Investors aren't fazed by Blue Pearl's weak financial results. And who can blame them? After all, the 36¢-per-share loss the company reported in March reflects just 67 days of operations since it bought Thompson Creek Metals Co. last fall ? a move that made Blue Pearl the world's fifth-largest molybdenum producer and the largest publicly traded pure molybdenum play.
Blue Pearl's surging stock price comes as a direct result of healthy molybdenum prices. Molybdenum ? or “moly,” a silvery-white metal that is used in pipelines and nuclear facilities as well as in fertilizer and oil production ? has increased from a mere $3 per pound in 2001 to now trade at about $30 per pound. Blue Pearl expects to produce 21 million pounds of moly this year at an average cost of just US$6.28 per pound. If China ? a major moly producer ? doesn't flood the market, those healthy prices could continue for some time as demand continues to increase.
Blue Pearl currently churns out about 5% of the world's total molybdenum production, but that will almost certainly increase as the company re-evaluates current production and reserves at its Thompson Creek facility in Idaho and brings new production online from its Davidson project in northern British Columbia. “At the Thompson mine they have a joke that this is just the US$5-per-pound open pit,” Blue Pearl executive chairman Ian McDonald told investors at the Orion Securities Molybdenum Conference in April. At US$25 per pound, the mine could expand to take in much of the surrounding county, McDonald joked. Blue Pearl investors may be laughing all the way to the bank.