Many investors are aware of the move into gold exploration undertaken by Thor Mining (LON:THR) with its two main projects at Spring Hill and Dundas in Australia.
Before gold however the company was better known for Molyhill, a Tungsten/Molybdenum project, also in Australia. The global economic collapse of 2008 saw Molyhill development stall, but with much stronger world tungsten prices and a greater global appetite for such projects, Molyhill has sprung back to life.
Following recent news releases we thought now would be a good time to update MiningMaven readers on progress at Molyhill, so we put a few questions to Mick Billing, Chairman, who was happy to respond as below:
MM: Can you provide a brief overview of the historical background of your Molyhil Project? Prospector Lindsay Johannsen first discovered scheelite (which contains tungsten) at the Molyhil Pinnacle in 1973.
MB: During 1976 and 1977 exploration activity led to the discovery of the Southern ore body magnetite skarn containing both scheelite and molybdenite mineralisation.
The project was intermittently mined through to 1981 when the tungsten price dropped following a decrease in demand for tungsten.
Thor Mining PLC (Molyhil Mining Pty Ltd) acquired the Molyhil Project in 2005 and conducted a systematic exploration program to fully evaluate the Molyhil deposit.
This culminated in a definitive feasibility study (DFS) in 2007 which demonstrated that the project could be profitably mined.
The Global Financial Crisis of 2008 severely impacted on the price of both molybdenum (in particular) and also tungsten, and project development was deferred.
In 2011, a significant and sustained improvement in the price of tungsten encouraged the directors to re-assess the commercial viability of Molyhil and a new DFS was commissioned. The results of this study are expected to be finalised before the end of 2011.
MM: What are the key features of the Molyhil Project that lend confidence that development may be viable?
MB: The recent strength of the tungsten price, in particular, bodes well for the project.
In addition, the independent assessment of the capital & operating cost of the operation suggests a profitable outcome. The current market price for tungsten APT is US$450/mtu. After discounting for concentrates, which we will produce, the price we expect to receive is around US$350/mtu. This compares with a production cost, after molybdenum bi-product credits estimated at US$130/mtu.
The DFS has been undertaken on the 1st stage open pit only. There is sufficient in the resource for subsequent expansions of that pit, and also for eventual underground mining if metal prices at the time justify it.
MM: Can you explain the markets for Tungsten and Molybdenum (the two metals in focus at Molyhil) and what factors should support the maintenance of metal prices during the coming years?
MB: Both commodities have industrial use.
The main end-use application for tungsten is in the manufacture of cemented carbides, also known as hardmetals. Cemented carbides (used in the manufacture of pressing, shaping, moulding, and extruding equipment) accounted for around 55% of tungsten consumption in 2010 and are, therefore, the main driving factor behind tungsten demand. The steels and alloying sector represented around 23% of global consumption with tungsten used in tool, stainless and full alloy steels, as well as in superalloys. Mill products manufactured from tungsten metal, which are mainly used as filaments in the lamp industry and for electrical and electronic contacts, had a 14% share of the tungsten market in 2010, while other uses, principally chemical applications and products, such as catalysts and pigments, accounted for the remaining 8%.
Molybdenum (Mo) is principally an alloying agent in steel, cast iron, and superalloys to enhance hardenability, strength, toughness, and wear and corrosion resistance. The versatility of molybdenum in enhancing a variety of alloy properties has ensured it a significant role in contemporary industrial technology, which increasingly requires materials that are serviceable under high stress, expanded temperature ranges, and highly corrosive environments. Moreover, molybdenum finds significant usage as a refractory metal in numerous chemical applications, including catalysts, lubricants, and pigments. It also used to remove sulphur from liquid fuels in the petroleum refining process. Few of molybdenum’s uses have acceptable substitutions.
The rapid industrialisation of China, India, and parts of South America, underpin the continued demand for these commodities in the medium term.
MM: What options are there for development of Molyhil, in terms of mine funding and practical mine operation?
MB: Funding options for the development at Molyhil can include a mix of both debt facilities, and equity raising. In addition we are exploring options for joint venture arrangements which may assist project financing.
Mine operation will be carried out on a contract basis where practical.
Key to the proposal is securing of off-take agreements for tungsten and molybdenum concentrates, and we are actively seeking these currently.
MM: Should Molyhil be developed, what value could that create for the company and its shareholders?
MB: The net present value of the 1st stage pit at Molyhil is still to be calculated (expected before the end of 2011), however we believe it should be at a level which will justify development.
We would then hope to deliver attractive returns for shareholders over a number of years, which would be allocated to dividend payments and the search for and development of new projects.
Can you clarify what newsflow investors could look forward to over the coming six months, in respect of Molyhil and company gold exploration activities?
In the coming months, investors can expect the following:
Molyhil
- Diamond drilling results
- Revised resource model
- Revised ore reserve and mining plan
- Results of the definitive feasibility study
- News relating to agreements for marketing of concentrates
Gold
Spring Hill
- Drilling results from Spring Hill diamond drilling (in progress)
- Revised (expanded) resource estimate
- Scoping & pre-feasibility study estimates
Dundas
- Drilling the Bifrost & Algron targets
- Further surface sampling
ENDS.
Disclosure: The Authors hold shares in Goldstone Resources
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