Molybdenum, the hot rock in cool market

Investors moved from uranium to molybdenum yesterday, pushing the few players in the sector higher as the sharemarket tumbled in the wake of stronger-than-expected inflation data.

Molybdenum explorer and market debutante Catalyst Metals surged 8¢ to 28¢, 40 per cent above its 20¢ issue price. Catalyst raised $3.2 million to fund exploration of its Minnie Creek project, north-east of Carnarvon.

Also enjoying investor interest in molybdenum, which is used to toughen alloy steels, was Moly Mines. Moly soared more than 28 per cent to $1.60 before closing 25¢ higher at $1.50 after it increased its Spinifex Ridge measured resource by 200 per cent.

DJ Carmichael & Co dealer Mike Munro said investors were getting excited about molybdenum projects because the price had jumped from $US4 a pound to more than $US30 a pound in the past 18 months and production was tight. ”The price of molybdenum has been going beserk because there are not too many large mines in the world that produce it and a couple of the big ones are running out of it,” Mr Munro said.

Among other molybdenum explorers Auzex Resources was unchanged at $1.33, Vital Metals was steady at 21¢ and Marengo Mining slipped 1¢ to 27¢.

Australian stocks dropped after the release of the consumer price index showed the inflation rate had exceeded the central bank’s target for the first time in more than three years. The benchmark S&P-ASX 200 index shed 56.7 points to 4935.7 and the all-ordinaries index dropped 52.3 points to 4907.6.

”The market believes in the probability of a rate rise and has reacted accordingly,” said Colonial’s Hans Kunnen. ”Anything moderately interest rate sensitive is down.”

The consumer price index rose 1.6 per cent in the three months to June 30 from the previous quarter for an annual rate of 4 per cent, the biggest rise since June 2001.

Uranium stocks were mixed after solid gains on Tuesday after Kim Beazley’s about-face on uranium mining. Summit Resources lost 4¢ to $1.55, Compass Resources gained 19¢ to $3.79, Toro Energy slipped 2.5¢ to 83.5¢, U308 fell 6¢ to 42¢ and Strike Resources firmed 1¢ to 86¢.

Of the oil majors, Woodside lost 90¢ to $42.85 and Santos declined 15¢ to $11.25 after the price of oil fell 1.7 per cent in New York.

Perth-based gold explorer Red 5 soared 4.9¢, or 57 per cent, to 13.5¢ in its biggest climb since January 2000. The company said it intersected three gold zones at its Siana project in the Philippines.

Chemgenex Pharmaceuticals jumped 5¢ to 42¢ after it said its Ceflatonin drug could be used by patients who drop a rival drug company’s leukaemia treatment, which was reported to increase the risk of heart disease.

New Hope Corporation gained 3¢ to $1.29 after revealing it had acquired a 19.9 per cent stake in Arrow Energy from Macquarie Bank for $48.5 million. Arrow was 1¢ weaker at 59¢.

In WA stocks Wesfarmers fell 66¢ to $35.65, Alinta shed 19¢ to $9.96, Coventry Group jumped 19¢ to $4.35 and WA Newspapers lost 22¢ to $8.53.

”¢ The Australian dollar firmed further yesterday after the surge in consumer prices bolstered expectations of a rise. At the Perth close the unit was at US75.76¢ from US75.54¢.

Ten-year bonds were at 5.90 per cent from 5.84 and three-year bonds ended at 6.03 per cent from 5.97.
with BLOOMBERG

Julie-Anne Sprague Markets