It is a polite arrogance of the new king of primary molybdenum producers that comes with the big kid on the block. That is, as Chairman of the Board called Blue Pearl Mining during our hour-long telephone interview about the development of his company, the future of the molybdenum market and new companies to imitate the hope of its success.
Ian McDonald may very well his opinion. Finally, Blue Pearl has the same number of molybdenum poundage in 2007produce as Cameco Corp. of uranium. (And free from those pesky legacy contracts or remediation efforts at Cigar Lake.) Blue Pearl is now the largest publicly traded primary molybdenum producer. The company plans to mine about one fifth of primary molybdenum in the world "in 2007 about five percent of the total mined molybdenum in the world. His company will also roast about 12 percent of the molybdenum in the world. Not bad for a company that is a Penny Stock was about seven months ago.
Blue Pearlhas become the darling of Bay Street as the company announced its audacious U.S. $ 575 million acquisition of privately held Thompson Creek Metals Company. After the closing of the transaction in late October, Blue Pearl now owns two operating molybdenum mines and concentrators and a metallurgical (roaster) facility in Pennsylvania. In mid-June the company's shares to be traded less than C $ 1.80, yesterday, the stock closed at C $ 12.06. Since the end of August, have shares in Blue Pearl steadily increased,with only brief pauses of consolidation.
We had the good fortune to have included Blue Pearl in our seminal article on the ratio of molybdenum metal with the energy bull market last July had to be heard at a time when some of the company.
On Monday the company announced encouraging cash flow from the recently acquired Thompson Creek operations. In the 67 days following this acquisition, Blue Pearl generated sales of $ 150.8 million generated about $ 2.25 million per day. For the year asThis could reach more than 800 million U.S. dollars in 2007, when the price of molybdenum remains firm and the production goes according to plan.
The cost for the issuance of the company Thompson Creek and Endako molybdenum mines in the average $ 6.28/pound. The company sells these 25.74/pound production at an average price of $. By 2008, the company wants me 27 million pounds from these mines. The firm moly price helped Blue Pearl discharge the Second Lien Credit Facility of $ 64.3 million in mid-March.According to news release on Monday, the company has cash of approximately U.S. $ 135 million.
The company expects that its bank debt by 320 million U.S. dollars to pay the first quarterly installment in the fall of 2007 from $ 18.75 million. Blue Pearl incurred $ 401.9 million in long-term liabilities in connection with the acquisition of Thompson Creek Metals. At its current pace of production, the quarterly bank payments amount to the production a little more than a week.
What's on Ian McDonald'sMind?
Historically, according to Western Troy's Rex Loesby annual molybdenum demand has developed around four per cent since the 1950s. This fits well with the prognosis of McDonald's by 700 million pounds in 2020. "This is what you need to supply," he told us. And what is to come? "This is of course the big question," says McDonald. "There is a lack of new projects in the pipeline." And he has reminded us that China has begun to consume more of their own molybdenumProduction.
As with uranium and other metals, China is delivering a wild card for molybdenum. In any moly discussion, China is a major concern for miners. "China produced, in 13 to 14 years, about 110 million pounds and exports of 100 million into a 230-million-pound market," noted McDonald. "Last year, in a 400-million-pound market, China produced approximately 80 million pounds, net exports about 30 million, so they are held. The story is they have a greater amount of their own." Heis quick to point out that global moly demand by six percent in 2006, but China's demand increased some 20 percent.
"I'm not going to sugar coat it," stresses from McDonald. "If they wanted to look bad, they would. If they start dumping on the market, everyone's trash." But he does not believe that is a likely scenario. There are only 39 big mines in the world produces molybdenum, he told us. "But in China there are over 500 small mom-and-pop operations. China is eagerwith some world-class companies, and they have shut down some of the smaller operations because they do not their power is not effective. If you have a large mining companies, they will have a long-term perspective, and maximize the resources of the country. "
What is the origin of the second ahead of rising demand McDonald sees. "There are a growing number of applications for molybdenum." He pointed out that cars consume molybdenum. "There are about 0.9 pounds or so in about a dozenvarious locations in the automobile, and with 55 million cars in the world, which is about 50 million pounds. "This is probably the third largest application of molybdenum.
"High-end molybdenum stainless steel applications consume the largest amount," says McDonald. "Any steel that is used in the ocean or in the vicinity of the sea is molybdenum in it." He pointed out that Blue Pearl about 10 percent of molybdenum production of the company in the sulfide form for the high-end market lubrication sheets --the oil companies. "Most of them in the Tech-oxide, MO3, and about 25 percent would be ferro," he said. "We've just sold some (ferromoly) in Europe for $ 34/pound."
