Editorial: Moly meltdown shakes things up

The spectre of a global recession continued to grow and shape-shift during the week ended Nov. 8, the 45th trading week of 2008, laying its dead hand onto more industrial players, including automakers, steelmakers and molybdenum producers.

• The biggest story, however, was Barack Obama’s convincing win on Nov. 4 of the U. S. presidential election, and the Democratic Party’s increased dominance of both national houses of congress.

We’re colour-blind at the Miner, but we’d have to be emotionally tone deaf not to recognize and honour the emotional outpouring that greeted the ascendancy of the first black person to the presidency some 143 years after slavery was abolished in the U. S. by the 13th Amendment to the U. S. Constitution, and 44 years after racial segregation was banned with the Civil Rights Act.

However, at the more practical level where miners dwell, the Democrats’ election-day hat trick bodes ill for anyone trying to develop mineral assets in the U. S.

The devastatingly anti-mining Hardrock Mining and Reclamation Act of 2007 (HR2262), introduced in the U. S. House of Representatives by House Natural Resource Committee chairman Nick Rahall (D-WV), is still working its way through the system.

It passed easily in the lower house in a roll call vote in November 2007 and now is in line to be voted on in the Senate (though debate may be taking place on a companion bill in the Senate, rather than on this particular bill.)

We’ve written about this bill before, but its more deleterious elements bear repeating: an 8% royalty imposed on all unpatented mining claims; mandatory reviews every three years on operating permits, which would be limited to 10 years; the withdrawal from mineral entry of 58.5 million acres identified in the Clinton Administration Roadless Rule, and a similar withdrawal of “sacred sites;” the requirement that proposed mineral activities would protect the environment, public health and public safety from a vague “undue degradation” and a recognition of the land’s value for other uses, including recreation, wildlife habitat and water supply; a requirement that a valid mining claim be supported by the discovery of a valuable mineral deposit in order to have any rights under the Mining Law; the meeting of all water quality standards within 10 years after closure without any water treatment; and the authorization of citizen-led suits that will further delay permitting.

Obama has already promised to heavily penalize America’s coal industry for emitting carbon and impose a large windfall profits tax on the nation’s oil and gas producers, so his general bias against the extractive industries is clear.

• The automakers were in the doghouse this week, as plummeting third-quarter auto sales, especially among America’s Big Three, translated into very large quarterly losses, plant closures and layoffs. There’s now talk of General Motors buying Chrysler, though at presstime, GM’s shares had fallen 40% in three days to a 65-year low.

An auto industry slump will dampen base metals demand, particularly from the still-reeling iron ore miners, who have been hit hard by the sharp contraction in output from China’s steel mills in response to America’s housing bust.

• If copper has a doctorate in economics then molybdenum must be the special ed student who’s been held back another year. While all other metals crashed in September and October, moly prices kept floating along blissfully above US$30 per lb. Well, that all changed in November, when moly suddenly plummeted to US$11 per lb.

Elaborate development plans for major moly projects around North America were quickly tossed aside in response: Freeport-McMoRan Copper & Gold halted the reopening of its Climax moly mine and chopped output at its Henderson mine, both in Colorado; Thompson Creek Metals shelved its Davidson mine project in B. C.; and juniors Inca Pacific Resources and Quadra Mining nosed onto the slow track their less advanced projects.

• Where do we even start with Venezuela? The week saw another flurry of rumours and denials about the government seizing Las Cristinas and booting out Crystallex International as project operator. President Hugo Chavez is undoubtedly keener to “liberate” foreign mining assets these days as tumbling oil prices and mismanaged state-run oil production starve the national treasury.

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