For many months now and
even more so of late with the flock of new Moly
plays emerging & endless promotions thereof, it has become very apparent
to myself and to a few others who have been directly involved or
writing/researching on the so-called Moly-Mania
phase for over two years that there are some serious misconceptions out there
regarding various junior Molybdenum projects. I cannot emphasize enough how
many emails and calls I field almost daily from Investors, Brokers, Fund
Managers, Research Groups and even personal associates etc; all wanting to
know my opinions on various participants among the gaggle of current Jr Moly plays. There are just
so many Molybdenum plays out there right now it has to be very confusing for
any long term player outside of the day traders. I can only assume and
frequently I am told that these constant requests I receive come as a result
of the multiple editorials I have written since early 2005 on Molybdenum. So
now it finally behooves me to take up pen and try
to clarify some widespread misconceptions. As I see it there are only three
possible “Current” & near term (1.5 to 3-4 years
out depending on which company) Large Scale (meaning @ least 10 or
more Million pounds production p/y) Molybdenum Mine hopefuls at present
and it should also be stated that I see absolutely no reason why all three of
these projects can’t eventually see production at some point as they
each have projects of merit, history & maturity. As well I would add that
contrary to some attitudes, there IS enough increasing Molybdenum
demand worldwide as indicated by my own, as well as others research for all
three of the companies I have chosen to mention or possibly even more, to
become producers over the next few years w/o disrupting the demand/price of
Molybdenum to any extent.
The three companies I see
with the best potential to be next in line are
–
*Adanac
Molybdenum Corp,
*Idaho General Mines,
*MolyMines
Ltd.
(Links to company
websites)
http://www.adanacmoly.com
http://www.idahogeneralmines.com
http://www.molymines.com
Outside of these three
aforementioned companies we see a few dozen grassroots stage projects, some
w/ or w/o past property exploration history who have jumped aboard the Moly bandwagon over the last couple years. Because of the
continual questions posed from so many corners I am going to try, as briefly
as possible, to outline the stages required to get near the finish line of a
working mine and give some small amount of insight into what an investor
should look for in their respective due diligence before swooning over the
next Molybdenum play they hear of, or read about. I can readily see that
among the majority of the multitude of other newer Jr
Moly projects currently out there that most all do
not yet even have any scale of NI-43-101 compliant ‘Resources’
nor Scoping Studies, etc, etc, not to mention ‘Pre or Final’
Feasibility Studies. The above items are all obviously totally necessary and
relevant aspects of creating a working mine that take years and many, many
millions of dollars to complete.
So whether it be monies to
be raised for drilling, infill or otherwise, new exploration drill targets,
ground Geo-Chem & Geo-Physical work or
whatever, it is all very time consuming and very expensive to say the least.
Then after the drilling of
100 plus holes minimum and more, you need to complete an Engineering &
Mine Evaluation report with an Environmental Baseline Study to be done by a
reputable mine engineering firm(s) and then you would advance into the
Socio-Economic & Environmental Studies. Next on the list would probably
be to obtain a National Instrument 43-101 Compliance
Resource for Measured and Indicated Tonnage & Grades of the said
Resource. Now you enter the phase of completing a Pre-Feasibility Study
(again by accredited Engineering & Metalurgical
Firms). Following that all being successful with necessary approval &
green lights given from all these studies you would need to complete a Final
Bankable Feasibility Study which usually takes upwards of one year and a lot
more money. ($15 to $20M each for the big 3 mines)
Ok, so now where are we at
this stage? Well, next would be the time consuming part of dealing with the
Government and applying for the Environmental Assessment Act application and
Mine Permits applications themselves. Now you would be at the stage where
depending on your managements level of confidence in the project’s EAO
Permits & Mine Permits being granted that you would enter the Detailed
Engineering (this alone can take up to one yr and cost $10 Million or more)
& the Procurement stage for long lead items. At this point you should
have the Engineering firms do the detail design for the Milling Process and
Mine Facility as well as Tailings Site, Waste Dumps and Water Management. Now
the company needs to raise a few hundred Million Dollars to build all this infrastructure (CAPEX) (Capital Expenditure). The
CAPEX rule of thumb is currently about $20,000.00 per Tonne milled per day.
