Mad Money IGMI & MMGG
Silver Stock Report
by Jason Hommel, Jan 24, 2006
Last night, I saw Jim Cramer on "Mad Money" on CNBC and he said that we
have to use creative thinking when making investment decisions.
He was saying that oil pipeline demand will increase, and thus increase
steel demand; and in fact, Jim recommended a steel company, Oregon
Steel--see how creative that is? It's almost as good
as recognizing that inflation will be good for gold and silver, and
thus, silver and gold companies! But it's also amazing how more
pipelines will be bullish for molybdenum prices, since 75% of moly is
used in steel, and pipelines use a special kind of steel that is extra
high in molybdenum! Well, I decided Jim might be open to hear the
moly story, so I emailed him (email@example.com)
If pipelines will drive demand for
steel, then won't molybdenum prices remain high, because pipelines need
steel with molybdenum--the moly prevents corrosion.
Moly prices are up about ten times, from below $2/pound, to up to
$40/pound, and this means big profits for old, pre-drilled moly
The world's top molybdenum mining project is IGMI, Idaho General Mines.
Idaho General Mines (IGMI.OB)
36.8 million shares fully diluted (Jan 17th, 2006)-- after recent $3.8
million financing at $1.10/unit
$96 million Market Cap
--needs to raise $415 million capital to build the mine
Grade: .11%-.09% moly/tonne, starting with .118% for first 5 years.
--Production Cost per pound = $3.15/lb. for first 5 years.
Ore Reserves: 1.3 billion pounds moly.
Expected Annual production: 35 million pounds moly, for first 5 years.
raising $400 million should not be difficult if the company can earn
over $400 million per year as follows:
35 million pounds x $11.85/pound profit (at $15/pound moly) = $415
million dollars annual profit.
35 million pounds x $16.85/pound profit (at $20/pound moly) = $590
million dollars annual profit.
35 million pounds x $26.85/pound profit (at $30/pound moly) = $940
million dollars annual profit.
35 million pounds x $31.85/pound profit (at $35/pound moly) = $1115
million dollars annual profit.
If the moly price is high, at $35/lb., profits could be $1115 million
At a P/E ratio of 10, the company would have a $11 billion market cap.
With 90 million shares (after raising capital to build the mine at
$10/share), each share would
be worth $124/share.
IGMI is $2.62/share, today.
Correction: Production costs are estimated at $3.15/lb. over the
first 5 years, not $3.50/lb., as I had been reporting.
The News link here verifies that: Idaho General Announces
Exercising Mount Hope Molybdenum Property Option to Lease
To my surprise, today I noticed that Jim wrote the following only
yesterday, which goes to show that those in the mainstream, (Jim
Cramer) are catching up to what we've known for years, that this is the
beginning of a major metals bull market--one that could last a
Mine the Surprising Mineral Shortage
By Jim Cramer
1/24/2006 9:59 AM EST
This column was originally published on RealMoney on Jan. 23 at 10:54
a.m. EST. It's being republished as a bonus for TheStreet.com readers.
I sit here and peruse the downgrades and worries and handwringing about
Newmont (NEM:NYSE) and Freeport-McMoRan (FCX:NYSE) and Phelps Dodge
(PD:NYSE), and it gets pretty darned obvious to me that we don't have
enough minerals to go around.
This is a new problem, everybody. I always figured that when copper
kicked in, we would simply flood the market worldwide with production.
I also believed that Newmont had unlimited supplies. Now I wonder if
all the consolidation activity in minerals is because companies are
This is amazing.
Despite the runs in Companhia Vale do Rio Doce (RIO:NYSE ADR), BHP
Billiton (BHP:NYSE) and Anglo American (AAUK:Nasdaq ADR), I would
continue to buy these if only because we know they all have more. They
can meet demand.
But these other companies are running short.
If it weren't for the pro-Che man next door, I also would buy Southern
Copper (PCU:NYSE) right here, right now. Only Anaconda fears -- anyone
old enough besides me to remember that mining concern? -- and
nationalization, ahem, keeps me from bulling that one right here right
Mineral shortage. Who woulda thunk it?
Jim's former attitude is exactly what many thought. They thought
that higher prices for copper would stimulate plenty of copper
production to cool off copper prices. But copper is up from $.75/lb. a
few years ago to over $2.16/lb., with no signs of stopping. So,
people are waking up to the "mineral shortage", and copper inventories
remain at about 2 day's worth of world demand, due to several
factors. First, "just in time" inventory practices. Second,
copper investors have been vilified as "speculators" and "manipulators"
and driven from the paper futures markets. This means that paper
shorts dominate, but in the end, they ended up shorting copper they
didn't have. That means they promised to deliver copper they
don't have! The same thing has happened in silver and gold--too
many paper promises, and not enough investment in the real things.
There were similar thoughts about moly--that higher prices would simply
encourage enough production as it was thought to be very simple to add
a "moly circuit" to many copper mines. But, apparently, not even
the copper/moly mines can keep up with copper--perhaps due to being
diverted into focusing on producing more moly!
article, confirming we are in the right sector:
Supply of Metals Raises Concern --Jan 20th
Getting back to news regarding IGMI, which is the "lowest cost moly project"
that I think exists:
"As a steel additive, moly is used mostly in pipelines. For a
pipeline 30 inches wide by 1 inch thick, about half a tonne of
molybdenum is required for every [kilometer]."
