ADANAC CONFIRMS POSITIVE ECONOMICS ON ITS RUBY
CREEK PROJECT
Updated Technical Report
Based on Current Costs
and Projected Molybdenum Prices
Ruby
Creek Project Highlights:
F0B7
2007 combined Measured and Indicated Mineral Resource
estimate using a 0.04%Mo cut-off is 212,907,000 metric tonnes,
with a grade of 0.063%Mo and 295,699,000 pounds of molybdenum.
F0B7
2007 Mineral Reserve Estimate of Proven and
Probable Reserves at 157,685,000 tonnes grading
0.058%Mo.
This is based on a 0.04%Mo mining grade cut-off and a 0.03%Mo milling grade
cut-off.
F0B7
Open Pit Mine life � 21 years
F0B7
Tonnage milled � 157.6 million tonnes
(average grade = 0.058%Mo)
F0B7
Milling rate � 23,000 tonnes/day
F0B7
Strip ratio � 1.11 : 1.00 (waste/ore)
F0B7
Molybdenum in concentrate � 81.7 x 180.1 million
lbs
F0B7
Pre-production capital � CDN $640 million
F0B7
Average operating cost ������ US $7.60/lb. Mo (first five years full production)
�� US $7.99/lb. Mo (remaining years of
production)
F0B7
The Base Case has an internal rate of return (IRR)
of 18.9% and net present value (NPV) of CDN $295 million at an 8% discount
rate, over a 21 year mine life. Payback of the pre-production capital is
estimated to take 3.2 years
Vancouver,
British Columbia -- December 6, 2007 � Adanac
Molybdenum Corporation (�ADANAC�)
(TSX: AUA) (OTC: AUAYF) (FRANKFURT: A9N)
today announced it has received the revised and updated NI 43-101 technical
report on its Ruby Creek Molybdenum Project from Golder
Associates Ltd. (�Golder�).
Golder recommended ADANAC continue to develop the Ruby
Creek Project through the ongoing detailed engineering (by AMEC Americas
Limited), and the planned construction (by LEDCOR Construction Limited).
�This is
exciting news for ADANAC as it moves us closer to becoming a producing
molybdenum mine,� said Michael MacLeod, President and CEO. �The revised
technical report indicates that molybdenum at Ruby Creek can be extracted
economically with proven mining technologies based on current costs and based
on the future price expectations of molybdenum. Detailed engineering and
procurement of long lead time items have also been underway since November
2006, and March 2007, respectively.�
An updated
Mineral Resource Estimate for the Ruby Creek property was announced in a news
release by ADANAC on March 20, 2007, as a letter report (�the February 22
Mineral Resource Estimate�), which was reproduced in Golder�s
report entitled �Mineral Resource Estimate Update, Ruby Creek Molybdenum
Project� and dated July 23, 2007 (�the July 23, 2007 Mineral Resource Update�).
The July 23, 2007 Mineral Resource Update does not include any drilling
information collected during the 2007 drilling exploration program for the Ruby
Creek Project. The July 23, 2007 Mineral Resource Update was used in the 2007
Feasibility Study Update. The combined Measured and Indicated Mineral Resource
estimate using a 0.04%Mo cut-off is 212,907,000 metric tonnes,
with a grade of 0.063%Mo and 295,699,000 pounds of molybdenum.
An updated
Mineral Reserve Estimate was developed from the February 22, 2007 Mineral
Resource Estimate as shown in Table 1. The mine design was adjusted to account
for cost savings attributable to using high pressure grinding rolls rather than
a SAG mill. ADANAC also increased the average milling rate to 1,100 tonnes per hour, from 906 tonnes
per hour.
Based on the
results of the revised feasibility study, the estimated Proven and Probable
Reserves stand at 157,685,000 tonnes grading 0.058%Mo.