So for a 20,000 T/p/d operation you’d have approximately a $400 Million
dollar CAPEX. If you’re going to invest in a potential, soon to be
working mine, all these things and a few minor things I left out for brevity
are going to have to be accomplished before you own a piece of any working,
producing mine in the 21st Century. That about sums it up for the
process and first few years of bringing a mine into production from just
being claim blocks on a mapsheet.
As an aside I called Mr
Larry Reaugh, now the Chairman of Adanac Molybdenum Corp (who has been on the Moly trail for about 15 years) and asked him ‘approximately
what it had cost Adanac over the last 3 years to
bring their Ruby Creek project up to their current Engineering, Procurement
and Permitting stage and he said’… “
that even with over 104,800
ft (31,959
M) of previous drill work in the 1970’s, a 9500
T bulk sample from the 3660
ft Adit, cross cuts &
raises, plus the subsequent 3 Feasibility Studies (one stage 2) all done back
then by majors on Ruby Creek, it will have cost Adanac
approximately $25-$30 Million dollars in conjunction with the participation
of high caliber of Metalurgists
& Engineering firms, along with competent experienced Adanac
management/directors & staff ”.
Personally myself, having
been to the Ruby Creek project and the town of Atlin twice in
the last year, I think I would add also that w/o Adanac
having earned the respect and the support of local First Nations people and Atlin residents, this like many Canadian mining projects
could have died on the vine long ago.
Now for the rest of the
CAPEX aspect. Regardless of some detractors statements I’ve repeatedly
heard of first hand for some months now regarding the viability of these
three above mentioned companies and other Molybdenum project of size not
being able to get financed, whom for obvious reasons don’t like hearing
of, or want any sizable competition intruding on their Molybdenum production,
well don’t be fooled. Those who think they can halt successful,
determined and realistic progress, especially when the realistic projects can
step out and raise $30 or $40 Million dollars in a ‘Bought
Financing’ and when being very near the stage of permits being granted,
well they wasting their breath. CAPEX money always comes to any REAL
potential money making, permitted mine, because making money is what
it’s all about. I know from personal contacts in the steel, catalyst
& mining industries that there are many end users and steel companies out
there right now worrying about how to tie up future “Primary”
Molybdenum production for their own use and owning a percentage or even all
of a “Primary” Molybdenum mine is the perfect way to do so.
My bet is they see Moly going higher in price, off
and on for some years ahead and thus they’re running around trying to
get new potential mines to sign off-take agreements early before the company
may even need one and are invariably entertaining thoughts or exploring the
potential of partial ownership of a new mine. (like the Sojitz Corp’s 25% of the Endako
Mine) The most effective and knowledgeable company management would know
full well they can field an off-take agreement almost any day of the week
with the Moly demand we now see and will see for
years to come. So why be in a rush when you can expect to do these agreements
(off-takes) at higher prices, right about the time you negotiate the CAPEX
debt funding a/o a JV partner. The other side of the CAPEX coin is that the
world is awash with cash looking for a place to go to work and multi-billion
dollar mines to finance w/ short timeframe payback are obviously few and far
between. As I say if the company does everything right, has the right project
and progresses it along in a timely fashion w/ no engineering mistakes to be
redone at great cost then the CAPEX will come if it isn’t already
possibly being negotiated by one or two of the three companies outlined.
*NOTE: Current status of
the three companies I personally see as the definitive front runners for the
next Large Scale Molybdenum Mine:
Adanac Molybdenum
Corp:
-Bankable Final Feasibility
Study: Completed Apr./06
-Mine Permits and EAO
Application: Filed Aug. /06
-Detailed Engineering
& Procurement: Contracted & UnderWay
-Contracts For Mine
Construction Camp: Completed
-Mine Lease Approval:
Approved Mar. /07
-Mine Permits, EAO Approval:
Expected June /07
-Total CAPEX: +/- $400 M
-Daily Tonnage: +20,000
T/p/d
-Mine Construction Start:
June/July /07
-Initial Production
Expected: 1st Q /09
Idaho General Mines:
-Initiation Of Baseline
& Environmental Studies: (underway)
-Initiation Of Bankable
Final Feasibilty Study: (underway)
-EIS Permitting: Being
Advanced in /07
-Detailed Enginering & Procurement: No Data Found
-Mine Lease Approval: No
Data Found
-Total CAPEX: Expected Up
To +/- $700 M
-Daily Tonnage: Expected
40,000 T/p/d
-Mine Construction Start:
Expected 2nd Half /08
-Initial Production:
Expected 2010
Molymines Ltd:
-Environmental Approval:
Expected in 2nd Half /07
-Mine Lease Approval:
Mar/07
-Detailed Engineering
& Procurement: No Data Found
-Bankable Final Feasibility
Study: Expected July /07
-Total CAPEX Expected: +/-
$ 622 M
(based on Pre-Feasibilty)
-Daily Tonnage: Approx
40,000 T/p/d (based on 15 Mil T/p/y)
-Mine Construction Start:
No Data Found
-Initial Production
Expected: 3rd Q /09
*Hopefully the above
timeline & steps can give you some scope of what stage each of the three
companies are currently at, and who will be first in line to generate revenue
for its shareholders. Even tho all three companies
are currently very well financed with millions of $$ in the bank “It
seems quite apparent to me that Adanac Molybdenum
Corp is in the lead by a fair margin”. If one is first to permitting
approval with their BFFS in hand, Detailed Design & Procurement of long
lead items, then I would strongly suggest they will be first to receive debt
financing and/or a JV partnership offer to help raise the necessary CAPEX
funds.
