Adanac Molybdenum Corporation

Published : December 06th, 2007

CONFIRMS POSITIVE ECONOMICS ON ITS RUBY CREEK PROJECT

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ADANAC CONFIRMS POSITIVE ECONOMICS ON ITS RUBY CREEK PROJECT

Updated Technical Report Based on Current Costs
and Projected Molybdenum Prices

 

Ruby Creek Project Highlights:

 

F0B7                    2007 combined Measured and Indicated Mineral Resource estimate using a 0.04%Mo cut-off is 212,907,000 metric tonnes, with a grade of 0.063%Mo and 295,699,000 pounds of molybdenum.

F0B7                    2007 Mineral Reserve Estimate of Proven and Probable Reserves at 157,685,000 tonnes grading 0.058%Mo. This is based on a 0.04%Mo mining grade cut-off and a 0.03%Mo milling grade cut-off.

F0B7                    Open Pit Mine life � 21 years

F0B7                    Tonnage milled � 157.6 million tonnes (average grade = 0.058%Mo)

F0B7                    Milling rate � 23,000 tonnes/day

F0B7                    Strip ratio � 1.11 : 1.00 (waste/ore)

F0B7                    Molybdenum in concentrate � 81.7 x 180.1 million lbs

F0B7                    Pre-production capital � CDN $640 million

F0B7                                                                          Average operating cost ������ US $7.60/lb. Mo (first five years full production)

�� US $7.99/lb. Mo (remaining years of production)

F0B7                                                                          The Base Case has an internal rate of return (IRR) of 18.9% and net present value (NPV) of CDN $295 million at an 8% discount rate, over a 21 year mine life. Payback of the pre-production capital is estimated to take 3.2 years

 

Vancouver, British Columbia -- December 6, 2007 � Adanac Molybdenum Corporation (�ADANAC�) (TSX: AUA) (OTC: AUAYF) (FRANKFURT: A9N) today announced it has received the revised and updated NI 43-101 technical report on its Ruby Creek Molybdenum Project from Golder Associates Ltd. (�Golder�).

 

Golder recommended ADANAC continue to develop the Ruby Creek Project through the ongoing detailed engineering (by AMEC Americas Limited), and the planned construction (by LEDCOR Construction Limited).

 

�This is exciting news for ADANAC as it moves us closer to becoming a producing molybdenum mine,� said Michael MacLeod, President and CEO. �The revised technical report indicates that molybdenum at Ruby Creek can be extracted economically with proven mining technologies based on current costs and based on the future price expectations of molybdenum. Detailed engineering and procurement of long lead time items have also been underway since November 2006, and March 2007, respectively.�

 

An updated Mineral Resource Estimate for the Ruby Creek property was announced in a news release by ADANAC on March 20, 2007, as a letter report (�the February 22 Mineral Resource Estimate�), which was reproduced in Golder�s report entitled �Mineral Resource Estimate Update, Ruby Creek Molybdenum Project� and dated July 23, 2007 (�the July 23, 2007 Mineral Resource Update�). The July 23, 2007 Mineral Resource Update does not include any drilling information collected during the 2007 drilling exploration program for the Ruby Creek Project. The July 23, 2007 Mineral Resource Update was used in the 2007 Feasibility Study Update. The combined Measured and Indicated Mineral Resource estimate using a 0.04%Mo cut-off is 212,907,000 metric tonnes, with a grade of 0.063%Mo and 295,699,000 pounds of molybdenum.

 

An updated Mineral Reserve Estimate was developed from the February 22, 2007 Mineral Resource Estimate as shown in Table 1. The mine design was adjusted to account for cost savings attributable to using high pressure grinding rolls rather than a SAG mill. ADANAC also increased the average milling rate to 1,100 tonnes per hour, from 906 tonnes per hour.

 

Based on the results of the revised feasibility study, the estimated Proven and Probable Reserves stand at 157,685,000 tonnes grading 0.058%Mo.