2007
Updated Mineral Reserve
Table
1
|
Ore
to Mill
|
Stockpile
Ore
|
|
|
Proven
|
Probable
|
Proven
|
Probable
|
Total
|
|
Tonnes
|
%Mo
|
Tonnes
|
%Mo
|
Tonnes
|
%Mo
|
Tonnes
|
%Mo
|
Tonnes
|
%Mo
|
Phase 1
|
19,455,000
|
0.089
|
3,065,000
|
0.082
|
6,0810,000
|
0.049
|
2,608,000
|
0.042
|
31,209,000
|
0.077
|
Phase 2
|
3,903,000
|
0.070
|
6,819,000
|
0.075
|
4,996,000
|
0.049
|
7,519,000
|
0.046
|
23,237,000
|
0.059
|
Phase 3
|
20,250,000
|
0.056
|
48,463,000
|
0.050
|
185,000
|
0.027
|
2,893,000
|
0.026
|
71,791,000
|
0.051
|
Phase 4
|
271,000
|
0.049
|
29,166,000
|
0.056
|
12,000
|
0.027
|
1,999,000
|
0.026
|
31,448,000
|
0.054
|
Total
|
43,879,000
|
0.072
|
87,513,000
|
0.055
|
11,274,000
|
0.049
|
15,019,000
|
0.039
|
157,685,000
|
0.058
|
Capital Costs
The capital costs
have been updated to reflect current conditions and the revised operating plan.
Actual materials and equipment purchase costs were incorporated as available.
Current escalation rates for labour, construction
equipment, fuel and consumables were applied. Commissioning and pre-stripping
activities completed in Year 1 have been accounted for in the capital cost
estimates.
The total
initial capital cost for the development of the Ruby Creek Project is estimated
to be CDN$640 million. The cost estimate has been carried out to an accuracy of
+/-15%.
A summary of the
major capital costs is shown in Table 2.
Table
2
Capital Cost
Summary
Description
|
Estimated Cost
(CDN$)
|
Project Development and
Infrastructure
|
39,700,000
|
Facilities Construction
and Commissioning
|
341,300,000
|
Materials and Project
Management
|
134,500,000
|
Engineering and Project
Management
|
48,800,000
|
Subtotal
|
$564,300,000
|
Contingency
|
55,600,000
|
Construction Risk
|
20,100,000
|
Total
|
$640,000,000
|
Operating Costs
Mining costs
were developed from first principles using site specific factors for labour, consumables and fuel; and were compared to actual
costs from similar mines.
The mine has
been designed and costed as an owner-operated mine.
The average unit mining cost was determined to be CDN$1.39 per tonne mined or CDN$3.94 per tonne
ore milled, for the first five years of full production and CDN$2.47 per tonne ore milled for the remaining years of operation. Process
operating supply costs are based on budgetary prices of the consumables and
reagents from vendors. The costs for General and Administration (G&A)
include mine management, transport, insurance, warehouse and security personnel
and general management. Tailings dam maintenance costs have been estimated from
published costs from other mines using similar construction techniques.
The total
operating cost for mining is estimated to be CDN$13.08 per tonne
of ore milled for the first five years of full production and CDN$8.11 per tonne of ore milled for the remaining years of operation.
The operating costs for mining, processing, power, tailing dam operation,
general administration and ADANAC�s related costs
were prepared by in house professional engineers and reviewed by independent
qualified persons to confirm that the work conforms to good engineering
practice. Tables 3 and 4 present the operating costs summaries for the first
five years of full production and thereafter to the end of the mine life
respectively (year 21).
Table
3
Operating Cost
Summary
(For first five
years of full production)
Description
|
Operating Cost
(CDN$/tonne of ore milled)
|
Mining Average
|
3.94
|
Processing
Power
|
2.40
5.57
|
Tailings Dam Operation
(average)
|
0.26
|
G&A
|
0.10
|
Owner Cost
|
0.81
|
Total
Average Operating Cost:
|
13.08
|
Table
4
Operating Cost
Summary
(After five
years of full production)
Description
|
Operating Cost
(CDN$/tonne of ore Milled)
|
Mining (average)
|
2.47
|
Processing
|
2.40
|
Power
|
2.25
|
Tailings Dam Operation
(average)
|
0.26
|
G&A
|
0.10
|
Owner Cost
|
0.63
|
Total
Average Operating Cost:
|
8.11
|
The molybdenum price
outlook is shown in Table 5 and was provided by CPM Group of New York.
Table
5
Molybdenum Price
Outlook
Year
|
Price per
pound (US$)
|
2008
|
34.00
|
2009
|
32.25
|
2010
|
28.00
|
2011
|
23.00
|
2012
|
21.75
|
2013
|
19.50
|
2014
|
16.00
|
2015
|
15.00
|
2016 onwards
|
14.75
|
To take advantage
of the expected higher metal prices in the early years of the Project, an
initial phase of the mining operation has been included in the mining schedule
which will maximize molybdenum production during the first four years of
operation. During this phase of the mining, the mine cut-off grade was raised
to 0.06%Mo.