*NOTE- the above
timeline & current status information was taken from the *Haywood
Securities Apr 2/07 MOL Report & the Website for MolyMines;
*News Releases & the Website for Idaho
Gen; *News Releases, Final Feasibility Study & the Website for Adanac Molybdenum.
On another note if some
folks are going to start calling & emailing me again, wanting further
discussions as to which one of the three companies outlined that I see as
having the best chance of being first or moreover ever being permitted and
financed, well you’ll possibly just have to do some more in depth
research and comparisons to figure it out as even tho
I do have definitive personal opinions after 2 ½ years at this,
I’m not an investment advisor. I’ve given a few tools and
outlines here to work from and all three of these companies have websites and
a multitude of news releases outlining where they’ve been, what
they’ve accomplished, and what’s next. I would think it should be
relatively easy and straightforward from here on in.
So in a nutshell when
reviewing any new Mine project or Jr grassroots
play look at the mine property history if there is any, pay close attention
to geological reports, (remember it’s not always ore grades or orebody size that make mines, it’s more about
lifespan, feasibility, permitability and
profitability) look at managements past successes & caliber
of their working team, and pay close attention as to where they are in the
timeline of necessary events I have outlined that must be
accomplished before you have a producing mine. Have they factored in power
costs (electrical grid a/o power plant generation) or do they have access to
a sufficient mine water supply and a year round shipping port or railhead? Is
it realisticly open pit or underground? What is the
stripping ratio? In some cases it can take years (if ever) to obtain all the
necessary permits for a mine if there are any anti-mining tree huggers
lurking nearby. (and yes, they do love their Moly
frame Mtn Bikes and SUV’s even tho they hate mines)
Now myself I’d keep
in mind if you aren’t an in & out day trader, but you want a longer
term investment, (for the real money) that most all of the grassroots plays
out there will never see a permit, open pit or a mineshaft. You know
who’ll get the shaft at the end of the day when the music stops. It may
be a time of unbridled excitement in the junior Molybdenum & Uranium
Markets right now, but at some point much further down the road we’ll
all look back and see it was a time of irrational exuberance for the majority
of the current new Molybdenum projects we now see coming into play. If it
never makes a mine then it only made money for those who bought and “Sold”
the shares on the way up.
As always: Thanks for
reading & best of luck to all those on the trail of “Moly-Mania” & the “Next” Big
Molybdenum Mine.
Best Regards; Ken Reser
Investor Relations &
Research Consultant:
Email- ykgold@telus.net
Office- 403-844-2914
*Molybdenum News Only
Website: Free Membership:
http://finance.groups.yahoo.com/group/MOLYBDENUM_NEWS_Forum/
NOTE: If you wish to
receive ‘periodical’ reports on Gold, Silver & Molybdenum, or
companies involved in these aspects of mineral exploration and production
thereof please email me to become a free subscriber. There often times is
potential to participate in Private Placement Financings as well if you have
so indicated an interest….KR
Disclaimer: I am an independent Investor Relations & Research Consultant,
currently employed by Goldrea Resources Corp, Adanac Molybdenum Corp. Molycor
Gold Corp and Rocher Deboule
Minerals Corp. I may own shares in these or other companies from time to time
a/o hold options of said companies. This editorial is not a recommendation to
own or buy shares of said companies as I am not an accredited investment
adviser. KR.
Ken Reser
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