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Investment Thesis
• Record high molybdenum prices. Tightening supply and growing demand has driven the price of molybdenum from the $2-$3 per pound range where it languished throughout much of the 1990s, to its current level near $30 per pound.

• Strong demand fundamentals. The growing production of construction steel(32% of end use) and stainless steel (31% of end use) has driven molybdenum
demand for its lightweight, high-strength and anti-corrosive properties. Demand for molybdenum-bearing construction steel (0.1%-1.2% Mo) continues to grow, fuelled by the oil and gas, ship building, aerospace and building industries. Stainless steel (1%-7% Mo) production has grown at a compound rate of 8% over the past five years and shows no signs of slowing down.

• Tight supply. Traditional producers of molybdenum have seen production rates decline. Codelco, the world’s second largest molybdenum producer, has
reduced annual production by 10 million pounds due to falling head grades. A further 11 million pound reduction is possible this year. Freeport McMoran
(Phelps Dodge) is considering reopening past mining operations or adding molybdenum recovery circuits to boost Mo by-product recoveries at their copper operations.

• Long lead time for new production. There is currently no significant excess standby supply at the mine level ready to be brought back into production,and limited new development of primary molybdenum mines has resulted in
long lead times for greenfield developments.

• Chinese molybdenum exports are falling. China is the third-largest producer of molybdenum and historically one of the largest exporters. The country’s exports are declining as its voracious appetite for steel has redirected domestic production. Additionally, more stringent regulatory enforcement and taxing of
exports have curtailed production from many small mines.

• High molybdenum prices likely to continue. Molybdenum consumption has grown at a compound annual rate of 5% over the past five years and now
stands at approximately 400 million pounds per annum. Assuming annual demand growth of 4% going forward, annual global molybdenum production will need to expand by 75% to 700 million pounds by 2020.

The Companies
• The market is rewarding molybdenum producers. Blue Pearl Mining, the largest publicly traded primary molybdenum producer, has seen its stock price appreciate by 340% in the past 12 months. But other companies have stepped up to meet the demand and are planning new projects. In this
Prospects publication we profile not only Blue Pearl, but also nine other companies that are developing molybdenum assets.