|
Good Morning Readers.
Today I
want to focus on one of my favorite holdings, General Moly (GMO). I've done
my homework, talked to the CFO, I’ve talked to the head of media
relations, Zack Spencer, and I have studied my charts. I can make this
statement without reservation. Today, General Moly is trading at long term
support level and it is on sale. There is a reason for this and I will go
into that shortly. First let me tell you about molybdenum (pronounced –
mo-Liden-um).
Molybdenum
is a Group 6 chemical element with the symbol Mo and atomic number 42. The
name is from Neo-Latin Molybdaenum, from Ancient Greek, meaning lead since
its ores were confused with lead ores. The free element, which is a silvery metal, has the sixth-highest melting
point of any element. It readily forms hard, stable carbides, and for this reason it is often used in high-strength steel alloys.
Molybdenum does not occur as the free metal in nature, but rather in various
oxidation states in minerals. Industrially, molybdenum compounds are used in
high pressure and high temperature applications, as pigments and catalysts.
OK the
chemistry lesson is over. Here’s what’s important. Molybdenum is
very rare. There is not a lot of the stuff around. Because it is used in the
creation of light weight super strong stainless steel that is also resistant
to high degrees of heat it is a very coveted element. It’s used in
every conceivable application where steel would be used but more important,
because of its ability to withstand high pressure and high temperature it is
used to build oil rigs and nuclear reactors. So as I said, there is a severe
shortage of Molybdenum and the world needs a lot of it. The Mt. Hope project
which is located near Eureka Nevada is public land but General Moly has a
secure long term lease. This is important and I will get to why in a moment.
For now it is important for you to know that the Mt. Hope project is largest
and highest grade surface Molybdenum deposit in the world. It is a
true find. GMO also owns the Liberty project in central Nevada and between
the two they will control the largest undeveloped molybdenum deposit in North
America.
OK. Why
is it so important that the My Hope project is on leased public land? There
is no way the project can be fast tracked. The permitting project needs to be
"by the book - chapter and verse." I spoke at length to the head of
media relations, Zack Spencer, and he told me that this project will get
permitted but because of the fact that it is government owned land, the
Bureau of Land Management (BLM) inspectors are covering all of the bases to
make sure nothing gets by them and it will take as long as it takes to get
the permits. We are talking about government bureaucrat’s protecting
their government jobs. I guess in today’s tight job market, no one can
really blame them. When I first recommended this company it looked like the
permits would move along in a timely pace but there was an environmental
impact study that had to be re-done regarding the water permits and this has
slowed down the process. There is no question that the company will acquire
the permits but it looks like it won’t happen until the fall of this
year. When it does there is a big loan from a Chinese bank that will be
released to them and the project will move along quickly.
When I
first started learning about this company I recommended to my readers that
they buy this stock for $6.25 or lower. I have a pretty sizable stake @
$5.47. Yesterday this stock was trading as low as $4.30 and closed at $4.47.
Yesterday, I doubled my position at $4.45 because my charts show a strong
level of support at the $4.50 level. See the enclosed chart below.
China,
Japan and South Korea’s stainless steel demand is increasing rapidly
and there have been major investments into the infrastructure and power of
this project. It is important to note that while China is the largest
exporter of Rare Earth Elements they have become a net importer of molybdenum
causing Japan and South Korea to seek supply from the West. As China is
seeking ways to diversify out of U.S. Dollars it hopes to gain control of
critical natural resource assets. I am sure that the selling yesterday was
not from the South Koreans or the Chinese. I can only assume the selling was
from the “faint of heart” investors who bought in before the
water permit issues arose pushing back the permitting of this project.
Forgive my pun but in the case of General Moly nerves of “steel”
will be rewarded if you have the patience to wait. We have to remember that
this mining stock is a long term investment and the permitting problem has
presented astute investors with an opportunity to buy in at long term support
and extremely oversold levels. I predict that General Moly will not last long
under $5.00 and I believe that over the next 12 – 18 months we could
see a possible triple in value. I also would not be surprised if a Thompson
Creek, a major miner of molybdenum, which has just backed out of a deal with
U.S. Energy on a molybdenum mine will take a hard look at this project.
Having said this, Zack Spencer told me that the company is going about its
business with the intention of making General Moly a major miner and the
world’s largest supplier of molybdenum. Either way it plays out I
recommend to my readers that they take a hard look at this stock at these
levels, as patience will surely be rewarded.
Google InvestingAdvisebyGeo on YouTube for a
video I hope to post today or tomorrow.
Stay Tuned for Updates!
|
