About Molybdenum

The global market for molybdenum is estimated to have grown from about 100kt in 1990 to 181kt in 2005, an average year-on-year growth rate of 4.3%. This compares with a world real GDP growth rate of 2.9% per annum.

Chinese consumption of molybdenum doubled to around 18kt between 2001 and 2005.

The main end-use of molybdenum is in steel industry with stainless steel and constructional steel accounting for around 63% of global consumption. The use of Molybdenum within chemical applications is growing however with around 14% consumed by that sector on an annual basis.

Within the steel industry molybdenum’s high melting point provides increased strength and corrosion resistance properties enhancing the application and capabilities of various metal alloys. In nickel base super alloys for example, which are used for high temperature applications such as turbine blades, the addition of molybdenum increases by up to 10% the high temperature strength of the matrix.

Catalytic applications are the most important chemical end-use for molybdenum, accounting for about 8% of molybdenum consumption. Demand is expected to grow at about 5% per annum up to 2010.

An important area in catalyst use is within the petroleum industry, where the application of molybdenum catalysts for the removal of organic sulphurs is growing.

Spent catalysts are both regenerated for reuse, and recycled for recovery of secondary molybdenum. Catalyst regeneration is expected to increase through to 2008, but the need for fresh catalysts will not decline because tighter emission standards and fuel economies are stimulating greater need for use of catalysts.

Other chemical applications include pigments where molybdenum stabilises colour and increases corrosion resistance, smoke suppressants and lubricants.

Ten companies account for about two thirds of world molybdenum mine production. Codelco from its four copper mining divisions in Chile, and Phelps Dodge from one molybdenum-only and three copper mines in the USA, are by far the biggest producers, together accounting for about a third of world mine production.

Rio Tinto more than doubled molybdenum output from the Bingham Canyon mine in 2005 to become the third largest producer with almost 9% of world production.

Mine production of molybdenum increased from about 140kt in 2002 to 180kt in 2005, with output increasing by almost 16% in 2004 alone. In 2005, sharp falls in Chinese production were offset by greatly increased US, Chilean and Peruvian production.

Five countries, the USA (32%), Chile (26%), China (20%) Peru and Canada accounted for 91% of world molybdenum mine production in 2005.

In March 2004, molybdenum prices started to rise rapidly, responding to limited world roasting capacity and growing demand for molybdenum, mainly in stainless steel. By May 2005, prices achieved spot highs up to $US40/lb compared with an average price of about $4.00/lb in the ten years up to 2004. At the date of this prospectus monthly average prices are around US$26/lb compared to a recent monthly low of around US$22 recorded in January 2006.

Mine production of molybdenum has historically been surplus to demand, but in 2002 and 2003 was in deficit. Mine output was again surplus to demand in 2004 and 2005, though there was a deficit in usable molybdenum products because of limited roaster capacity.

Although prices in 2006 will probably be somewhat lower than in 2005, they are not expected to return to their pre-2004 levels, and will be underpinned by limited roasting capacity and firm demand, particularly in China.