 

 

2007 Updated Mineral Reserve

Table 1

 

 

Ore to Mill

Stockpile Ore

 

 

Proven

Probable

Proven

Probable

Total

 

Tonnes

%Mo

Tonnes

%Mo

Tonnes

%Mo

Tonnes

%Mo

Tonnes

%Mo

Phase 1

19,455,000

0.089

3,065,000

0.082

6,0810,000

0.049

2,608,000

0.042

31,209,000

0.077

Phase 2

3,903,000

0.070

6,819,000

0.075

4,996,000

0.049

7,519,000

0.046

23,237,000

0.059

Phase 3

20,250,000

0.056

48,463,000

0.050

185,000

0.027

2,893,000

0.026

71,791,000

0.051

Phase 4

271,000

0.049

29,166,000

0.056

12,000

0.027

1,999,000

0.026

31,448,000

0.054

Total

43,879,000

0.072

87,513,000

0.055

11,274,000

0.049

15,019,000

0.039

157,685,000

0.058

 

Capital Costs

 

The capital costs have been updated to reflect current conditions and the revised operating plan. Actual materials and equipment purchase costs were incorporated as available. Current escalation rates for labour, construction equipment, fuel and consumables were applied. Commissioning and pre-stripping activities completed in Year 1 have been accounted for in the capital cost estimates.

 

The total initial capital cost for the development of the Ruby Creek Project is estimated to be CDN$640 million. The cost estimate has been carried out to an accuracy of +/-15%.

 

A summary of the major capital costs is shown in Table 2.

 

Table 2

Capital Cost Summary

 

Description

Estimated Cost (CDN$)

Project Development and Infrastructure

39,700,000

Facilities Construction and Commissioning

341,300,000

Materials and Project Management

134,500,000

Engineering and Project Management

48,800,000

Subtotal

$564,300,000

Contingency

55,600,000

Construction Risk

20,100,000

Total

$640,000,000

 

Operating Costs

 

Mining costs were developed from first principles using site specific factors for labour, consumables and fuel; and were compared to actual costs from similar mines.

 

The mine has been designed and costed as an owner-operated mine. The average unit mining cost was determined to be CDN$1.39 per tonne mined or CDN$3.94 per tonne ore milled, for the first five years of full production and CDN$2.47 per tonne ore milled for the remaining years of operation. Process operating supply costs are based on budgetary prices of the consumables and reagents from vendors. The costs for General and Administration (G&A) include mine management, transport, insurance, warehouse and security personnel and general management. Tailings dam maintenance costs have been estimated from published costs from other mines using similar construction techniques.

 

The total operating cost for mining is estimated to be CDN$13.08 per tonne of ore milled for the first five years of full production and CDN$8.11 per tonne of ore milled for the remaining years of operation. The operating costs for mining, processing, power, tailing dam operation, general administration and ADANAC�s related costs were prepared by in house professional engineers and reviewed by independent qualified persons to confirm that the work conforms to good engineering practice. Tables 3 and 4 present the operating costs summaries for the first five years of full production and thereafter to the end of the mine life respectively (year 21).

 

Table 3

Operating Cost Summary

(For first five years of full production)

 

Description

Operating Cost

(CDN$/tonne of ore milled)

Mining Average

3.94

Processing

Power

2.40

5.57

Tailings Dam Operation (average)

0.26

G&A

0.10

Owner Cost

0.81

Total Average Operating Cost:

13.08

 

 

Table 4

Operating Cost Summary

(After five years of full production)

 

Description

Operating Cost

(CDN$/tonne of ore Milled)

Mining (average)

2.47

Processing

2.40

Power

2.25

Tailings Dam Operation (average)

0.26

G&A

0.10

Owner Cost

0.63

Total Average Operating Cost:

8.11

 

 

The molybdenum price outlook is shown in Table 5 and was provided by CPM Group of New York.

 

Table 5

Molybdenum Price Outlook

 

Year

Price per pound (US$)

2008

34.00

2009

32.25

2010

28.00

2011

23.00

2012

21.75

2013

19.50

2014

16.00

2015

15.00

2016 onwards

14.75

 

To take advantage of the expected higher metal prices in the early years of the Project, an initial phase of the mining operation has been included in the mining schedule which will maximize molybdenum production during the first four years of operation. During this phase of the mining, the mine cut-off grade was raised to 0.06%Mo. However, material grading between 0.04 and 0.06%Mo would be stockpiled for processing at a later date. By processing a higher grade feed to the mill during this phase, net revenues are maximized allowing a faster pay-back of the initial capital investment, as outlined in Table 6.

