Two moly stocks: IGMI and AUA

Silver Stock Report

by Jason Hommel, Feburary 1, 2006.

Moly prices, as you know, are up in price nearly ten times, from $2/lb. to $23.50/lb., hitting a recent high of $40/lb.!

75% of the annual use of moly is in steel.  As you may not have noticed or heard, steel stocks are screaming upwards right now on anticipated high demand for steel continuing from China.

Moly is typically a small cost componant of steel.  Or, it is a necessary componant of high moly specialty steels.

Thus, moly prices will likely move up more, further, faster, than steel, as moly has already done!  Thus, we can expect continued strong high prices for moly, greatly increasing potential profits, and increased chances of permitting and mine financing.

I personally believe that the moly shortage, and high moly prices, are evidence of the beginning symptoms of hyperinflation, and that this cannot be resolved except with much, much higher gold prices, such as gold over $3000 to $10,000/oz. in 2006 dollars.  At very high prices for gold, more moly can be produced in many very low grade gold/copper/moly projects that have much lower grades of moly than the companies below.   These are likely the very best moly projects in the world.

Yesterday, Ken Reser wrote a great article explaining why he is bullish on moly, and he promoted his moly stock Adanac, which moved up strongly in price today.

This means that there's big money to be made in mining moly these days, and there is growing interest from investors!  Here are two of the top, most advanced, moly mine projects, both with feasibility studies, both looking for permits, both looking for just over $400 million in financing to build a mine, and here's how they compare:

Idaho General Mines
36.8 million shares fully diluted (Jan 17th, 2006)-- after recent $3.8 million financing at $1.10/unit
@ $3.07/share
$113 million Market Cap
Needs to raise $415 million capital to build the mine
Grade: .11%-.09% moly/tonne, starting with .11% for first 5 years.
Production Cost per pound = $3.15/lb.
Ore Reserves: 1.3 billion pounds moly.
Expected Annual production: 35 million pounds moly, for first 5 years.
(53 year mine life!)

From a Research Report (Dec. 21, 2005)
51.3 million shares
fully diluted (Dec. 21, 2005)
@ $.84/share Cdn
x .87 US/Cdn = $.73 US
$37.5 million Market Cap
Needs to raise $414 million capital to build the mine
Grade: .06% moly/tonne
.06% moly/tonne x 2200 pounds/metric tonne = 1.32 pounds/tonne x $23.50/lb. = $31.02/tonne rock.
Cost to process the ore: $10.93/tonne milled / 1.32 pounds/tonne = Production Cost per pound
Production Cost per pound = $8.28/lb.
Ore Resources: 270 million pounds moly.
Expected Annual Production at mill rate: 20,000/tonne/day x 365day/year x 1.32lb.tonne= 9.6 million pounds moly.

What kind of profits may be realized?

I'll assume IGMI raises $500 million at $10/share to finance the mine, adding 50 million shares.
Assuming 100 million shares by then.
If moly prices stay at $23.50/lb. - cost of $3.15/lb = $20.35/lb profit.
35 million pounds of production x $20.35 = $712 million annual profit
At a P/E of 10, this implies a market cap of $7.1 billion / 100 million shares = $71.2/share, and IGMI is $3.07/share today.

I am also bullish on zinc, which is also used in steel, and moving up strongly in price, up to $1.06/lb.
See my recent report on the silver/zinc company MMGG:
MMGG: Here’s why you will make a fortune on zinc.  (January 28th, 2006)

IGMI is also going to be drilling for zinc on their Mt. Hope property, as they encountered two zones of moderately high grade zinc as follows:

From 39 to 83 meters depth: 44 meters (144 ft) assayed 9.1 % Zinc
From 129 to 144 meters depth: 15 meters (49 ft) assayed 9.3 % Zinc

Idaho General Announces Drilling Plan for Evaluating Zinc Mineralization at Mount Hope
Wednesday January 18

For my prior articles on IGMI, see:

Final Disclaimer:  I own shares of IGMI and MMGG, and nobody has paid me to write this email. (I cannot sell any stock for at least one week after a promotion such as this one.)  My emails are now going out to 18,700 email addresses, and the emails are opened by about 5000 people.  Typically, about 1000 or less click on the links.


Jason Hommel

Excerpt from my article: Bible Verses on how to Manage Money

Diversify.  Invest your money with wise and honest men for the sake of safety, because you do not know what bad or unexpected things may happen.  Although there is no safer investment than gold and silver in your possession; however, they can be stolen, so invest with others, like mining companies.

Ecclesiastes 11:1   Be generous, and someday you will be rewarded.
2   Give a portion to seven, and also to eight; for thou knowest not what evil shall be upon the earth.