Here’s today’s big fat promise:
“YOU can cash in up to 2,682%…
“As a tiny Canadian mining company taps into a $60 billion deposit of one of the most crucial metals ever discovered.”
Sounds pretty good, eh? I confess to only having had a couple investments show that kind of return in my life, and they were wildly lucky lottery pick options trades — not the kind of thing that you can build a portfolio around or predict. So what the heck are they talking about?
This is an ad for the Hard Money Millionaire newsletter from Luke Burgess … and to let you know how overwhelmingly lusty he’s feeling about this one, I’ll just jump down to the P.S.:
“P.S. If recent history is any indicator, the move to retain an investor relations firm may be the last thing we hear from this company before their stock goes into orbit. With the drill test results analyzed, and the extraction strategy determined, I’m looking at one week – two on the outside – before this opportunity dissolves into a landslide of gains for stockholders. Be ready before it happens.”
I don’t know if things are still the same as back when I was toiling in the direct mail copywriting pits doing charitable fundraising, but back then they always told us to focus on the P.S. first — almost everyone turns over a letter to see who signed it, and the P.S. catches their eye even if they don’t read the whole thing. Does it really work with online and email ads, too? I have no idea, but certainly old habits die hard — and I know a lot of folks “scroll down” to see what’s at the bottom before they read the article in full (if they do that at all), so maybe the “focus on the P.S.” lesson is still as strong today as it was a couple decades ago.
Really, you’re not here to learn about my shady past as a fundraiser, though, you’re wondering what the heck they’re talking about that could generate 2,682% returns … right?
Well, in this case it’s a molybdenum mine. Or more accurately, a big plot of land with some holes drilled into it that might be a mine in a few years.
We’ve seen molybdenum resources teased before — I suspect it’s partly because most folks don’t really know what it is, so being able to say that it’s a critical, unknown metal that goes into everything makes for a nice sales pitch … like this:
“Because your life – and the lives of everyone you know – depends on it every single day.
“Molybdenum (muh-lib-duh-num), or moly for short, is a key ingredient in the high-strength alloys that allow our energy, manufacturing, and transportation industries, (just to name a few), to function.
“In fact any metal designed to resist heat, contain extreme pressure, hold up under tension, or maintain electromagnetism, most likely contains this element.”
So yes, moly is critically important — it’s also quite abundant, mostly in copper mines but also in primary molybdenum mines around the world … and the price has been very volatile in recent years.
Burgess also teases that the supply picture is perilous …
“And today it’s running out.
“Thanks, in large part, to a recent Chinese campaign to hoard every ounce of moly they can get their hands on, for the first time ever, global supply is lagging far behind demand…
“About 31% annually at last count….
“With China suddenly a net importer of this once plentiful element, other major consumers – namely the United States, European Union, and India – are scrambling for new sources.
“The result: We’re now in a perfect storm scenario for a commodities rush unseen since the 1970s Hunt Brothers’ campaign to monopolize silver.”
And it doesn’t take long before we get into the heart of the tease — it’s not just that moly is scarce and critically needed, it’s that there’s a huge stockpile of it being held by one tiny company. Come on, you knew that was coming, right?
“However, a solution has surfaced at precisely the right moment in time.
“A tiny mining exploration company, operating out of British Columbia and worth just $70 million dollars…
“Is now in sole possession of a molybdenum reserve worth a staggering $60 billion!
“… Making it the biggest untapped moly deposit in the world.
“… Big enough to supply global demand, at its current rate, for the next decade.
“The reserve is so huge, actually, that every time this metal’s price goes up 5 cents… the value of the property jumps by $200 million.”
And then we get into some more details about why this company and its resource are extra-critical:
“The Moly Play that Stands Far above the Rest – Literally
“In the world of moly, there isn’t anything like this, anywhere.
“Like I said before, this micro-miner recently cornered a molybdenum reserve that’s three times bigger than the next biggest known moly resource…
“And right now, they’re sitting on the edge of a truly historic development program.
