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Page 1 of 323 I recently attended the Blue Pearl annual meeting. For those of you who don’t know Blue Pearl, it is a molybdenum mining company. Oh no, that unpronounceable metal again, you must be thinking. It was a lovefest, full of elderly shareholders thanking management for the great year. When they referred to a great year it was only referring to the eightfold stock price movement, not the company results which posted a loss of millions. Most shareholders seemed to be most concerned with the possibility of the company being taken over and losing their potential to compound their capital gains yet again. Management seemed surprised by the unanimous view that the company was in play and responded with quizzical looks. Some shareholders lamented the fact that Inco had been taken over by the Russian steel company and that could happen to Blue Pearl. Not likely, in my mind, since it actually wasn't a steel company and it wasn't Russian but I have to admit that CVRD did get a steal in buying Inco with a one year payback, so at least the word “steal” was right. But the real reason that Blue Pearl is unlikely to be taken over is that it is overvalued, having risen 8 fold from its lows. Admittedly, it is a different company and it even has a different name now: Thompson Creek is its newly minted name after the property it owns. I spoke briefly at the annual meeting to their specialist in Moly____, you know that unpronounceable metal. He talked about the last boom in moly - in 1994. The price was booming and then the aptly named Climax Mine came back on and the price collapsed. He summarized. I did a bit of reading about the Climax Mine which is now in the Freeport camp, after changing hands several times over the years. It was the largest mine in the world supplying 75% of the world's molybdenum. And it has been shut since 1995 (the last peak in Moly) awaiting higher moly prices, its website stated. But the most worrying thing I found on its website is that 99% of the moly produced by the Climax mine over an 80 year history is sitting in tailing ponds, waiting for higher moly prices when it will be economic once again and can be extracted and sold onto the market. The Climax mine is known for having the highest post office in the world as well as the highest railroad station. And, it is also known for killing the moly price and it could do it again. But we don't even need to have the Climax mine come on for moly prices to decline. I like to look at the marginal price of production of the lowest cost producers in a particular resource before I invest. Moly is a byproduct for many copper mines. As a byproduct , no one cares what they sell it for, it is found money and comes with no cost. Codelco, as the largest Copper producer, and a private company, is the largest producer of Moly. It has been participating in the recent move in moly prices and enjoying higher profits but Codelco, as a private entity, has no need to meet quarterly expectations and as such, could sell Moly at any price. I believe that Thompson Creek and other moly producers are less vulnerable to being taken over and more vulnerable to a weakening Moly price.
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