However, material grading between 0.04 and 0.06%Mo would be stockpiled for
processing at a later date. By processing a higher grade feed to the mill
during this phase, net revenues are maximized allowing a faster pay-back of the
initial capital investment, as outlined in Table 6.
Table
6
Production and
Operating Costs (First four years of production)
Year
|
Lbs Mo
(Millions)
|
Total
Cost/Tonne
(CDN$)
|
Total
Cost/lb Mo
(USD$)
|
Projected
Price
(US$/lb)
|
Projected
Gross
Margins
(US$/lb)
|
2009
|
8.143
|
13.48
|
7.42
|
32.25
|
24.83
|
2010
|
13.816
|
12.25
|
6.29
|
28.00
|
21.73
|
2011
|
12.463
|
12.38
|
6.87
|
23.00
|
16.13
|
2012
|
12.147
|
13.68
|
7.18
|
21.75
|
13.97
|
After the
initial four years of production, the mine cut-off grade is predicted to
decline to 0.04%Mo and the focus of operations will be on maximizing overall
project cash flow.
Internal Rate of Return and Net Present Value
Results
A pre-tax economic
model has been developed from the estimated costs and the open pit production
schedule. The Base Case has internal rate of return (IRR) of 18.9% and net
present value (NPV) of CDN $295 million at an 8% discount rate, over a 21 year
mine life. Payback of the initial capital is estimated to take 3.2 years. A
sensitivity analysis and varying molybdenum prices, capital and operating costs
are shown in the following table:
Table 7:
IRR and NPV
Summary Results
Case Description
|
IRR
|
NPV @ 8%
(CDN Millions)
|
Payback Period
(Years)
|
Base Case
|
18.9%
|
295.0
|
3.2
|
Sensitivities
|
|
|
|
Historical Average Mo Price (last 3 years)
|
30.3%
|
1,014.7
|
2.9
|
Low Case
Mo Price Scenario
|
12.3%
|
120.7
|
5.9
|
High Case
Mo Price Scenario
|
24.6%
|
444.1
|
2.6
|
Capital Cost + 15%
|
14.8%
|
213.0
|
3.8
|
Capital Cost � 15%
|
24.8%
|
377.2
|
2.6
|
Operating Cost + 15%
|
15.2%
|
185.6
|
3.5
|
Operating Cost � 15%
|
22.4%
|
404.5
|
2.9
|
Specific Economic
Sensitivities
|
|
|
|
Mine Operation with hydroelectric power
starting earlier in year 3 (Base Case is year 6)
|
19.5%
|
325.0
|
2.6
|
Increase in in-situ grade by 15%
|
27.6%
|
533.4
|
2.4
|
Detailed engineering
and procurement of long lead time items has been underway since November 2006
and March 2007, respectively. The Company previously announced a production
decision in September, 2007 and received the Environmental Assessment
Certificate for the project on September 10, 2007. ADANAC is in the process of
arranging equity and debt financing to build the mine and infrastructure.
ADANAC�s goal is to become a producer as soon as possible,
as the timing of the project is critical to take full advantage of the current
high molybdenum prices. The decision has been made to use diesel-electric power
generation initially in order to expedite the proposed development schedule.
This has added significantly to both capital and operating costs but enables
the project to start-up at least two years earlier than otherwise could be
achieved. ADANAC believes that connection to grid electric power from Yukon will occur by the
end of 2013.
This news release has been reviewed by
John W. Fisher, P.Eng. a
qualified person pursuant to National Instrument 43-101.
About Adanac Molybdenum
Adanac
Molybdenum Corporation is engaged in the exploration and development of mines
to produce molybdenum and ferro-alloy metals. ADANAC�s flagship property is the Ruby Creek molybdenum
project, located near Atlin, B.C. Procurement of long
lead time equipment has been completed and construction has begun.
Information Contact
Michael
MacLeod
President & CEO
Head
Office: Suite 200 � 2055 152 Street, Surrey, B.C. V4A 4N7
Corporate
Office: 2A 15782 Marine Drive,
White Rock, B.C. V4B 1E6
Telephone:
604-531-9639 Facsimile: 604-531-9634
Email: info@adanacmoly.com
The
Toronto Stock Exchange has not reviewed and does not accept responsibility for
the adequacy or accuracy of this release.
www.adanacmoly.com
This message was
sent from Hope Parrish to .com. It was sent from: Adanac
Moly, 2A 15782 Marine Dr, White Rock, BC V4B 1E6, Canada. You can
modify/update your subscription via the link below.
|
|
|