first majestic silver

Adanac Moly Corp.

Technical Analyst, Precious Metal Investor & Author
August 14, 2006
MOLYBDENUM - MOLYMANIA!
"Little known metal now in big demand".
 

Molybdenum is a hard, grey, metallic element used to harden steel alloys. Its alloying versatility is unmatched, because its addition enhances strength, hardenability, welding toughness, elevated temperature strength, and corrosion resistance.

The demand for molybdenum (moly), is currently exceeding production, and the price is a reflection of this demand. Gold may be up by 300% since commodities bottomed in 2001, silver up by 350%, copper has increased 500%, nevertheless the one commodity that is well ahead of the field is molybdenum.

In just 3 years moly prices have skyrocketed from 2.00 in 2002 to 26.00 a pound in 2006, an increase of 1200%. Demand for moly comes from many segments of the economy, but primarily from the oil and gas industry, as pipelines demand incredible amounts of hardened steel. A recent US report estimates the demand for natural gas alone will require a 30% increase in pipelines.

Moly has no substitute. It is essential in the construction of drill stem steel tubing used by oil and gas drillers, and in the building of ships, bridges and skyscrapers. Nearly 62 percent of the metal comes as a bi-product from copper mining, as pure moly deposits are even scarcer than moly itself.

One of the essential features of moly is that it is anti-corrosive. If B.P. had used more moly in the construction of its Alaska pipeline, they might have been able to prevent the recent leak. Moly is also being used in the conversion of coal to hydrocarbon liquids. This application has unlimited potential, as oil and gas become scarcer, and the world turns to alternative fuels.

Moly is also vital to the booming nuclear power industry, with hundreds of new plants either under construction or on the drawing boards.

The world-wide trend towards cleaner air, despite an ever-increasing number of motor vehicles, is also adding to the need for moly as a catalyst. The rapid increase in the price of moly has created an opportunity for moly producers and explorers to cash in on this bonanza. Most of the moly that is presently being mined is coming into the marketplace from large companies that mine copper, as moly is most often found where there are copper deposits.

Miners are now frantically searching the planet for moly sources. Several junior exploration companies have moly projects in British Columbia. One of the most exciting prospects is Adanac Moly, headed by Mr. Larry W. Reaugh, who has been interested in moly for a number of years, and when he perceived that moly demand was beginning to overwhelm supply, he moved in, and acquired the 10,000 acre Ruby Creek moly deposit in B.C. The property was known, for at least 40 years, to have moly in abundance, but low prices kept the previous owners from developing the site.

Thanks to the vision of its CEO, Adanac Moly (TSX.V:AUA; Pink sheets ANCGF; Frankfurt A9N) has recently completed its final feasibility study, conducted by Wardrop Engineering, which indicates that the Ruby Creek moly deposit has the potential to earn a billion dollars or more over the next 20 years. The report estimates that at current moly prices the mine payback period is 3 years.

Adanac Moly is planning a 20,000 ton open pit mine with measured and indicated (43-101 compliant) resources of 286 million pounds of moly. The Ruby Creek molybdenite occurrence is, according to the Table of Significant Porphyry Molybdenum Resources in B.C. (contained in British Columbia Ministry of Energy and Mines geofile report #2005-23) one of the largest unexploited known moly deposits in B.C.

Production is expected to commence late 2007, or early 2008. Once in production, Ruby Creek has the potential, at current moly prices, to generate 75 to 80 million dollars (Cdn) per year. Even if the price of moly should drop to $8.00/lb, the operation is still expected to generate a profit.

On June 28th 2006, Adanac began 45 degree angle drilling. This type of drilling is required for metallurgical testing, but will also determine whether vertical fractures contain significant amounts of moly. Bulk testing of 10,000 tons surrounding 6 drill holes by Kerr Addison in 1969 resulted in a remarkable 20% increase in grade. Drill results from current drilling, are expected to substantiate the theory of mineralized vertical fracturing, thereby increasing the resource by an estimated 20%, as well as reduce the cost of production to below 5.00 a pound.

This will obviously increase the resources, and make the profit potential even greater!

In addition to very positive fundamentals, the technical picture is also bright, as indicated by the enclosed chart, courtesy www.stockcharts.com

The green vertical dashed line marks the end of a 3 month correction, and the start of a new uptrend, confirmed by an ABC bottom, right at the 200DMA, (red line on the chart). A new channel has opened up, with the near-term target at 1.80

The RSI and MACD are positive, with room to move up along with the price.

As if to put icing on the cake, Larry Reaugh has acquired 3 more moly properties for Adanac, all three are in Nevada, and all three have moly in the ground!

 

August 14, 2006

DISCLAIMER:

Please do your own diligence, I am not responsible for your trading decisions.

 

Peter Degraaf is a successful on-line trader who sends out occasional E-mail alerts. He offers a 60 day free trial. He also sends out a free E-mail message to people who are confused by some of the terms used. It is called: Explaining the terminology. Contact him at [email protected]

Peter Degraaf became interested in silver and gold when the Governments of the US and Canada proceeded to remove silver coinage from circulation in the mid 1960s.

He noticed the effect of Gresham’s law:  “Bad money drives out good.” He became a coin dealer, attending coin shows all over The US and Canada. In 2001 he semi-retired from coin sales and concentrated on investing in precious metals. He mastered the art of technical analysis and applies this to his investments. In 2001 he started publishing a daily and weekly market report.  His website is at http://www.pdegraaf.com/.


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