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Iron ore production with moly-copper to follow : 2011 is the Moly Mines year
Over at the Perth, Western Australia, head office of Moly Mines Limited (ASX/TSX: MOL), the development stage resource company which owns two advanced projects at Spinifex Ridge in the Pilbara region of Western Australia and a host of other exploration plays, busy is an understatement. Chinese delegates fly in and out, staff are always on call and Derek Fisher, Managing Director, has a lot of exciting news to talk about. AuBJ last checked in with Moly Mines in July, 2009, when the company had devised a small initial scale operation at Spinifex Ridge which was soon to come into operation. As of December 3, 2010, iron ore production commenced, and for its molybdenum-copper project, which is and has been ready for construction for some time, things are looking good in 2011.
“We’re on a roll at the moment in terms of news coming out going forward,” Fisher says.
“I believe that Moly Mines will be a very different company by the end of 2011.”
As we gear up for what looks like a truly company-changing year, AuBJ recaps the progress made since 2009 and looks at all of the many developments in the pipeline for one of the companies everyone has their eye on for the coming year.
In iron ore production
Moly’s iron ore production today is, according to Fisher, a fairly simple operation aimed at mining and chipping a million tonnes of iron ore per annum. It was commissioned approximately two weeks ago and already the company is trucking between 2,500 and 3,000 tonnes of iron ore per day into Port Hedland.
“It’s an open pit mine, then we crush the ore and screen it —we’re going to be only producing an iron ore fine product,” Fisher says.
“After it’s crushed and screened it’s then trucked into Port Hedland to the new Utah Point facility and all that process is underway and working successfully at the moment.”
Upon commencing mining, Fisher told press that at current iron ore prices, the project would be cashflow effective immediately. Since then, more good news has flooded in and the company plans to have its first shipload of iron ore leaving Port Hedland shortly after Christmas— the ship is booked for between the 24 and 29 December. Meanwhile, expansion of the current resource base continues.
“Our pit design captures about five million tonnes of the seven million tonnes resource that we have,” Fisher says.
“There is another two million tonnes below the pit as it is currently designed, and if iron ore prices stay up we’ll certainly take the pit deeper and grow to that two million tonnes.”
Moly is also weighing up other iron ore opportunities in Western Australia and further afield, and Fisher says that with the support of the company’s new major shareholder as of April 2010, Hanlong Mining Investment Pty Ltd (Hanlong), he believes the iron ore mining side of Moly Mines will expand significantly. In addition to supporting this future growth, Hanlong will be instrumental in bringing on the Spinifex Ridge molybdenum-copper project; which will be the first such greenfields project to come into action in 25 years.
Spinifex Ridge: molybdenum-copper
In recent news, the National Developmental Reform Commission (NDRC) of China, gave approval for the nation’s banks to provide funding for the molybdenum-copper project. Fisher explains that this Chinese state organisation is the state approval required for Chinese companies to invest in any offshore and native projects today.
“It’s a fundamental approval in China that’s needed for banks to proceed to provide debt, in this case for building the Spinifex Ridge molybdenum-copper project,” he explains.
“It now leads to other approvals which will flow on from that, such as Ministry of Commerce approvals, State Administration of Foreign Exchange Approvals —you need all of these but they flow consequentially to getting NDRC approval.”
The approvals process under the NDRC has proved to be rather technical, with the organisation appointing an independent group to assess the project. This has been done and granted, and now Fisher says that the project is coming along quite rapidly, following a relative two year standstill.
“By the end of 2007 we were ready to build that project, but we were held up by the G.F.C. We got within about two weeks to a month of financing and by that time we had appointed JP Morgan and Morgan Stanley to lead major financing to build the project. We got very close,” he recalls.
“The moly-copper project is fully-permitted. It has environmental permits in place, native titles in place, mining leases granted, water licenses done —it is all there. We’ve been waiting for the circumstances to change to the point where we can do it again. That’s where the Chinese have stepped up to the plate and that’s what we’re doing with them.”
By bringing in Henlong, Moly has begun to quickly bring on this project once again. Henlong has provided $200 million, partly in debt and equity, and in another part of the agreement with Moly, the company will assist in organising bank financing for the development costs of the molybdenum-copper project.
“We’re building it at a mining throughput rate for the mill of 10 million tonnes per annum. That is half of the scale we had originally planned, so we scaled it back with the G.F.C. and take a smaller bite of it initially. Ultimately it will be expanded to a much larger operation,” Fisher explains.
“The resource is large, we have a JORC resource of just over a billion tonnes of molybdenum-copper ore and a reserve of about 450 million tonnes, so it demands scale and the bigger you can build it, the more economic it is.”
He says that it may take up to four or five years for Moly to expand this project, but ultimately the company will get to its targeted 20 million ounces per annum throughput. In light of these recent developments, the next big news for the company will, of course, be the financing of this project.
A lot to look forward to
Looking forward to 2011, Moly believes that it will have a term sheet design with the Chinese banks by around the end of January, maybe even December. This is the company’s current focus and one of the main reasons behind the Perth office’s influx of visitors and activity of late. Moly has a draft term sheet put together and is in talks to negotiate the necessary engineering contract with a Chinese engineering group that is partnering up with an Australian engineering group. Fisher says that this is at a very advanced stage.
“We believe that will be signed off before the end of December —it’s that close. That’s one of the banking requirements, that we have an engineering contact in place for building the project. That will lead to finalisation of the banking and banking term sheet,” he says, adding that once all conditions of the banking are met, draw down will follow and production will commence thereafter. Good news for the coming year continues for the iron ore project too, and in a mere couple of weeks that first shipment will make its way from Port Hedland.
“That’s going to be around Christmas sometime and that’s pretty significant when you consider that we only found it and started drilling in the second quarter of 2008 and we’ve already drilled up enough to get it in production, built the plant and started shipping ore,” Fisher says.
“That’s an extraordinary turnaround for a company that could easily have been wound up in 2008 in the depths of the G.F.C. From a shareholder point of view you could almost argue that the current share price is supported by the iron ore project alone.”
Fast-forward to this time next year, and Moly will be almost unrecognisable in terms of its current production activities and other involvements.
“We will have an iron ore mine in production, which we do now, and we’ll be shipping a significant amount of iron ore, and we’ll have the world’s first major greenfields molybdenum project in 25 years under construction,” Fisher says.
“And, with some of the other things we’re planning in iron ore, there will be other significant changes in the company.”
Moly Mines is clearly in the throes of a significant growth period today. All of its ongoing work, in iron ore production and advancing the molybdenum-copper project over at Spinifex Ridge, is set to culminate in 2011 and most certainly result in significant share price growth during that time. This next year will be a big one, but it is just the beginning for this well-supported, well-partnered and portfolio-rich developer/producer.
www.molymines.com
https://www.australianbusinessjournal.com.au/moly-mines-limited/