20 years of restarting life

Chapter 3880 Zhao Chang'an's Shielding and Isolation Design
"I plan to set up a foreign trade company specializing in the import and export of mineral products. It's definitely not good for the molybdenum company to be shut down like this. Once the contract is signed, we will immediately restructure the personnel and resume production as soon as possible."

Zhao Chang'an said to Wen Ye, "If the foreign trade company takes over these goods, the mine can be freed up, and the hundreds of millions of yuan locked in the products can be released smoothly and put back into circulation to help the company's production."

"You mean to buy them all? The reason they've stockpiled so much and are heavily in debt is that they're waiting for the market to recover. It's definitely not appropriate for us to take them away now."

Wen Ye shook his head, somewhat surprised, and said, "Although the current international price for a grade of molybdenum concentrate is 500 to 550, most of their stockpiles are from previous mining operations, with a cost of about 800. It was only later, when they couldn't hold on any longer, that the city took the lead in negotiating with all parties, reducing some taxes and fees, and managed to bring the cost price down to 700. This output accounts for about two-thirds of the total. If we want to take it for less than 800, there will be a lot of opposition. Moreover, if the price goes up in the future, it may not be a good thing for us. As you said, reputation is priceless."

"Moreover, during the negotiations for the acquisition of a controlling stake, the average negotiated price for these goods was calculated at 700. Although we hold 76% of the shares, the other parties still hold 24%. If we take them away for 500, it would be equivalent to taking away their assets, and they would definitely raise objections."

Wen Ye said seriously, "It's okay that the national price is 500 now. They may not be able to see the future trend clearly. But if it really is as you predicted, and the price rises later, then things will really get complicated."

"I never said I wanted to buy at the current market price—"

Zhao Chang'an.

"You're offering a high price? You're just wasting your time. With that kind of money, even though there's a phenomenon of hoarding molybdenum mines both domestically and internationally, you can easily buy some if you offer a higher price, like 550 yuan per ton."

Wen Ye interrupted Zhao Chang'an, feeling that he was making a pointless and unnecessary fuss: "If you have money, you don't need to specifically buy Luanchuan Molybdenum. You can buy from other molybdenum companies and stockpile just as well. And you won't have the problem of them thinking you're exploiting them when prices rise in the future. What are you after?"

“Unless it’s just a small purchase and stockpile of one or two hundred million worth of molybdenum concentrate and ferromolybdenum ore, any larger purchases would be a completely different story. It could easily cause market price fluctuations and chain reactions, and whether the fluctuations will go up or down is beyond my prediction and control. We want to ride in a sedan chair, not make our own.”

Zhao Chang'an has always maintained a sense of awe towards the free market economy. His current judgment that international molybdenum prices will recover within the next year or two is based on a rigorous analysis of the current operating conditions of the molybdenum company.

In his previous life, without a single nanometer of investment, this company was still able to grow rapidly and become the number one molybdenum giant in China.

Given the current state of the molybdenum company, let alone surviving for another two years, it's practically an eternity.

Zhao Chang'an also admired the decisiveness and courage of the leadership of the molybdenum company, who dared to back up production. He also admired the vision and magnanimity of Gu Dacong and his group of leaders in Luoyi, who dared to grit their teeth and gamble.

However, no matter how bold they are, there is always a limit. If one nanometer does not intervene this time, the molybdenum company's ceiling can only support it until April or May of this year at most.

Without external funding, the only option was to sell some of the molybdenum concentrate at a loss to stay afloat.

This means that the industry is very likely to show signs of easing and recovery before the end of this year.

Because of this practice of selling molybdenum concentrate at a loss, for every ton of molybdenum concentrate sold, the company's repayment ability decreases by the amount of molybdenum concentrate sold. The total amount of debt accumulated to more than one billion yuan will only amount to 600 million yuan after all the molybdenum concentrate is sold. The remaining 500 to 600 million yuan in debt will force the company to shut down and stop production.

Moreover, once production is shut down, even if molybdenum prices rise in the future, it will be extremely difficult to resume mining operations.

Without repaying the remaining five or six hundred million yuan in debt, creditors who have been owed money for two or three years, or even six or seven years, will absolutely not agree to the company resuming production until they receive at least a portion of their payments. Because no one is stupid; restarting the molybdenum mines at that time would require an investment of at least thirty or forty million yuan. And after the investors profit from selling the ore, who can guarantee they won't hoard the money and run away when molybdenum prices plummet again?
After all, the signs of speculation surrounding molybdenum concentrate are too obvious. Everyone knows that it's only a matter of time before the price plummets again, not whether it will happen.

Therefore, once the entire molybdenum group ceases production, the client will need to come up with at least 200 million yuan to revitalize the mines.

Knowing full well that this price was inflated by international speculators, who would dare to take out 200 million to gamble?
Therefore, Zhao Chang'an dared to bet that the price of international molybdenum concentrate would recover by the end of this year at the latest.

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However, Wen Ye also said that, according to rational analysis, although the molybdenum industry is a very niche metal category worldwide, the production capacity has always been sufficient, and there is no phenomenon of supply falling short of demand.

In reality, molybdenum mines worldwide are not operating at full capacity, and many mines with huge proven reserves are in a state of closure due to low international prices.

Like the Spence copper-molybdenum mine in Chile, the ore reserves are approximately 26.6 billion tons, with an average molybdenum grade of approximately 0.104%, molybdenum metal reserves of approximately 257 million tons, and copper metal reserves of approximately 3.5 million tons.

BHP Billiton obtained the mining rights, but has not yet officially started mining.

The Claymax molybdenum mine in the United States has proven reserves of more than 300 million tons of molybdenum metal with a molybdenum grade of 0.2%, which is higher than that of the Luanchuan molybdenum mine. Due to the decline in molybdenum metal prices, it stopped production in 95, but it can resume production at any time.

If production resumes, the Klemarx molybdenum mine will have an annual molybdenum production capacity of over 2 tons, accounting for 18% of the world's total molybdenum production last year, a figure that Luanchuan Molybdenum Industry cannot currently match.

It is precisely because of these realities that there is a great deal of disagreement among industry insiders regarding the future price trend of molybdenum.

This also illustrates that in the next few years, the price of molybdenum metal will actually deviate from its original reasonable price, at least in part. For example, the price has been deliberately suppressed to 500, and even as low as 400 at one point. This is the extreme price suppression before speculation, which further suppresses and damages the world's molybdenum production capacity.

Luanchuan Molybdenum, as a global supplier of molybdenum metal, barely manages to be on the table, but it's relegated to a corner and is certainly being monitored by speculators.

If Zhao Chang'an had foolishly and presumptuously entered the game and started stockpiling large quantities of molybdenum concentrate and ferromolybdenum, he really couldn't have guessed what kind of countermeasures those hungry wolves would take.

The simplest solution is to continue suppressing prices for two or three years. Just doing that would be enough to make the molybdenum company, controlled by OneNan, suffer a significant loss.

Therefore, the best approach is to honestly manage the molybdenum company that has been acquired and maximize profits by utilizing the company's own resources.

In this way, Zhao Chang'an and the molybdenum company made money, and those speculators had no choice but to grit their teeth and endure the free ride, reaping huge profits.

After all, they earn more; they're after money, not pride.