Idaho General Mines: Vindication!
Silver Stock Report
by Jason Hommel, March 26, 2007
Last week, the stock price of GMO, my largest holding, increased by about 50%!
Why? Rumor is that the Sprott Funds have raised $75 million to invest in molybdenum and moly stocks.
China also announced the restriction of the export of moly.
"Along with indium, China has announced this month that it is imposing a quota upon, and thereby restricting the export of, molybdenum metal and chemical products, such as ferromolybdenum."
Other moly stocks, such as AUA.V and MOL.TO did about the same; up 50% each. But GMO is so vastly superior to AUA.V and MOL.TO, as follows:
Idaho General Mines
Location: Mt. Hope, Nevada, USA
Shares: 43.4 million
Warrants: 16 million
Share Price: $3.89 U.S.
Market Cap: $169 million
Fully diluted Market Cap: $231 million
Reserves: 1,300,000,000 pounds moly
Capital cost: $415,000,000
Cash cost: $3.15/lb. moly
Annual production: 35,000,0000 pounds moly
Mine Life: 53 years
Leverage: (with a penalty for the longest mine life: 17.8 to 1!)
Adanac Moly Corp
Location: Atlin, British Columbia, Canada
Shares: 59.3 million
Warrants: 8.3 million
Share Price: $2.28 Cdn.
Market Cap: $115 million, U.S.
Fully diluted Market Cap: $130.9 million, U.S.
Reserves: 67.8 million pounds moly
Measured & Indicated: 218 million pounds moly
Inferred Resources: 43.7 million pounds moly
Capital cost: $414 million
Cash cost: $8-10/pound moly
Annual production: 10,000,000 pounds moly
Mine Life: 32 years
Leverage: 8.3 to 1.
Moly Mines Ltd
Shares: 51.6 million
Warrants: 15.5 million
Share Price: $3.13 Cdn.
Market Cap: $137 million U.S.
Fully diluted Market Cap: $178.5 million U.S.
Measured & Indicated: 599.8 million pounds moly
Inferred Resources: 33.8 million pounds moly
Capital cost: $466 million
Cash cost: $6.33/lb.
Annual production: 15,000,000 pounds
Mine Life: 40
Leverage: 12.8 to one.
So, GMO is projecting the most annual production, has the highest grades, the lowest capital costs, the lowest cash costs, the longest mine life, and the most leverage! GMO's project is better on every measurable metric that there is!
The other important point that I saw in last week's trading action was that GMO traded the fewest shares! This is very important because it shows that GMO shareholders know what they have, that their project is the best, and they are the least willing to sell out for the meager gains that have only just begun.
It also means that it was likely a fund, probably the Sprott fund, that has only just started buying, and rather indiscriminately, by bidding up all three companies by the same 50%. Having received the least GMO shares so far out of the three, and soon the fund must discover that GMO is the best, there will probably be more fund buying for GMO in the near future.
In the long term, GMO can make $800 million per year, or more.
This means that GMO has a forward looking P/E ratio of about 0.25.
Yes, that's less than 3, less than 1, very, very low, as I was speaking about in my last report.
In the long run, if GMO rises to have a normal P/E ratio of 10, and raises the capital to build the mine even from more share dilution, the stock could rise to as high as $40-80/share.
But wait, there's more!
GMO recently acquired a CEO from Newmont. Yes, Newmont, the major gold mining company! GMO is so great, it attracted a CEO away from Newmont!
Further, GMO completed the acquisition of the Hall Tonopah project, also in Nevada. This other project might be even better than the Mt. Hope project that is the focus of the current projections, above. Hall Tonopah has similar high grade moly, but it also has copper. We don't yet know how much, but the historic grades were enough copper for a high grade open pit copper mine. GMO is now proving up those grades with a current drilling program. The Hall Tonopah project may have 273 million pounds of moly, and may produce up to 14.6 million pounds of moly per year, which is as much as, or more than, either of the other company's primary moly projects.
GMO shareholders, and buyers at current levels, stand to be richly rewarded.
For more information, see my last full report on GMO here:
The Best Mining Stock in the World
by Jason Hommel, November 21, 2006
Nearly every time I write about GMO, people ask me also about Northern Dynasty, or Northern Orion, both of which have very large, very low grade copper/gold/moly projects. Well, for the past 8 months, I've been developing an online spreadsheet of mining stocks, that compares and contrasts companies in exactly the manner above, in real time, based on stock prices every 15 minutes. It is currently ranking a leverage calculation for up to 50 companies, and is now available for paying subscribers who get access to "look at my portfolio". My software tells me that Northern Dynasty has a leverage calculation of 11 to 1. And Northern Orion has a leverage calculation of 10 to 1. This is a leverage of resources to market cap, that also takes into account the capital costs, mine life, and cash on hand.
To subscribe: http://silverstockreport.com/customerservice.htm
Disclaimer: I own 300,000 shares of GMO, and GMO has not paid me to produce or send out this article. I have not received any shares for "consulting", I purchased all my shares.
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