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Moly Mines proposes smaller Stage 1 molybdenum development at Spinfex Ridge

Last updated: 23:00 26 Jan 2009 EST, First published: 00:00 27 Jan 2009 EST

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Advanced 8-10 mtpa Start Up Scoping Study

In view of the lower molybdenum price environment, the Company is undertaking detailed investigations modifying the development profile for Spinifex Ridge, re-optimising mine plans and plant capacity for a smaller staged start up development that will enhance the Project's ability to move forward and improve prospects for financing in the tight capital markets.

The Company’s internal technical team is now focussing on an advance, optimised staged development profile for Spinifex Ridge that commences with a smaller scale mine and plant, with a capacity in the order of 8-10 mtpa, producing 11 to 13 mlbs Mo per annum. This would entail a significantly reduced capital cost for the Stage 1 project.

Mine planning optimizations based on a US$10.00/lb molybdenum price have identified various 10 year starter pits that rapidly access the higher grades of the core of the deposit.

These pits have a significantly lower strip ratio, with much of the “waste” being low grade mineralised material which can be stockpiled for later processing through an expanded mill.  In addition the new design also minimizes the plant footprint and consequently reduces infrastructure costs. The staged development has significant impacts on infrastructure costs, in particular water supply.

The existing permits in place for the 20 mtpa project should also support an 8-10 mtpa development.  Revised cost estimates are expected to be completed during March/April 2009.

Molybdenum price downturn - 3 of 5 major molybdenum projects delayed indefinitely

The first 9-10 months of 2008 were characterized by a resilient world molybdenum market amidst an unprecedented deterioration in world financial markets and the base metals complex. The stability of the molybdenum market and its strong outlook allowed the Company to close the US$150 million Interim Financing in October.

The world’s largest primary and by-product molybdenum producers have reacted quickly to the combined effects of the sudden fall in molybdenum prices, the continued weakness in copper prices and the tightness of capital markets by instigating immediate production cuts and the indefinite deferral of expansions and new project development.

Moreover, of the five major molybdenum projects that were planned for financing, construction and production by 2011, three have been delayed indefinitely leaving Spinifex Ridge as one of two projects active. It is anticipated that there will be a significant correction in demand for the metal once the impact of the economy-boosting, infrastructure development programmes of the major countries commences.

Iron Ore Activities

Iron Ore explorations continue on the mineralization identified to the west of the planned Spinifex Ridge molybdenum / copper deposit and within the current granted mining leases for Spinifex Ridge. The Company completed the first stage resource definition drilling at the end of 2008 and is awaiting final assays. This will lead to the calculation of a resource estimate during first quarter 2009. Environmental impact assessment studies have commenced and work programs developed for mineralogy classification,metallurgical testwork, mine design, process design and financial modelling.

Cash Position

The Company’s significant cash position has allowed it to review other opportunities outside its existing portfolio of assets.

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