“On Feb 24th, the results of a massive on-site drill test were released.
“With 801.4 meters (2632 feet) of test holes drilled and analyzed, not only was the deposit’s size confirmed, but the specific positioning of the moly mineral itself was determined.”
Burgess also included a chart that listed the “world molybdenum resources” at various known deposits around the world — and the “censored” one was, of course, the company we’re being teased with today … three times bigger than the next largest resource, Mt. Hope, which is followed by Mineral Park, Thomson Creek, and Spinifex Ridge, among many other smaller ones. Of course, the chart also neglects to include the large resources and reserves at mines that are operational.
And they compare the potential of this stock to the huge run made by Northern Dynasty, which is a partner in the huge potential moly mine in Alaska (the Pebble mine, which potentially is one of the several that are larger than this teased resource and not included in the chart) — Burgess even make this comparison:
“However, with a starting market cap about 2.8 times smaller than Northern Dynasty – and an untapped moly reserve a full 75% the size of Northern Dynasty’s in-ground resources…
“A straight linear comparison would put growth projections for the company I’m talking about far higher than Northern Dynasty’s 460% run.”
Which makes some degree of sense — but only if we don’t think about the fact that Northern Dynasty is primarily of super-sexy interest because of the gold in their potential mine, not the molybdenum. Not that the moly is inconsequential in the Pebble Mine, at current prices the gold resources are theoretically worth something like $75 billion and the moly is around $50 billion, by my back of the envelope calculations, but the huge gold reserve is what has investors hot and bothered (and of course, the mine is one of the most hotly contested I’ve ever seen — it may never be built).
So take that comparison to the Pebble Mine with a grain of salt — but yes, Burgess says that he sees massive returns ahead for his favorite top-secret moly project:
“more than 50% growth… each and every month for the next two years.
“But like I said, this is an EXTREMELY conservative estimate…”
And molybdenum prices have already risen over the past quarter or so by a good chunk, bottoming out just under $10 a pound and coming back up to the high teens (I don’t have really good moly prices, but there is a futures contract on the LME and enough moly producers put up charts that I get the gist) — but the price has certainly been far, far higher in the past, routinely trading over $30 a pound in 2007 and 2008.
And then we get into the urgency of the tease:
“The problem is, as hot as this opportunity may sound right now, I can’t guarantee how long it will last…
“You see, with these drill results now focused on pinpointing exact locations… And with the impending arrival of spring about to soften the ground and optimize conditions for mining…
“The commencement of operations is not far off.
“In fact, recent moves by management indicate that interest in this stock is expected to jump dramatically in the very near term.
“A couple weeks ago, this firm retained a major North American investor relations firm in anticipation of an unmanageable influx of new stockholders… A firm that specializes in servicing the investor-management needs of medium and large cap companies.”
OK, so that gives us more than we need to solve this puzzle … the stock being teased by Burgess must be …
Mosquito Consolidated Gold Mines (MSQ in Canada, MQCMF on the pink sheets)
They’ve actually hired two investor relations and communications companies this year — the first is Faessel Publishing, and if you want to get an idea of the kind of promotional backing they’ve been putting behind the shares you can see Dr. Faessel’s “commentary and insights” on Mosquito here [pdf file]. The investor relations contract agreement was announced in January. That’s clearly a more promotional relationship, but they did also sign up a new investor relations firm who’s not receiving stock options more recently, Renmark Financial Communications. So they’re clearly focused on getting the word out.
Mosquito carries the old name of a gold mine in British Columbia, and is based in Vancouver, but is not a gold miner at the moment. They do hold a number of potential gold resources in their portfolio, mostly in Canada — but it doesn’t look like they’ve been doing much of anything to advance those projects of late, the real focus has been on their molybdenum projects, the main one of which is what’s being teased here as the biggest untapped moly resource in the world –it is called CUMO, and it’s in Idaho.
