After a rapid increase in the price of molybdenum, should the world's biggest direct producer of the metal invest in expanding mining capacity?
After a rapid increase in the price of molybdenum, should the world's biggest direct producer of the metal invest in expanding mining capacity?
In the early 1980s, AMAX Corporation was faced with a major investment decision. As the world's largest direct producer of molybdenum, a metal used as an alloy additive to high-performance steel, AMAX was considering investing $600 million over three years to expand its mining capacity after the metal's price had more than tripled in five years. AMAX's proposed investment would increase capacity at its two operating mines and re-open a higher-cost Canadian mine. In this case students recommend whether AMAX should make the investment after studying the company's income statement and balance sheet; demand, pricing and production of molybdenum; and the projected return of the investment given a range of molybdenum prices.
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