Whatever happened to MolyMania?
Bob Moriarty
April 20, 2006
One of the
great disappointments to me in the last two years was the failure
of even a single junior mining company to take advantage of a
500% rise in the price of molybdenum. Since 2003, moly
has rocketed from about $5 to $38 before settling down at about
$25 for the last couple of months. And not a single junior has
gone into production. Yet.
The most advanced
moly project has to be the Ruby Creek property of Adanac Moly
Corp (AUA, 50 million shares) that I first wrote
about
in August of 2004. Adanac continues to develop the property with
production planned in about two years.
Two other juniors,
Golden Phoenix (GPXM-OB, 136 million shares outstanding ) and
Roca Mines (ROK-V, 42 million shares outstanding) have been in
the running to actually be the first to get into production.
I wrote
about Roca Mines
in December of 2004 and as of now they plan
to be in production in late 2006. Golden Phoenix has been burdened
with management problems for several years. GPXM looks as if
it might get into production this summer but they have issued
so many over-optimistic press releases over the past couple of
years that I wouldn't make a bet on them until I saw some metal.
There is another
miner, a real miner, much closer to the actual production of
moly. In November I traveled to the bitter north country of the
Geraldton-Beardmore gold mining camp in Ontario. I was leaving
70 degrees in Miami for -1000 degrees in the Thunder Bay area.
And boy did it seem cold. I was visiting the Nortoba-Tyson moly/gold
property of Roxmark Mines Ltd.
Back in 1999-2000
when the entire industry seemed on the verge of shutting down,
the TSE, now TSX Exchange, demanded Roxmark accept a move to
the another exchange. Legally Roxmark then fulfilled all the
requirements of the TSE but for political reasons the
exchange insisted on either more money in the till or a downgrade
in their listing. Being a real mining company unlike so many
of the promotional-oriented companies springing up today, Roxmark
bit the bullet and accepted the downgrade. They listed on the
CNQ (Symbol-RMKL), a junior exchange in Canada most people don't
even know exists. The shares are way underpriced primarily due
to the simple lack of liquidity.
Roxmark spent
the last five years acquiring and consolidating their holdings
in the camp. They picked up the high grade Leitch Gold Mine and
an excellent moly property. They kept a sizable portfolio of
medium size gold projects and were content to keep the doors
open and the heat turned on. With higher prices for gold
they began to increase the pace of their activities in 2005.
They already own a 200 TPD mill in Beardmore which has been inactive
since 2001. They recommissioned it last year and upgraded it
with a new state of the art Knelson concentrator and a Gemeni
table for fine gold separation. In addition, and planning for
the future, they installed a moly floatation circuit with disc
filters and a concentrate dryer.
Then President,
now Vice Chairman David Malouf, showed me around his various
projects in November for two days. I was impressed. They have
some real mines and a good plan and I think they will succeed.
I've said it
before and I'm sure our readers will hear me say it many times
in the future, I like the real miners a lot more than the Rhinestone
Cowboys of the penny dreadful Vancouver stocks. In my mind, the
very best miners in the world are the garimpeiro miners of Brazil
and Chile and their brethren in Burkina Faso and Tanzania. All
of them make a profit and profit is a four letter word in Vancouver.
If the artisan miners can't mine at a profit, they don't mine.
The most promotional Vancouver companies will drill as long as
some fool will belly up to the bar and fork over more hard-earned
cash.
Mexican miners
drill a hole or two until they find ore, then they drift until
they run out of of pay dirt. There are companies in Vancouver
that would drill until they hit China, then do a Private Placement
or three. I like the real miners. They will be the salvation
of the industry.
Roxmark has
six past producing gold mines which collectively produced 2 million
ounces of gold. They have a fully functional 200 TPD mill, a
flotation circuit and have been producing gold in small quantities.
In addition to the various gold properties, they have a high
grade molybdenum deposit called the Nortoba-Amorada-Tyson prospect
located in the Beardmore Mining Camp in the Thunder Bay Mining
District.
David Malouf's
plan is to put the high grade surface moly ore into production
this spring/summer. The moly has a historical reserve grade of
1.72% MoS2 which would be equal to about 1.032% moly oxide worth
some $520 gross metal value per ton. Roxmark has outlined about
3000 tons which they have applied to mine via a bulk sample permit.
The objective is to prove the capability of the mill and to provide
the cash flow to further develop an underground mine where he
has already outlined 6,000 tons of the 1.5% to 1.7% MoS2. The
permit for the surface bulk sample should be in hand soon and
by the time they have mined the surface ore, they should have
the underground permit.
I like moly,
it's an interesting metal. Some 80% of moly mined, goes into
stainless steel. The rest is used in industrial chemicals and
in aerospace applications. China is the swing producer and their
production determines the world price. Most moly is produced
as a byproduct of copper production so the price doesn't have
a major effect on supply. China has shut down hundreds of small
moly mines in the last two years and since all their production
goes straight to steel mills, the price of moly rocketed from
$2 a pound to as high as $38 before stabilizing in the $24 range.
It's important
for anyone considering the purchase of any primary moly stock
to understand there is no shortage of moly properties. In fact,
we know of enough moly in the ground to supply 200 years worth
of moly. But there is a short term (at least short term)
supply shortage. The first companies to actually get into production
are the ones who are going to reap the benefit.
I suspect Roxmark
will be the firstest with the mostest. I like management, I liked
the company enough to buy some shares as soon as I saw the story.
I think they have a viable plan for making a nice profit. With
over $2 million in the till, Roxmark is well cashed up. The cash
flow from the surface bulk sample should pay the way for the
underground mining and that should put them back on their feet
without further dilution.
I was quite
strong in expressing my concerns about the company with David
Malouf and he is taking the steps necessary to make the company
better. First of all, they have to get off the CNQ exchange.
It's worse than being on the pink sheets here.
David assures
me they are working on the upgrade to the TSX and I think that
will move the stock higher.
Second, I am
not comfortable with stocks in the teens. Shares trading in the
$.15 to $.18 range just doesn't give me confidence. Anytime they
do a placement, they end up giving the company away, literally
for pennies. With about 112 million shares outstanding, they
might as well bite the bullet when no one gives a damn about
the price and roll the shares back.
The other six
gold properties are nothing to sneeze at. I've written about
the moly property because it's money in the bank but with $640
gold, all of the other mines have good potential for more production.
I suspect Roxmark will try to keep them in house so they
get the benefit, that's why they have been sitting on them for
so long but they could do a JV or two at any time. Roxmark has
experienced management who are real miners, they have survived
a dreadful period in mining and are on the way back up.
Roxmark has
not paid for this piece. They are not advertisers but I wouldn't
be opposed to having them on our site. I do own shares and am
a long-term investor. It's a good story, worth investing in.
You are responsible for your own investment decisions in the
same way I am responsible for mine.
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Ted
and I really hate the cold! |
200
TPD Mill |
Ted
examining Moly drill core |
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David
Malouf at the feeder chute |
Floatation
cells |
Moly
surface outcrop |
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Moly
surface vein |
The
traveling bear & my much-traveled hammer |
Rewards:
Honey for the bear & a moly sample for me |
Roxmark Mines Ltd
RMKL-C $.165 Canadian (April 19, 2006)
112 million shares outstanding
Roxmark Mines website
Bob Moriarty
President: 321gold
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321gold Inc

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