And yes, the potential is staggering if you take the resources of the CUMO site and multiply them by the current molybdenum price — but that’s not particularly surprising, the potential value of in-the-ground minerals almost always sounds outlandish and staggering compared to the current value of the company, especially when there isn’t even a feasibility study for extracting those minerals yet.
If you’d like to see the large CUMO resources stacked up against the other untapped moly resources in a chart produced by the company, you can click here for that [pdf file]— it’s a bit more inclusive than the chart in the teaser ad, but still, of course, makes the potential look remarkable.
The company’s market cap has climbed a little bit lately, so it’s no longer a $70 million company, they’ve now breached the $80 million level. Still very teensy, and it seems likely that if the ad push behind this one gets any traction the price is likely to be very jumpy for at least a few days, though one can never tell for sure. And yes, it trades in very low volume and the interest of a new tranche of investors is always likely to cause price spikes, so be careful — even the relatively small, wise, and cautious Stock Gumshoe readership could move this one around a bit.
There also will quite possibly be news coming from Mosquito in the months ahead — they did release a “preliminary economic assessment” back in November that put the net present value of the CUMO mine at between $10-15 billion, and in that release they said the following:
“Based on the excellent results of the Preliminary Economic Assessment of CUMO, Mosquito plans to complete the 2009 drilling and update the current mineral resource. At the same time, work will continue on the environmental baseline, engineering, and metallurgical work required to bring the project to feasibility.
“Mosquito is currently negotiating with several major parties interested in funding the future development of the CUMO project.”
We’ve since seen the drilling results of some of the holes announced in press releases, but not an updated resource estimate, so that news could come at some point and get attention — and at this stage in their development, when they are in the fairly expensive process of drilling and turning their resources into reserves, they certainly need money — they raised $5 million recently, but that’s a drop in the bucket compared to the millions more they’ll need over the next couple years, and the billions that would be needed to eventually build the mine after that. They do have a big investment from “the Chinese” already on board, and major shareholder Hongxue Fu (through his International Energy and Mineral Resources Investment Company) is the Chairman of the Board of Mosquito.
Here’s an excerpt from a Dow Jones newswire story [pdf file]that went into some more detail (the article is from January):
“‘We are aiming for large-scale production from CUMO in between five and six years time,’ [CEO Brian] McClay said, adding that Mosquito expects to mine around 120,000 metric tons a day of molybdenum, copper and silver, which are also found in the deposit.
“We aim to have the lowest costs producing molybdenum–we are aiming for producing at $3/lb, and if we anticipate $15/lb molybdenum (prices) that is clearly economic. We will be the lowest cost producer, primarily because of economy of scale–because of the size of the deposit,” he added.
“Mosquito intends to advance project to feasibility within two and a half years, which it expects to cost $75 million.
“‘We will then seriously assess our options and sell, enter into a joint-venture with a steel consortium or mining companies, or seek financing to progress to production ourselves,’ McClay said.
“There has been financial interest in the deposit, primarily from the Chinese, McClay said. For CUMO to reach production, Mosquito anticipates capital costs of around $2.5 billion.”
The mine won’t be built for several years, at least, and it’s on Forest Service land in Idaho so there is bound to be lots of news as they maneuver their way through the long permitting process and raise those billions of dollars (assuming they don’t make a deal with another company to let them develop the mine). And there are plenty of other folks excited about the possibility as well, so this is not exactly an unheard-of project, the investors and newsletters have been circulating for some time (including James West for his Midas Letter, whose kind words for Mosquito are here).
That’s not to say that this company isn’t possibly a huge value — just to remind you that even with those massive moly resources it’s still a speculative hole in the ground into which a lot more money will have to be thrown before anything of value is dug up. Will it be the next Thompson Creek, or the next Formation Metals, both of whom have successful Idaho mining projects? Bigger? That’s your call — it is, after all, your money. Let us know what you think of Mosquito Consolidated with a comment below.
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