great article on mgo

Thanks to bvbfaN on SS for this,


From Minesite

"We’ve Got To Start Somewhere": Marengo Edges Ever Closer To First Production At Yandera


Taking a birds-eye view of the vast swathe of mineralisation on the tenements of Marengo Mining in Papua New Guinea’s highlands, the question quickly arises as to why in particular the company is proposing to start its mining operations on its Yandera property at exactly the spot that it’s chosen. “It’s two kilometres from the village,” is the astonishingly simple answer from Marengo chief executive Les Emery. But might there not be even better copper and molybdenum deposits further away? “There might well might be”, is Emery’s answer, “but we’ve got to start somewhere”. And start he is planning to do, as drilling continues to confirm the enormous size of the mineralisation BHP first saw at Yandera more than 30 years ago, and which other companies have since kicked over. But in those earlier times copper was selling for less than US$1 a pound and molybdenum was virtually given away as a by-product for use in making special steels.

Today, even with the boom fraying at the edges as Europe indulges in its August shutdown, the US frets, and China closes factories for the Olympics, copper is holding a price north of US$3.50 per pound and moly is looking better than it has done for a decade with long-term price projections of US$15 to US$20 per pound. Those numbers, even if cut in half, will make Yandera a highly profitable mine, with the outlook is getting better by the day as knowledge of the orebody expands, and thanks also to the discovery of payable quantities of high-priced rhenium, which is used in making jet turbine blades. While it doesn’t match the future cash flows likely to come from copper and moly, Emery estimates that the rhenium, which currently sells for around US$350 an ounce, could chip in nicely with as much as an extra US$50 to US$100 million a year in revenue.

“Rhenium was not even on our radar screen when we started the feasibility studies into Yandera”, Emery says, sitting in a coffee shop close to his West Perth office. “But it’s an example of how much we’re learning about the project, and how much more we have to learn”. That comment goes to the heart of the question Emery is asked repeatedly by investors: why start the project at Yandera when so many other tantalising copper assays have been returned from elsewhere? The answer is always the same: it’s time the project moved off the drawing board and started returning some of the millions of dollars spent on drilling.

In other words, this time around, work at Yandera is dinkum (Aussie slang for real McCoy). The next few months will see Marengo make a series of critical decisions as news flow builds around this, one of the world’s biggest copper deposits still in the hands of a small explorer/miner. If all goes to plan, Yandera will be a project costing close to a billion dollars to develop, yielding 124,000 tonnes of copper a year from year three of operations onwards, plus an average of 6,700 tonnes of moly per year. Early studies using a copper price of US$1.50 and moly at US$15.00 produce “robust” financial returns. “If we used US$3.50 for copper it would almost pay for itself before we started mining,” Emery says with a grin.

Moves to beef up Marengo Mining’s board, plus a listing on the Toronto Stock Exchange, plus imminent decisions on key items of plant, such as ball mills and crushers, plus ecisions on ore processing and waste disposal, all indicate how close the company is to converting Yandera from an isolated resource in the hilly centre of Papua New Guinea into a viable mine. The current plan is for a project that will extract a minimum of 450 million tonnes of ore averaging 0.48 per cent copper for a minimum of 10 years. For the first two years ore will be processed at a rate of 25 million tonnes a year, rising to 50 million tonnes a year thereafter. Given that roughly an equal amount of waste rock will be shifted, the scale of Yandera soon becomes apparent. It is a 100 million tonne a year venture (ore and waste), which is a world-scale development.

Recent decisions on how to operate the project include a decision to crush the ore in-pit ore and then convey it to a near-mine processing plant where separate copper and moly circuits will produce a concentrate for delivery by slurry pipeline to the port of Madang, where it will be dried prior to shipping. This broad-brush picture of how Marengo proposes to develop Yandera is becoming better known as the company talks to potential equipment suppliers. What Minesite’s Man in Oz found somewhat more interesting is the start of drilling outside the notional “pit shell” at Yandera. It’s out there that Marengo has the potential to expand its operations into something that even the world’s biggest miners will be forced to keep a close eye on – and where Minesite readers need to take up their “bird like” position sitting high above Yandera.

From a height you can see the starter pit at Yandera, a relatively small semi-circle that will supply the plant for its first three years. This grows into a much bigger bean-shaped pit which will provide ore out to year 10. But to the north-west and south-east are more potential ore zones, the surfaces of which have hardly been scratched. But they soon will be. The latest drilling results reported by Marengo include the usual eye-catching intersections such as a whopping 198 metres assaying 0.9 per cent copper equivalent (copper-moly combined) from the Gremi and Omora zones which lie inside the pit shells. Drilling to the south-east at Mumnogoi is just starting, while to the north-west drilling is yet to get underway at Tumuanogoi. These areas have the potential to become extensions to Yandera.

Now, fly a bit higher and look along the full length of Marengo’s tenement package and you see a series of prospects, some with the potential to be entirely new mines of similar proportions to Yandera. It’s these “blobs” on Marengo’s maps which cause investors with an interest in PNG’s richly mineralised highlands to ask Emery why he’s starting at Yandera when there is the potential for something richer possibly waiting to be discovered, and it’s then that Emery can only answer: “we’ve got to start somewhere”.