Molybdenum and the 'New' Economic Powers
Kal Kotecha
Oct 13, 2005
Since my February 18th article titled, "Economically Speaking Molymania Is For Real", many unfortunate, dramatic world events have occurred, such as hurricanes and political strife which has contributed to the increase in the price of natural resources such as oil, gas and gold. In this article, I will focus on macroeconomics of the two future economic giants India and China, resources targeting molybdenum, and introduce you to a company that I believe presents a sound and viable opportunity.
The two new "super" economic powers are here to stay - as I often reiterate to my College economic students. Yet again, the forces of macroeconomics dynamically impact the resource markets. All major resources have considerably increased in price over the past several years. Again, the fundamentals of this increase are based on the macroeconomic factors of supply and demand. As an example, the rapid rise in oil is based on the fact that the world's thirst for this transient resource is increasing while most of the supply of 'easily' extracted oil is diminishing. Hence, the increased interest in the thick Alberta tar sands.
As you know, the world's demand for resources is currently insatiable, and will continue to be for quite awhile. But there will be lapses and we will once again see supply outstripping demand in the case of many resources...as the popular colloquial statement reads, "nothing lasts forever." So should you worry now? Probably not, as you might want to 'ride the wave'. I remember Gold continuously hitting new highs in the late 70's. I was just a young boy so I couldn't purchase Gold myself, so I suggested to my father to buy some. Being conservative, he refused. How many of us missed buying Microsoft, AOL or Ebay in the mid 90's at 'ridiculously' low prices? A lot of us probably purchased technology stocks at their peak...I am guilty of that. I do not expect to make that mistake again. In my opinion, I feel the resource boom is in the 3rd inning of a 9-inning game. There will be peaks and valleys along the way, but the pinnacle of the mountain is yet to be scaled.
Close to 40% of the world's population is segregated into two countries, India and China. Urbanization in these two major regions is quite rapid and fluid. Copious amounts of resources are needed and are being utilized including, Oil and Gas, Steel and the omnipresent Molybdenum, which is a metal used to harden steel and to line pipelines. We have all heard the two next economic superpowers will be India and China. Let's analyze this prediction by taking a look at some statistics of each country.
India, the Tiger, boasts the largest democracy in the world and is considered to be politically stable. Population is over 1 billion where over half are under the age of 25. This is a key factor since these young people will eventually represent the "supply" of the workforce and they will demand material goods as consumption increases. These individuals will be the 'new world consumers'. India's middle class equals the entire population of the United States. This middle class is growing in leaps and bounds - what will they need? They will demand new housing and buildings which will lead to more steel and molybdenum requirements. According to Goldman Sachs projections, by the year 2050, India's real Gross Domestic Product (GDP) will hit $27 trillion. According to the CIA, website: cia.gov  India's. Est. GDP in 2004 was $3.3 trillion. These numbers reflect that India will grow its' economy approximately 9 fold within 45 years...astonishing statistics!
China, the Dragon, holds a population of over 1.2 billion and has a huge growth increase in its middle class. China's GDP growth is close to double digits and, according to Goldman Sachs, by 2050, China's GDP will be approximately $45 trillion from its estimated 2004 GDP of $7.25 trillion (source: CIA). Therefore, these numbers dictate that China will grow its economy by approximately 6 fold over the next 45 years...again astonishing statistics!
Looking at these two juggernauts, it is easy to decipher that the price of resources and the growth of the economies are not mutually exclusive. Currently, there is a big supply and demand gap in Moly with not enough new supply to meet the increasing demand. It will take many years before there are sufficient stockpiles of Moly to meet the ever-increasing demand. I believe that the next few operational mines will, in all likelihood, make substantial profits for their shareholders.
As an investor, you know that it is prudent to pick a company with great management and properties. I believe one company stands out. United Bolero Development Corp. (symbol UNB on the TSX and UBDVF in the U.S. market) holds molybdenum, gold and oil properties.
UNB has optioned the Bald Butte molybdenum property in Lewis & Clark County, Montana. The majority of this property is on private land (previously patented mining claims). Amax and Gulf Mineral Resources conducted extensive drilling programs on this property in the 1970's and 1980's. In one area of the property, molybdenum (moly) mineralization of approximate grade 0.132% moly is very close to surface, as evidenced by the company's recent percussion drill program.
There is provision under the Montana Metal Mine Reclamation Act for the filing of a Small Miner Exclusion Statement (SMES) enabling small operations to operate without permits or bonding, provided the total non - reclaimed surface disturbance does not exceed 5 acres. UNB has filed an operating plan and an SMES with the State of Montana. Approval to commence mining has been granted. This is exciting news! Once UNB has secured financing (which should be completed shortly), drilling can proceed approximately 30-45 days after. UNB can further offer its investors true value by capitalizing on the high price of Molybdenum. More information on UNB can be found by visiting the companies website at: www.unitedbolero.com
Economics is a very humbling field. It is not an 'exact science' as is math or chemistry. At times when students ask me about the future state of the economy, I must say, "I do not know, noone really knows". It is an analyzed prediction, such as is the weather through weather patterns. Economics is no different, but there are new predicators that impact a paradigm shift.
The paradigm shift is rumbling in the resource market and impacting the future state of the economy. The awakening is transformative, bringing with it insight. In our world of great upheaval, foundations are and will be destroyed. World events and the future state of the economy will be a big part in the new paradigm shift. The new paradigm will forever change the way in which we view the economy and the world at large.
There is no halting stopping the growth of the mammoth US debt. Consumer debt is also monstrous. However, resources and resource based companies should thrive... let's be on the 'winning' team.
In my fall/winter edition of the Moly/Gold report (to be released in November/December), I will be focusing on United Bolero Development Corp. and macroeconomic forces impacting natural resources such as molybdenum. For those who have not yet subscribed for the FREE Moly/Gold report, you can do so by emailing me at kkotecha@rogers.com
Thank-you for your time.
Kal Kotecha
Disclaimer: Kal Kotecha has been hired by United Bolero Development Corp (UNB), to perform Public Relations/Investor Relations duties and provide consulting services. Kal Kotecha also owns stock in UNB and may buy/sell from time to time. The material here is for informational purposes only and is not intended for any investment advice or for solicitation to purchase the stock. All statements, other than statements of historical fact, included herein are forward looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Third party statements contained herein and information contained in any source cited herein are not adopted by or endorsed by Kal Kotecha, nor has their accuracy been verified by Kal Kotecha. |
