Perth, May 31, 2006 (ABN Newswire) - Moly Mines Limited (ASX: MOL) is pleased to announce that as part of the Spinifex Ridge Bankable Feasibility Study ("BFS"), a major review of the Spinifex Ridge project capital cost has commenced targeting a 25% cost reduction while maintaining a 15 million tonne per annum mining and processing rate.
The capital cost reduction program is focussing on:
- optimising utilities and delivery;
- optimising the plant design; and
- sourcing the most cost competitive equipment and materials for construction.
Managing Director Dr Derek Fisher said "The Preliminary Feasibility Study delivered a non-optimised capital solution. It is now the opportune time within the BFS to undertake such a program, which can only improve the project's strong fundamentals and help attract competitive financing alternatives and enhance shareholder value."
The study has already identified a number of critical target centres where significant cost reductions may be achieved. These include the project's water source with a current capital cost estimate of A$100 million and power with an estimate of A$38 million.
An A$1.2 million hydrological study program has been approved which will investigate in detail 3 alternate water sources. The water source used in the PFS was the most expensive alternative due to its distance from Spinifex Ridge; however it is a proven resource of high quality water. The Company believes a significant capital cost reduction can be achieved by proving up one of the alternate water sources closer to Spinifex Ridge and by sourcing lower cost materials for the water pipeline.
Discussions have also commenced for the delivery of power on a sustainable contract basis.
Pilot Plant test-work is scheduled to commence in June following the completion of recent PQ diamond drilling programs. The Pilot Plant test-work will be used to confirm the non-necessity of a Secondary Crushing facility (PFS capital cost estimate: A$25 million). Recent testing has indicated that this may not be required. The Company is also investigating re-configuring the flotation circuit to a single train facility.
The ongoing resource drilling program is scheduled for completion in June and it is expected sufficient Measured Resource will be defined for mine planning and scheduling and hence BFS project financing.
Molybdenum prices remain strong with molybdenum oxide and ferromolybdenum having recently moved up to approximately US$26.00/lb, significantly above the average sales price of US$12.50/lb used in the PFS and the PFS cash operating cost of US$3.30/lb of molybdenum produced.
The PFS delivered a robust, long-life open-pit mining and processing operation using conventional "off the shelf" processing equipment with a total capital cost of A$622 million for a 15 million tpa plant. The capital cost was factored for 2008 inflation and included all items of construction and development, including mining and pit development and commissioning costs. A summary of the major capital items included in the PFS is as follows:
15M TPA Spinifex Ridge Project A$'M
Process Plant (inc EPCM Fees & Contingencies) 385.2
Water 100.4
Power 38.0
Mining (inc pre-strip) 52.6
Infrastructure 28.1
Other (inc pre-commissioning) 17.7
Total Capital Cost 622.0
The capital cost reduction program is expected to be finalised by September 2006 and will likely impact on the BFS, scheduled for completion in the first quarter of CY 2007.
The Spinifex Ridge Mo/Cu Project will be Australia's first substantial entry into the 200,000 tonne per annum world molybdenum market being a primary molybdenum producer with substantial copper by-product credits. At full production, Spinifex Ridge could supply on average 9,700 tonnes of contained molybdenum per annum (approximately 5% of the world molybdenum market) and 8,600 tonnes of contained copper per annum.
The project is located in the Pilbara Region, the famous iron ore province of Western Australia, approximately 150km ESE of Port Hedland.
Spinifex Ridge JORC Resource Estimate (as at May 2006)
Classification Tonnes Mo Cu Cut Off
Measured 60,570,000 0.08% 0.13% 0.03%
Indicated 348,961,000 0.05% 0.08% 0.03%
Inferred 71,188,000 0.05% 0.07% 0.03%
-----------------------------------------------------
Total 480,719,000 0.06% 0.08% 0.03%
-----------------------------------------------------
Contained Metal Tonnes 288,000 385,000
-----------------------------------------------------
Pre-feasibility Study Results (February 2006)
Mine Life (LoM) Plus 20 years
Designed Throughput 15.0M tones p/a
Treatment Hours (95% avail.) 8,300 hpyr
Daily Throughput 43,300 tonnes
Strip Ratio 1.42 (first 10 yrs) ex pre strip
Unit 15Mtpa
Life of Study Years 12
Mo Price US$/Ib 12.50
Cu Price US$/Ib 1.10
Ag Price US$/oz 5.75
Exchange Rate US$:A$ 0.725
Discount Rate % 10.00
Capital Cost A$M 622.0
NPV (pre-tax, ungeared) A$M 633.4
IRR (pre-tax, ungeared) % 29.0
Average EBITDApa A$M 223.0
Cash operating cost/t ore A$/t ore 8.60
Cash operating cost/lb Mo US$/Ib Mo 3.30
Molybdenum
Molybdenum is regarded as an indispensable alloying element in high performance stainless steels and is present in 15% - 20% of stainless steel grades produced. It is used in the production of stainless steel, alloy steel, tool and high speed steels, catalysts, lubricants and pigments.
Molybdenum gives alloy steel and iron a combination of strength, toughness and wear resistance not possible with unalloyed steels. Molybdenum melts at over 2,500 degrees Celsius and therefore provides critical temperature and corrosion resistance to stainless steels.
Marketing studies indicate an ongoing relationship between world oil prices and molybdenum which may reflect the importance of molybdenum's strengthening and anti-corrosion qualities in oil exploration drilling, catalysts, speciality steels, oil transportation and refining.
