Anticipation of a new fund that will invest in molybdenum stocks sparked a market rally in nearly anything and everything related to the rare metal yesterday.
As resource guru Eric Sprott was in Toronto marketing his Sprott Molybdenum Participation Corp. ahead of an initial public offering that hopes to raise $75-million, shares in companies who produce "moly," as it is generally called, and many who simply own moly development projects were rocketing higher.
The world's largest publicly traded pure play moly producer, Blue Pearl Mining Ltd., saw its shares hit a year high. The stock gained 72 cents or 6.5 per cent to $11.68 on the Toronto Stock Exchange.
Few investors had even heard of moly, which is used primarily as a hardening agent in the production of steel and high-grade stainless steels, until the recent rally in metal prices.
Soaring values for better known base metals such as nickel and copper have been well documented and the boom in uranium stocks has persisted for more than a year. It appears some investors searching for the next big commodity play are betting on moly.
"It really seems to have captured people's imagination," said Ian McDonald, the executive chairman of Blue Pearl. "I don't know if its just for a few days or the flavour of the week."
Mr. McDonald suspected that some buyers of moly stocks may have been trying to get ahead of the expected investment's by Mr. Sprott's molybdenum fund.
The Sprott Molybdenum Participation Corp. intends to use more than half of the proceeds from its IPO to invest in moly-related stocks. It also plans to buy actual molybdenum, which may tie up more supply from an already tight market. Blue Pearl has been named as an adviser to the moly fund.
The price of molybdenum was unchanged at $29.15 (U.S.) per pound yesterday, according to Bloomberg data. The price has gained approximately $5 in the past month.
Other soaring moly stocks yesterday included Moly Mines Ltd., which is developing the Spinifex Ridge molybdenum-copper project in Australia. Moly Mines shares jumped 71 cents (Canadian) or 27 per cent to $3.34 in heavy trading in Toronto, where its shares have more than doubled in the past month. Last week, the Perth-based company said it had been granted mining leases by the Western Australian government covering the Spinifex project, bringing it a step closer to development. It also appointed a number of executives to positions related directly to the project.
Another moly high-flyer was White Rock, B.C.'s Adanac Molybdenum Corp. The company, which derives its name from "Canada" spelled backward, saw its shares surge 25 per cent on the TSX Venture Exchange. Adanac is developing the Ruby Creek moly project in northwestern B.C. Its stock climbed 41 cents to $2.03.
President and chief executive officer Michael MacLeod said the financial community has recently woken up to the potential for moly miners, following the successful creation and debut of Blue Pearl.
"In the last two years, we've gone from people that can't say the word, to people who are intimately familiar with the workings of the market," Mr. MacLeod said in an interview. Capital costs to build the Ruby Creek mine are estimated at $456-million and Mr. MacLeod said the company is hoping the sudden interest in moly will help attract a development partner.
With just 400 million pounds of metal produced a year, the moly market is susceptible to supply disruptions. This month, China said it would impose a quota system, restricting moly exports to those who produce more than 3,000 tonnes per year. The measure is designed to crack down on small "mom and pop" moly mines that are common in China.
Some observers believe the new quota system could reduce the amount of moly exports from China, creating further price pressures on an already tight market.