High prices excite B.C. moly investors

Molybdenum prices have gained altitude and performed a "loop the loop" in recent years that aerobatic pilots would envy.

Skyrocketing from a low of $2 a pound in 2002 to a peak of $50 a pound in 2005, before dipping to the $20-a-pound range last year and climbing back to $33.75 a pound in mid-June, moly prices are having a heck of wild ride.

Mining companies, in response, have been scrambling to expand and start up molybdenum projects. The trend is particularly evident in mineral-rich British Columbia, where 1,350 molybdenum-bearing occurrences have been identified.

Moly's spectacular comeback stems from unprecedented demand. Consumption is up in manufacturing hardened and anti-corrosive steel for use in pipelines, oil and gas drilling, ships, bridges and skyscrapers. The worldwide trend towards cleaner air, despite an ever-increasing number of motor vehicles, is also adding to demand for the gray metal as a catalyst, especially in newer applications such as converting coal to hydrocarbon liquids and making vital components in nuclear power plants.

The robust global market for moly also may be changing the nature of molybdenum mining. Currently, 62 percent of the world's moly production is a by-product of copper mining.

But moly is in such short supply that numerous investors have launched standalone moly projects in recent years.

In British Columbia, geologists list 430 mineral deposits in the province with molybdenum as the primary commodity. Nearly all of these moly-bearing occurrences were explored and identified up until the 1980s when prices plummeted in an earlier downward spiral from about $30 a pound to less than $3 a pound.

Molybdenum production from 100 deposits in British Columbia between 1915 and 2004 totaled 320,300 tonnes, and total resources in some 60 major deposits exceed 1.9 million tonnes, according to the B.C. Ministry of Energy and Mines.

Enterprising companies are busy reviving the most promising of these discoveries.

Led by Thompson Creek Metals Co., formerly known as Blue Pearl Mining Ltd., the pack is comprised of mostly junior mining companies.

This group is moving rapidly toward expansion of existing production at places like Thompson Creek's Endako Mine near Fraser Lake, B.C., but also toward first production at several new projects across the province.

Some B.C. deposits with high-grade cores have the potential for facility production to proceed relatively quickly, the ministry said. These include Thompson Creek's Davidson project near Smithers, B.C., and Roca Mines' Max deposit, near the southeastern corner of the province.

Adanac Moly Corp.'s Ruby Creek deposit in northwestern B.C. and New Cantech's Lucky Ship project in the west-central area also hold considerable promise, their developers say.

Endako updates outlook

Thompson Creek Metals changed its name from Blue Pearl Mining Ltd. after acquiring the Thompson Creek mine in Idaho, along with Endako and a metallurgical roasting facility in Pennsylvania in October.

Now the world's fifth-largest moly producer, Toronto-based Thompson Creek is also developing the Davidson underground molybdenum project near Smithers, B.C.

The Endako operation, which includes an open-pit mine, concentrator and roaster, came into production in the mid-1960s. Sojitz Corp., a Japanese-based molybdenum trading company, owns 25 percent interest in the mine.

Annual output at Endako averages about 9.44 million pounds, though production this year is expected to exceed the average by about 3 million pounds.

Endako has an estimated mine life of seven years based on about 103 million pounds of proven and probable molybdenum reserves. In April, Thompson Creek announced an updated measured and indicated molybdenum resource estimate of 463 million pounds of molybdenum for Endako, calculated by the Vancouver office of Wardrop Engineering Inc. The analysis is part of a new mine plan for Endako, incorporating updated operating costs and a long-term molybdenum price assumption of US$10 per pound. Previous reserves estimates and existing mine plan extending to 2013 assumed a long-term molybdenum price of US$3.50 per pound, the company said.

As part of its review, Wardrop is examining the feasibility of constructing a super-pit, unifying Endako's three existing pits into a large single pit, and of increasing mine production to 50,000 tonnes per day from about 30,000 tonnes per day, with a proportionate increase in roasting capacity.

Startup looms at Max project

Another company that scented opportunity in the wind in 2003 is Roca Mines Inc., developer of the Max Molybdenum Project near Revelstoke, B.C.

Since acquiring the deposit in August 2004, Vancouver, B.C.-based Roca has galloped toward startup within three years. In April, the company predicted it would achieve first moly production by mid-2007, making Max the first new primary molybdenum producer in Canada.

The initial phase of mining is expected to produce about 1.5 million pounds of contained molybdenum from each production run of 72,000 tonnes. Roca said it aimed to complete back-to-back production runs in 2007, resulting in the production of some 3 million pounds of contained molybdenum.