His company was chosen to the production of guidance on the newly launched Sprott Molybdenum Participation Fund. We asked about his involvement. "We receive a small fee for the storage of molybdenum if they choose to buy," he told us. It would be stored at Blue Pearl smelter in Pennsylvania. "We would sell themsome, "he said. added, his company would not be advising the fund to take over the business investment holdings." It would constitute a conflict of interest and we would reçus, "he said.
Provides no new supply on the Horizon
"It is a tremendous barrier to entry for a new primary molybdenum mine to come without us OnStream market," McDonald observed. "Because without a forward sale, financing for the capital to one of these new building could be reduced to veryvery demanding. "He believes that one of the other major molybdenum mines get funded, but he warned:" I think that once you have it does not mean they are all on the road. "He explained his personal experience:" When we raised the $ 575 million last year to buy Thompson Creek, this was a company that is close to U.S. $ 400 million per year after taxes, and we had some heavy work to do. It was difficult. It would be difficult for another junior. "
A place where he sees immediatelyMolybdenum supply is from Blue Pearl's Davidson deposit, not far from the company's Endako mine and milling machines. "We will have the opportunity in the second quarter - I say that in the second quarter, but I hope that very soon," McDonald told us. "It is the highest grade molybdenum mine in the world." He said his company was fortunate to get them for three years. "It was ready for production, and there were a lot of development done in this market." So the company decided on the movefinal feasibility study instead of trouble with a scoping study or pre-feasibility. He said the Davidson project would be in full production in 2009.
What about my development? "There are 2.5 kilometers of underground tunnels, there are great and soil conditions," he said. "We have opened up a few years ago, when nobody had underground railway in 25 years. All the scaling for the entire 2.5 kilometers fit in a five-liter bucket of paint." McDonald told us Blue Pearl plansjust me the deposit and little else: "We will not even crush, just a rock crusher, and it only print up to Endako."
But Blue Pearl is a partner to take on Davidson - the Japanese trading company, Sojitz. "They have 25 percent of the Endako own, and they want to buy 25 percent of Davidson," McDonald said. "It would be useful if they would have the same percentage of own brand. There would be no recovery problems or a combination of ore and al that. We have the same labor force." He hasCaution was the business is not finished yet. "We're looking to do if a transaction with them."
Another project where McDonald hopes that they will have to ensure additional molybdenum supply on a possible expansion of Endako into a "super pit." The company plans, the scoping study will follow later this year, may have in June. "I feel very good to say about that, it's pretty realistic," he told us. "We are a massive resource, and it would be a pretty big task. But, it could be the wind out of somethese other juniors. "
We talked about his vision for the expansion of the mill to 50,000 tons per day. "It is probably now 32,000 tons per day," he said. The first step consists in redoing the reserves and resource calculations at Thompson Creek and Endako with a $ moly price. The previous price was "too conservative," says McDonald. 10/pound We suspect the higher resource productivity, the number would to open the door, raising the estimated 250 million U.S. dollars of the institution of higher tonnage upgradeOperation. And his mind is already moving in this direction.
"Let's say we had done a study within the next year," he said. "It would be until 2008 or 2009 to build it. Unfortunately, because the mine has been forty-two years we would move the existing mill." The mill would have to be postponed because it is ore beneath the present plant site. "It will not happen overnight," he warned.
And what about the other junior molybdenum companies? "We will notGrowth of our company through the purchase of all these other moly deposits, "he replied." Then we have to go and save 700 million U.S. dollars to bet worry about marketing another 20 million pounds a year, and the company on it. Personally, and our board agrees, we would rather buy something that is either in production, and pay a little more for them, or take a little lead in a feasibility study, like copper / moly. We have a pretty good record, or we will have until the end of this year. Then perhaps we could buy MolyProduction. "
What are his plans as the rolls in 2007? "We have to qualify for the New York Stock Exchange," McDonald confided. "We have spoken with them. I think we got the ball rolling this spring, and we could look for an early fall completion. We go to the U.S. come, we qualify and they seem pretty keen on us."
Just to make, so we his story right, McDonald added: "We will not sit on our laurels. We have a lot of growth ahead of us, start-Davidson,Expansion of the reserves of both mines, while a scoping study for the expansion of Endako. Our main task is the one who paid the debt and increasing the reach reserves. That's quite a bit. It's all in our garden and our own know-how. Everything we do, the outside - we will do other things, I think, but they are things that are going to be safe. "
Copyright © 2007 by Stock interview, Inc. ALL RIGHTS RESERVED.
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