Two moly stocks: IGMI and AUA
Silver Stock Report
by Jason Hommel, April 25th, 2006
Good news for moly stocks!
If you don't see the chart, see this link:
Idaho General Mines (IGMI.OB) -Blue line in chart above (I own shares of IGMI)
60.1 million shares fully diluted (March 13, 2006) -- after $30 million financing at $2/share.
$192 million Market Cap
Needs to raise $416 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!)
Adanac (AUA.V) -Red line in chart above
From a Research Report (Dec. 21, 2005)
52.5 million shares fully diluted (March 13, 2005) --after $500,000 financing at $.80/share.
@ $2.10/share Cdn x .88 US/Cdn = $1.85 US
$97 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: 11.3 million pounds moly, for first 5 years.
(Adanac, in the most recent feasibility study, lowered their costs by about 4% less, and increased production estimates by about 18% to 11.3 million pounds of moly per year for the first 6 years.)
Those who wish to trade both AUA.V and IGMI.OB may wish to keep the following in mind:
1. Since IGMI.OB aims to produce about 3 times as much moly, at lower costs per pound, and 1/3 the capital costs (proportional to production), IGMI's market cap may be be valued at about 3 times higher, or more. (Currently, IGMI is only about twice the market cap.)
2. IGMI has about 4.8 times as much moly in reserves as AUA.V has. I don't think this means that IGMI should be valued at 4.8 times as high, because it will take IGMI much longer to extract those reserves.
3. IGMI has higher grades of moly, about 1.5 times richer grades, (.09% vs. .06%)
4. Both companies completed recent financings, and IGMI raised significantly more capital. We should probably expect to see IGMI be financed to production first, because both projects cost will cost about the same, and IGMI will produce about three times as much moly per year, and at a lower cost per pound of moly produced.
5. AUA.V claims that they will be in production sooner, but such a claim depends on receiving a timely permit, and on receiving financing, and perhaps other factors, such as acquiring the large tires needed for mining trucks!
Both companies will probably be hit by the severe, world wide, mining tire shortage:
See the following: "mining tire shortage" at google.com
Big-tire shortage big-time concern: State's contractors, miners affected
The Arizona Republic -- Jun. 17, 2005
OTR tire shortage could hinder mining boom
January 4, 2006
I do not know how the mining tire shortage will affect these companies. The shortage may be over by the time they reach production? (I'm just a promoter and thinker, not an engineer.) It may result in one or more of the following;
1. Delayed production.
2. Higher prices for the company's cost of production estimates.
3. Higher prices for moly, as less moly projects will be able to be put into production.
4. Revised mine plans, requiring the use of alternate means of transporting ore, such as through conveyor belts?
IGMI's recent $30 million financing at $2/share will do several things. First, it will help establish a new, higher, floor for the stock price at or slightly above $2/share. Second, it will provide the company with enough money to complete an AMEX listing, and get through the permitting stage. In fact, it may significantly accelerate the permitting process to less than 1.5 years (instead of 2 years).
Since IGMI recently raised $30 million which resulted in further dilution, and since the moly price increased to $25/lb., I figureed I should update my share price target for IGMI. (Remarkably, the target price is about the same!)
Target price for IGMI once in full production:
I'll assume IGMI raises $500 million at $10/share to finance the mine, adding 50 million shares.
Assuming 110 million shares by then.
If moly prices stay at $25.00/lb. - cost of $3.15/lb = $21.85/lb profit.
35 million pounds of production x $21.85 = $764 million annual profit
At a P/E of 10, this implies a market cap of $7.6 billion / 110 million shares = $69/share.
Target price = $69/share.
Today IGMI is $3.20/share.
For my prior articles on IGMI, see:
Molymania has Just Begun --February 9th email.
Big Money in moly stocks: IGMI & AUA --February 2nd email.
IGMI: My Moly Stock --January 17th email.
Final Disclaimer: I own shares of IGMI, 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 21,500 email addresses, and the emails are opened by about 7000 people.