a ray of sun on a gloomy day, page-4

Yes the finance is going to be a factor and as the conclusion of the report indicates time is of the essence. IMO once the bottom of the market is realised, and if the DOW keeps going the way it is going there aren't that many points left to lose, then the bottom will be found soon and those companies with a bit of cash stored away for a rainy day will want to get a good return on that cash sooner rather than later. As investors we just need to ride this out and be comfortable in the knowledge that it is not only us who are aware of just how undersold this stock is.
Well without further delay here is the remainder of the report.

"Mind the (Supply) Gap

The supply side of the equation is also helping to keep moly prices bouyant. Last year, 187,000 tonnes of moly were produced globally. That’s only 3,000 more tonnes than was produced in 2006.

That’s a growth rate of less than 2%...it’s not going to cut it.

China, Chile, and the United States produced 78% of the world’s moly last year. We all know China is willing to go the extra mile to put mines into production. Chile is a mining friendly country focused on copper, not moly. In fact copper mining accounts for 7% of Chile’s GDP. Theoretically, the United States could ramp up moly production but permitting and environmental challenges make this difficult.

There is more moly supply coming on line, but at current growth rates it won’t meed short term demand.

Kevin Loughfrey, Chairman and CEO of Thompson Creek Metals, says, “We think the molybdenum demand relative to those other commodities is strong, and our outlook for the molybdenum continues to be good.”

Jonathan George, CEO of Creston Moly, stated a few days ago, “Molybdenum is trading at around US$33.85/lb but we see it moving up into the US$40/lb range in 2009 bcause there is a stranglehold on molybdenum supply.”

Moly has a lot going for it. Demand is growing and supply is not keeping up. But, all of that good news could be what makes us shy away from moly right now."

And the conclusion i alluded to earlier.

"Good News can be Bad News

As investors, we always have to look at the risk/reward situation.

Moly is in demand and new production is lagging, there just isn’t a big upside here. Moly prices have held up relatively very well during the recent downturn and many moly stocks have too. That’s good for current shareholders of moly companies, but not good for investors looking to get in now.

This year and 2009 should be good years for moly. However, that’s all expected to change in 2010. Freeport McMoRan (NYSE:FCX) has a new mine expected to increase world moly supply by 2%. In 2011 and 2012 there is even more new moly supplies slated to come on line.

The upside for Moly over the short-term is appealing, but over the medium and long term, the situation is not nearly as strong. High prices are the solution to high prices. In this case, high prices have attracted a lot of mine developers into new moly projects. Since we value stocks using long-term expected cash flows, new supplies will likely push moly prices down and reduce long-term cash flows, starting in 2010.

The moly industry even admits it. Jonathan George, who called for moly prices to rise 20% this year, also said, “"Once a lot more of these molybdenum projects get on line in 2011-12, then you'll probably see the price come back down to the US$25-30/lb range. But in the interim, there are a lot of potential molybdenum producers that just aren't getting permits and that won't be online as quickly as they thought.”

Though a price drop is anticipated, the industry is still expecting moly prices to stay more than 300% higher than the long-run average. Clearly, there are a lot of high expectations built into the moly industry.

At the Prosperity Dispatch, we stay away from stocks that are smothered in high expectations. High expectations often lead to disappointment in the stock market.

Moly likely has a few good years ahead of it, but the good news is already built into moly stocks. As a result, the downside risk offsets any upside potential. The odds are against us and it’s best to steer clear of shares of moly producers for now.

Good investing,



Andrew Mickey
Chief Investment Strategist, Q1 Publishing"


Well hope it gives you something to read and if anything, took your mind off the market troubles for a moment or so. This is not intended to be an upramp or downramp, just passing on information that some might not be aware of.

Banksy

"DMOR - Doing My Own Research"