to have its own conversion plant, hence - its concentrate is not held hostage by outsourced conversion."

This is the sticky point for us with respect to Idaho General. By the time the ambitious Mt. Hope project comes online, the Climax molybdenum mine may also be coming back online. If Idaho General proposes to annually mine along the lines of 35 million pounds, and Climax mines 20 to 30 million pounds annually, where will Idaho General roast the moly concentrates and convert these to molybdenum oxide. Permitting a roaster in the United States, we have been told, could be a fool's errand. As one wag put it, "Hell will freeze over first." Mt. Hope is big, and the company has begun the permitting process. It would be interesting to fast forward to 2009 or 2010 and find out how the project has been advanced.

Roca Mines Inc.

Quietly, Roca Mines (ROCAF) is moving forward toward becoming a small-scale molybdenum producer. A hiccup in their plans to mill the moly ore at British Columbia's MAX deposit and begin selling it, as had previously been announced, was delayed by a few months. The company cited weather-related problems during the construction of their tailings facility. On a positive note, the company plans expanding mill capacity to 1,000 tpd.

In crunching the numbers to determine the value of the rock for the MAX deposit, Michaud concluded, "It's rich." Depending upon how the numbers were calculated, this deposit could be worth between US$561/tonne to US$660/tonne. Cost of operations could be as low as $71/tonne to a higher level. Estimated recovery could run between 85 and 90 percent depending on how this start-up mine plays out. On a milling level of 1000 tpd, this equates to about 35,000 pounds per day of moly sulfide concentrate, or about 20,000 pounds of molybdenum oxide per day.

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Bluntly said, if Roca delivers on its plan of selling 3 million pounds of contained molybdenum in 2007, and the moly price hovers at the $25/pound level, the company stands to rapidly build its treasury. We interviewed Scott Broughton during our Audio Series this past week, which helps provide a better of this company's plans.

Conclusion

Molybdenum might likely be premature in creating the sort of excitement found with the uranium price frenzy and the explosion of junior uranium companies of 2006. There may be some life this year in the moly sector. Most mining analysts are forecasting a slow drifting in the molybdenum price over the course of the 2007 to 2010 period. Some are the same analysts who were cautious in the uranium price outlook before Cameco Corp announced severe flooding at the company's northern Saskatchewan Cigar Lake uranium mine in the Athabasca region. Since then, the uranium price shows the potential for additional hysteria coming into this New Year. Molybdenum does not, at least not yet, carry with it the overpowering supply/demand imbalance. However, the current price levels induce the further exploration and development of previously explored properties and especially those which have stronger degrees of deposit delineation from the earlier, but short-lived molybdenum boom.