In the news:Moly producers predict prices of US$19 per pound,...

In the news:

Moly producers predict prices of US$19 per pound, say demand to be led by China

By Kristine Owram (CP) – 6 days ago

TORONTO — Explosive Chinese growth over the next 15 years will bring tightness back to the molybdenum market that's been hit hard by the global recession, say producers of the metal used to strengthen steel.

However, industry players say it's unlikely moly prices in the foreseeable future will return to highs of US$25 to $35 per pound that were common before the global economy sank last fall.

Norman Ting, managing director of metal-trader Wogen Pacific Ltd., predicted Chinese demand will send moly prices - which have already climbed from lows of approximately $8 per pound to above $12 per pound - to between $18 and $19 a pound on Chinese stimulus spending.

Fact: Moly is $US12 lb, that’s $US8 lb less than it needs to be for any of these projects to get funded and its 64% below its $US33 high point.

A long way to go for Moly and keep in mind it’s the Chinese stimulas package that got it from $US8 lb to $US12lb.

VWM needs another $4M just to fulfil its farm in expenditure (3 year time from when they started).

They are now buying a company with a $US50M liability hanging off it and which requires VWM to inject $US10M into it to get it up an running.

So VWM needs to find $US4M + $US10M = $US14M to just tread water. Then me have the no small matter of paying off $US50M until 2015. One assumes they intend to do this from future cashflow but no numbers are provided.

Basically, this is a totally unbankable very high risk deal that is beyond belief.

Even if it was somehow able to be done with a whopping equity injection, VWM shareholders will have to be diluted into oblivion.

This may be the years worst deal attempted.

Good luck.