Annual moly demand is about 370 million pounds, or about 168,000 tonnes.
A few days ago, I found this article "PetroChina
to build two oil pipelines" (bullish on moly, as moly is
used in pipelines). Remember, IGMI's moly project was drilled by
EXXON! The article actually discusses 4 pipelines to be built in
China, two more at the end of the article.
build two oil pipelines
Wang Ying (China Daily)
Updated: 2006-01-19 06:45
The nation's biggest oil producer,
PetroChina, yesterday said it has obtained the government's final
approval to build two cross-China pipelines.
These will pump refined oil, such as
gasoline and diesel, from northeastern and northwestern areas to
The two pipelines will start from
Lanzhou, in Northwest China's Gansu Province, and Jinzhou, in Northeast
China's Liaoning Province, and converge in Zhengzhou, in the central
province of Henan.
A further extension will reach Changsha,
the capital city of Hunan Province, south of Henan, PetroChina sources
"We received final approval from the
State Council a couple of weeks ago to start building the two
pipelines," said a senior PetroChina official, who did not want to be
Industry sources said Central China is
expected to suffer from severe oil shortages, which could see it short
of about 10 million tons of refined oil products in 2010.
Beijing-based PetroChina will be the only
builder and will invest about 12 billion yuan (US$1.5 billion) in the
construction, Zhu Shihou, an official overseeing energy projects at the
Henan Development and Reform Commission, said.
The PetroChina official said it would
take one or two years to build the pipelines. "So we expect, as
originally planned, to put the two lines into operation by next year or
in 2008," he said.
The pipeline from Lanzhou is expected to
carry 8 million tons of refined oil a year; the Jinzhou route is
designed to have an annual capacity of up to 4 million tons, local
media reports said.
The pipelines will pump oil from
refineries in north-eastern and north-western regions, which will
process crude oil imported from Russia and Kazakhstan. This will arrive
in China through cross-border oil pipelines, the PetroChina official
China and Kazakhstan in December jointly
announced the formal opening of their first cross-border crude oil
pipeline, which pumps crude oil from the Central Asian country to
Alashankou, in Northwest China's Xinjiang Uygur Autonomous Region.
The Chinese-Kazakh pipeline will
initially carry 10 million tons of crude oil a year.
Another pipeline project is also under
discussion between China and Russia, which could transport about 30
million tons of crude oil a year.
And even zinc
prices are screaming upwards, nearly doubling in the last
6 months from about $.50 to a new high
This is highly inflationary! It's not just copper, or moly, or
zinc, or lead, or steel, it's all of them. One of my friends who
was a "best man" at my wedding called me this week. He works with
metal, and is required to memorize all the different prices of the
different kinds of steel used in installing air conditioners.
With prices rising so fast in the metals, he certainly recognizes
inflation, even if our government is in denial. He just wishes he
could convince his parents, but feels rather helpless, since he does
not have a strong investment background. That's how I felt, about
6 years ago, in 1999 when I began to convince my father. After
all my Bible studies, I realized it was more important to help my
family, than to try and trust the government.
favorite silver/zinc stock right now is Metalline Mining, MMGG (OTC) ,
with a market cap of about $30 million, and has 4.9 billion pounds of
zinc resources, with potentially the lowest cost of production in
the zinc industry, and needs to raise about $300 million to
build the mine, but plans to produce just under 400 million pounds of
Zinc 101: The Future of Metalline Mining Company -- by David Zurbuchen, Jan 2006
Mining (MMGG) for the
long term Jan, 2006
Silver, Zinc, & Metalline Mining
-- Hommel & Duncan Hsia, March 19th, 2005
--one correction for the
article. The word "reserves" should be
Excerpt from my article: Bible Verses on how to Manage Money
Avoid the lures of communism, which is the result of
and stealing. Avoid insurance, and social security, which are
plans of communism. Trust in God's ways. God's ways are
that the family should take care of the family, and that the Church
should take care of widows. The way of criminals is the way of
communism, "let us all have one purse", which means that the family
does not need to take care of the family, because the state has taken
over the family duty.
Exodus 20:12 Respect your father
and your mother, and you will live a
long time in the land I am giving you.
1 Timothy 5:8 People who don't take care of their relatives, and
especially their own families, have given up their faith. They are
worse than someone who doesn't have faith in the Lord.
Proverbs 1:11 when they say, "Come on! Let's gang up and
kill somebody, just for the fun of it
12 let us swallow them up alive as the grave, and whole, as
those that go down to the pit;
13 we shall find much precious substance, we shall fill our
houses with spoil;
14 cast in thy lot among us, let us all have one purse""
15 my son, walk not thou in the way with them; restrain thy
foot from their path;
16 for their feet run to evil and make haste to shed blood.
17 Surely in vain the net is spread in the sight of any
18 And they lie in wait for their own blood; they lurk
privily for their own lives.
19 So are the ways of every one that is greedy for gain,
which taketh away the life of the owners thereof.