Total annual operating costs (mine, mill and overhead) are estimated to total $7.2 million, or about $100 per tonne, with capital costs of about $14 million and payback of start-up capital within 10 months of construction startup, or four months from mill startup.

Using a campaigned mining-milling approach, Roca plans to recover much of Max's estimated 280,000 tonnes of high-grade molybdenum within the first few years of production.

Earlier this year, Roca decided to accelerate phase 2 of its plan for developing the Max deposit with additional exploration and underground construction to increase access to the deposit.

Roca said the global measured and indicated resource at the Max project is nearly 43 million tonnes, grading 0.20 percent molybdenum at a 0.10 percent molybdenite cutoff, meaning more than $3 billion in contained metal value is at stake with moly selling for at least $30 a pound. This estimate does not include inferred resources and the Max deposit remains open at depth.

Roca is also advancing plans to explore the property for tungsten, at both underground and surface tungsten targets. The surface strike length of known tungsten mineralization on the property now totals 1,450 meters in length and extends over a vertical range of 600 meters.

Future exploration will focus on expanding the resource both at depth and in areas surrounding the main deposit. Roca said it has formed an advisory board of porphyry molybdenum experts to guide the company with further exploration plans at Max.

Several molybdenum deposit experts have observed that the Max deposit has similarities to the URAD deposit (the uppermost deposit associated with the famous 700 million-plus tonne Henderson deposit). Henderson has operated since 1976 as a primary molybdenum underground mine and is projected to remain an economic producer for another 20 years, Roca officials say.

Originally prized for the relatively small (about 13.7 million tons of .35 percent MoS2) URAD ore body, subsequent drilling in 1965 revealed what is now the Henderson deposit within Red Mountain. The Henderson mine 40 years later is operating at more than 30,000 tonnes per day, making it one of the largest underground mines in the world.

At this point, Roca is wondering if the 43-million-tonne Max deposit could be an upper offshoot of something much bigger lurking under Trout Mountain.

Ruby Creek races to be first

Adanac's Ruby Creek Molybdenum Deposit is a low-grade bulk-type occurrence estimated to contain a measured and indicated resource of 220 million pounds of molybdenum ore. Located 124 kilometers southeast of Whitehorse and 22 kilometers northeast of Atlin, B.C., Ruby Creek was staked for Adanac Mining and Exploration Co. Ltd. in 1967.

Extensive exploration of the property ensued until the early 1980s, but the owners then dropped the minerals claims.

In 2001, Adanac Gold Corp (formerly Stirrup Creek Gold Corp) purchased and staked extensive mineral claims in the Atlin Mining Division, including the 10,000-acre Ruby Creek molybdenum deposit.

So far, the company has invested $11 million in the project, bringing total investment in Ruby Creek to $35 million.

Recognizing the current moly trend in late 2003, Adanac implemented a plan to produce molybdenum from the Ruby Creek deposit by early 2009, ahead of all other competing projects.

Adanac, which also owns three molybdenum and/or copper-molybdenum deposits in Nevada, is developing a 20,000 tonne-per-day open pit mine at Ruby Creek. The company estimates total production of about 164 million pounds of molybdenum over the mine's life of 21 years.

The junior aims to develop a high-grade (0.84 percent) starter pit during the first five years of production, while continuing to explore the deposit. Ruby Creek's resource is open to depth to the west and south.

Preproduction capital, including operating costs, is estimated at C$434 million, with average operating costs of $5.87 per pound during the first five years.

Adanac says it has a 12- to 18-month lead over competing greenfield projects, and Ruby Creek is positioned to become the first major primary molybdenum mine brought into production in decades.

Davidson offers future promise

Molybdenum was discovered at the Davidson Project, formerly known as the Yorke-Hardy deposit, under Hudson Bay Mountain in 1944. Extensive exploration since revealed a high-grade deposit with excellent potential for selective bulk underground mining.

With a measured and indicated resource of nearly 300 million pounds of molybdenum at Davidson, Thompson Creek is envisioning first production in 2008, assuming a plan to process the ore at Endako, which is 200 kilometers away, proves to be economic. A feasibility study is under way.

Lucky Ship could set sail

New Cantech Ventures Inc. of White Rock, B.C., is pursuing development of the Lucky Ship Molybdenum Project near Morice Lake south of Smithers, B.C.

The company announced in May completion of a preliminary economic assessment of the project that demonstrates positive economics as a 10,000 tonnes-per-day open pit mine. The independent study shows the mine could operate continuously for 16 years using conventional open pit equipment. Powered by hydropower, the mining process would produce a molybdenite concentrate for direct sale.

A recent estimate of the indicated and inferred resource at Lucky Ship is 62 million tons, grading at 0.70 percent of MoS2.

New Cantech is continuing to explore the property.