Mining News: Northern Neighbors: Alloycorp optimizes molybdenum mine plan

Alloycorp Mining Inc. Nov. 13 released the results from a Front End Engineering Design study completed on the Avanti Kitsault molybdenum project in western British Columbia. Based on the results of the study, an optimized mine plan has been developed to target the highest grade reserves and softest ore zones first. The average molybdenum grade over the first five years 0.092 percent and over life-of-mine is 0.078 percent. The mine is now expected to average roughly 12,994 metric tons of molybdenum and 1.2 million ounces of silver annually during the first five years. After by-product credits for the silver, site cash costs are expected to be US$5.04 per pound of molybdenum over the first five years of production and US$5.24 per pound over life-of-mine. Total cash operating costs are expected to be US$6.91 per pound of molybdenum over the first five years of production and US$7.32 per pound over life-of-mine. Pre-production capital costs estimates have increased by C$395 million, to C$1.2 billion in the FEED study. The mine outlined in this study is expected to result in an after-tax net percent value (8 percent discount) of C$346 million; internal rate of return of 12.7 percent; and a payback period of 5.3 years. Peter Mah, president, Avanti Kitsault Mine Ltd., and CEO, Alloycorp said, “The FEED has allowed us to firm up project scope and estimates to a point where we can recommend an engineering, procurement and construction strategy best suited for the company going forward, and supported by two project partners ready to execute on this strategy.” With the FEED study complete, Alloycorp said it will continue to engage a syndicate of lenders in the pursuit of financing commitments. However, given the recent molybdenum price decline, there is no certainty credit commitments will be received at this time. In the meantime, the company will evaluate alternatives to further de-risk the project form a technical perspective. Alloycorp also has entered into an agreement to amend the terms of its existing US$50 million bridge-loan facility, with goal of increasing the funds available under the loan by US$4.5 million. The interest rate on the bridge loan will remain unchanged at 12.5 percent per annum. Interest will be payable in cash at maturity. The default interest rate remains unchanged and is payable at the applicable interest rate plus 5 percent per annum, compounded quarterly in arrears together with all other due but unpaid interest.

- Shane Lasley