 

Table 6

Production and Operating Costs (First four years of production)

 

Year

Lbs Mo

(Millions)

Total

Cost/Tonne

(CDN$)

Total

Cost/lb Mo

(USD$)

Projected

Price

(US$/lb)

Projected Gross

Margins (US$/lb)

2009

8.143

13.48

7.42

32.25

24.83

2010

13.816

12.25

6.29

28.00

21.73

2011

12.463

12.38

6.87

23.00

16.13

2012

12.147

13.68

7.18

21.75

13.97

 

After the initial four years of production, the mine cut-off grade is predicted to decline to 0.04%Mo and the focus of operations will be on maximizing overall project cash flow.

 

 

Internal Rate of Return and Net Present Value Results

 

A pre-tax economic model has been developed from the estimated costs and the open pit production schedule. The Base Case has internal rate of return (IRR) of 18.9% and net present value (NPV) of CDN $295 million at an 8% discount rate, over a 21 year mine life. Payback of the initial capital is estimated to take 3.2 years. A sensitivity analysis and varying molybdenum prices, capital and operating costs are shown in the following table:

 

Table 7:

IRR and NPV Summary Results

 

Case Description

IRR

NPV @ 8%

(CDN Millions)

Payback Period

(Years)

Base Case

18.9%

295.0

3.2

Sensitivities

 

 

 

Historical Average Mo Price (last 3 years)

30.3%

1,014.7

2.9

Low Case Mo Price Scenario

12.3%

120.7

5.9

High Case Mo Price Scenario

24.6%

444.1

2.6

Capital Cost + 15%

14.8%

213.0

3.8

Capital Cost � 15%

24.8%

377.2

2.6

Operating Cost + 15%

15.2%

185.6

3.5

Operating Cost � 15%

22.4%

404.5

2.9

Specific Economic Sensitivities

 

 

 

Mine Operation with hydroelectric power starting earlier in year 3 (Base Case is year 6)

19.5%

325.0

2.6

Increase in in-situ grade by 15%

27.6%

533.4

2.4

 

 

Detailed engineering and procurement of long lead time items has been underway since November 2006 and March 2007, respectively. The Company previously announced a production decision in September, 2007 and received the Environmental Assessment Certificate for the project on September 10, 2007. ADANAC is in the process of arranging equity and debt financing to build the mine and infrastructure.

 

ADANAC�s goal is to become a producer as soon as possible, as the timing of the project is critical to take full advantage of the current high molybdenum prices. The decision has been made to use diesel-electric power generation initially in order to expedite the proposed development schedule. This has added significantly to both capital and operating costs but enables the project to start-up at least two years earlier than otherwise could be achieved. ADANAC believes that connection to grid electric power from Yukon will occur by the end of 2013.

 

This news release has been reviewed by John W. Fisher, P.Eng. a qualified person pursuant to National Instrument 43-101.

 

About Adanac Molybdenum

 

Adanac Molybdenum Corporation is engaged in the exploration and development of mines to produce molybdenum and ferro-alloy metals. ADANAC�s flagship property is the Ruby Creek molybdenum project, located near Atlin, B.C. Procurement of long lead time equipment has been completed and construction has begun.

 

 

Information Contact

 

Michael MacLeod

President & CEO

Head Office: Suite 200 � 2055 152 Street, Surrey, B.C. V4A 4N7

Corporate Office: 2A 15782 Marine Drive, White Rock, B.C. V4B 1E6

Telephone: 604-531-9639 Facsimile: 604-531-9634
Email: info@adanacmoly.com

 

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

www.adanacmoly.com

 

 

This message was sent from Hope Parrish to .com. It was sent from: Adanac Moly, 2A 15782 Marine Dr, White Rock, BC V4B 1E6, Canada. You can modify/update your subscription via the link below.

Email Marketing Software

 

 

 

Adanac Molybdenum Corporation

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ISIN : CA00652E5065
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Adanac Molybdenum is based in Canada.

