Gold, silver, uranium, and other metals often get glamorous headlines and a dedicated following who will invest in them and swear by them through thick and thin.
But there are some metals – like molybdenum – whose names are more obscure. "Joe Average" may recall hearing the name molybdenum in high school science class and then promptly forgetting about. It is, however, a valuable resource and an important mineral and it should have the attention of investors. Molybdenum strengthens steel and increases its corrosion resistance. It may not be the sexiest mineral around but its use and value is undeniable and companies – and investors – make their fortunes with it.
We spoke to Craig J. Nelsen, the CEO and founder of molybdenum-focused junior mining company, Avanti Mining Inc. We are very impressed with Craig Nelsen and his strong management team and the Kitsault Molybdenum Project
Thom Calandra of Ticker Trax states “Avanti Mining (TSX: V.AVT, Stock Forum) – Cheap molybdenum mine at Kitsault. Compelling to the max. I believe I own more than a million shares now. I have seen the B.C. property. CEO Craig Nelsen and CFO AJ Ali have my allegiance on this one, complicated as the share “structure’’ is. This thing will be producing moly of good to excellent grades within 18 months. Plus, moly futures start trading in London in February.”
According to their website, Avanti Mining Inc. has a threefold strategy: "First, to acquire advanced molybdenum prospects and move them towards development; [second], to purchase by-product molybdenum production streams from copper producers; and, lastly, to become a consolidator in the junior Molybdenum market."
Oblique satellite image of Kitsault Project located at the end of Alice Arm (Google Earth)
Kitsault Project Overview
- Kitsault is one of the top five primary Molybdenum development assets worldwide.
- It is a high-grade resource with existing infrastructure consisting of an electricity grid and ocean and road access.
- It is permitted, but will need an amendment for tailings disposal and the resultant environmental assessment.
- An ongoing reclamation plan is already in place.
- Avanti will be able to benefit from the extensive historical geologic, production and other data compiled by others during Kitsault's prior two periods of production.
Avanti purchased the Kitsault Molybdenum mine in British Columbia in October 2008. Kitsault was first mined (for other metals) in 1911 and today is one of the top 5 undeveloped primary molybdenum assets in the world. "We looked at undeveloped molybdenum prospects around the world and Kitsault stood out. So the first thing we did was track down the original owner – Alcoa, which had acquired it through a series of corporate takeovers and subsidiaries – and they knew nothing about it. We spent over a year to convince them to sell it… We bid on it and were successfully awarded it."
Timing wasn't perfect on the purchase of the project, Mr. Nelsen admits, but it wasn't all bad news. "We signed a letter of intent in June of 2008 and we closed in October 2008." And then the recession struck. "But the project was so robust that we did interest a private equity firm to back us in the venture." With funding in place, they got to work in spite of the recession: "We completed a confirmation drilling program, a preliminary economic assessment, and [through 2009] a Prefeasibility study."
So, why would Avanti be an interesting company for investors to consider? There are several reasons for investors to think "molybdenum":
First, Craig Nelsen and his team are highly experienced in the industry. Mr. Nelsen says, "I'm an exploration geologist by training and I've been in the business close to 34 years. I've worked mainly in gold but I've been involved in other commodities, too, including base metals and molybdenum."
After leaving a senior position at a large mining company, he founded Metallica Resources in 1994. "I ran it for 5 years until 1999 when I left to run the worldwide exploration and business development of Gold Fields Limited. I left Gold Fields in 2007 to start Avanti and focus on molybdenum assets."
The switch from a highly successful career in gold to a new start-up in molybdenum is not as unusual as it sounds. "Going to another metal was the smart thing to do at the time. The process [between gold and molybdenum] is exactly the same: Identify the property, quantify the economics of the property, and push it towards production." It's not just similar in theory, but Mr. Nelsen has done exactly this work very successfully before: "At Gold Fields, we had a successful track record. My job at Gold Fields was to advance their offshore production to balance their South African production. We accomplished that within my 8 years there and I'm employing much of that same skill-set at Avanti."
Along with Mr. Nelsen is CFO "AJ" Ali, a CPA with rich experience in the mining industry. Mr. Nelsen says, "He's an expert in project finance. He's been in the field for 35 years and worked with several of the European resource banks in a situation almost exactly like this where their technical engineers work hand-in-hand with our feasibility team."
Other team members include Ken Collison. "He's been the COO of a large primary molybdenum mining company, Thompson Creek Metals, for the past six years. He has a lot of experience in the industry and is committed to the development of the mine.”
Bob Blair, VP of Exploration, has 40 years of industry experience and is one of three geologists who discovered Climax’s Henderson molybdenum mine. Along with this executive team, the company also has a team of molybdenum-experienced directors.
Second, molybdenum is an in-demand resource that has important uses in the marketplace. Molybdenum keeps its properties while being exposed to very high temperatures, which makes it perfect for critical pieces of machinery that tend to get hot but need to maintain their strength and structure. For example, motors and airplane parts are made out of molybdenum, as well as even more commonly used things like light bulb filaments. "The commodity has lagged the other base metals on financial recovery over the past two years. That's because we really haven't seen steel prices increase but that's starting to happen right now."
Third, Avanti has a near-term plan that looks good: "Right now we have requests for proposals out to 5 major engineering firms for a bankable feasibility study and, concurrent with that, we are working on financing the operation. So by the time the study is completed, we want to have financing in place." Not only that, but a lot of the work has been done already: "The project itself is really a brownfield expansion. A lot of the risks have already been addressed by previous mining activity. A lot of the infrastructure like roads and power lines are still there.
Their project valuation compels them – and investors – to press forward: "We estimate at an 8% discount that the project is worth pretty close to $550 million USD… that's based on a pretty conservative molybdenum price."
Molybdenum might not be the most exciting commodity available, and it certainly won't win any headlines, but it's a critical resource.
Resources
http://www.avantimining.com
Avanti Mining Services, Inc.
Suite 175, 12200 E. Briarwood Avenue, Centennial, CO USA 80112
Telephone: 303-565-5491