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Good Morning Readers.
Yesterday General Moly held a
presentation for Goldman Sachs and from my sources in Nevada it was a
stunning success. Bruce Hansen seems to be able to take the most complex
concepts and distill them down into very clear lucid thoughts. As I predicted
last week GMO would not last long at $3.50 or $4.00. It closed yesterday
above the 200 day moving average and today it was pennies short of the 50 day
moving average. When I studied the chart today it scared me to see how close
this stock came to the feared “Death Cross.” For some of my
readers who don’t know what the “Death Cross” is, it is
when the 50 day moving average crosses under the 200 day moving average. It
is almost always a sign of bad news.
Well, what a difference a couple of
days make! To be honest I never feared it because as I have been drilling
into my readers as Professor Newcomb drilled it into Bernard Baruch –
it is the law of supply and demand. China used to export 97% of the worlds
Rare Earth Elements (REE’s). Now we are not sure how much they export
as they stockpile these ores, maybe rightfully so, for their own use. First
they were cutting their exports by 37% and then it was 50%. It changes every
day. The Chinese are very
fine people but when it comes to the Chinese government they do not do
anything that is not in their best interests. So while they are exporters of
REE’s to the world they are actually net importers of Molybdenum.
When I first learned about General Moly I
could not even pronounce molybdenum (mo-Liden-um). Then I learned what
molybdenum was and what it was used for. I learned that they had a first
class management team led by Bruce Hansen. [Ed. Note: when I look for
companies to buy one of the first things I find out is if the company has a
first rate management team.] I learned that you can have all of the iron ore
in the world but to make steel molybdenum needs to be introduced into the
mix. Then I learned that General Moly was in Nevada and that Nevada just
happens to be one of the world’s most friendly mining jurisdictions.
Then I learned that while the Chinese had all of the REE’s in the
world, what they didn’t have was molybdenum. Finally after I did my
homework I knew that the Chinese would not let this plumb escape their grasp.
General Moly, between their Mt. Hope
project and their Liberty project sits atop the largest undeveloped deposit
of molybdenum in the world and the Chinese, South Koreans and Japanese need a
lot of it. It was not long before China and lest we forget their equally
industrious neighbors South Korea and Japan sank millions of dollars into the
empty coffers of General Moly. So now General Moly has three
“partners.” In China they have the Hanlong Bank. In South Korea
they have the giant steel company Posco and in Japan they have a major
trading company, Sojitz. Even CEO, Bruce Hansen, has been picking up shares
on the open market and last week bought 25,000 shares when the stock dipped
below the $4.00 level and is now approaching ownership of close to 800,000
shares.
China is getting a taste of their
own medicine as institutions that know of China’s shortage of
molybdenum would have then scrambling to find vital molybdenum assets. Mercator Minerals paid a 38% premium
for Crestor Moly, which is far less advanced than General Moly in the mining
process. We also have Hudbay Mineral which is taking over Norsemont Mining
for millions of dollars.
Yesterday
morning, CEO, Bruce Hansen presented a Power Point presentation
to Goldman Sachs investors that were assembled I Eureka Nevada. The first
hyperlink will take you to a recording of the live presentation and the
second hyperlink will take you to the power point presentation.
The chart above shows that GMO has returned to a $5.00 level of
support for the fourth time. Take notice that the stock has made a healthy
break above the 200 day moving average and is getting close to breaking the
50 day moving average. I expect that when the permitting process is concluded
in the third quarter this stock will easily be trading between the $7.50 to
$10.00 range. Once the company begins production in 2014, if we use
today’s price of molybdenum of $16.50 per pound the stock should be
trading in the $17.00 range. If the price of molybdenum was to rise the price
of the stock would trade higher proportionally.
Please
stay tuned for further updates and look for a video on YouTube today
regarding this post.
Have a great weekend!
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