Adanac Molybdenum develops copper and molybdenum in Canada, and holds various exploration projects in Canada.

Its main asset in development is RUBY CREEK in Canada and its main exploration properties are B&C SPRINGS/ NEVADA BC, CUCOMUNGO and PINE NUT in Canada.

Adanac Molybdenum is listed in Canada, in Germany and in United States of America. Its market capitalisation is CA$ 5.3 millions as of today (US$ 5.2 millions, € 4.0 millions).

Its stock quote reached its lowest recent point on April 09, 2009 at CA$ 0.02, and its highest recent level on March 04, 2011 at CA$ 9.00.

Adanac Molybdenum has 25 462 000 shares outstanding.

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In the News and Medias of Adanac Molybdenum Corporation
11/7/2007 640 million gamble on molybdenum mine
Financings of Adanac Molybdenum Corporation
12/10/2007Announces $15 million Equity Offering
Option Grants of Adanac Molybdenum Corporation
3/17/2008 Incentive Stock Options
10/25/2007INCENTIVE STOCK OPTIONS
Nominations of Adanac Molybdenum Corporation
9/22/2009 Announces Resignation of President and CEO and Appointment ...
8/5/2008Senior Management Core Team Appointment
Financials of Adanac Molybdenum Corporation
2/28/2011Announces Emergence from CCAA
Project news of Adanac Molybdenum Corporation
5/29/2009(Ruby Creek)Releases Updated 2009 NI 43-101 Mineral Resource Report for ...
1/20/2009(Ruby Creek)Ruby Creek Project - Exploration Update
9/30/2008(Ruby Creek)Comprehensive Study Switched to Screening Assessment
10/1/2008(Ruby Creek)Ruby Creek Project - Exploration Update
7/10/2008(Ruby Creek)Drilling Encounters More Mineralization Adjacent to the Perm...
6/24/2008(Ruby Creek)Update and Ruby Creek Project
1/28/2008(Ruby Creek) Focusing on Critical Path
12/24/2007(Ruby Creek)Ruby Creek Receives Approval to Begin Onsite Construction
12/6/2007(Ruby Creek) CONFIRMS POSITIVE ECONOMICS ON ITS RUBY CREEK PROJECT
11/7/2007(Ruby Creek) Construction Begins at Ruby Creek
9/28/2007(Ruby Creek)MAJOR MINING EQUIPMENT SELECTED AND ORDERED FOR RUBY CREEK P...
9/12/2007(Ruby Creek) RECEIVES ENVIRONMENTAL CERTIFICATE FOR RUBY CREEK PROJECT
Corporate news of Adanac Molybdenum Corporation
1/25/2011Outlines New Common Share Distribution
8/28/2009Obtains Extension of Stay Period under CCAA to November 30, ...
7/6/2009Obtains Extension of Stay Period under CCAA
1/20/2009Completes Initial Restructuring
1/19/2009Gains Extension to Creditor Protection
12/20/2008to Evaluate Strategice Alternatives Under CCAA Protection
11/14/2008Presentation at Rodman and Renshaw Conference in New York
11/7/2008Interview with Mining Industry TV Airing Times
9/30/2008Implements Shareholder Rights Plan
9/19/2008Website Update and Reconstruction
8/8/2008Fish Habitat Reserve Facilitates Ruby Creek Tailings Permit
7/14/2008Management Reorganization
6/20/2008Receives BC Mines Act Permit
6/4/2008Corporate Update
5/28/2008Closes Bridge Financing
5/2/2008Corporate Update
4/16/2008Announces $80 Million Bridge Financing Offer
3/27/2008Announces Organizational Changes
3/19/2008Ruby Creek Project Update
1/29/2008New Interview Posted on Smartstox.com
1/17/2008MGI Securities Inc - INITIATING COVERAGE - Adanac Molybdenum...
12/31/2007Announces Completion of Previously Announced Financing
12/21/2007Announces Final Terms To Previously Announced Financing
10/17/2007Engages Investment Bank For Ruby Creek Debt Financing
9/11/2007Receives Environmental Certificate
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