4th December 2006Definitive Feasibility Study on Molyhil...

4th December 2006
Definitive Feasibility Study on Molyhil Tungsten-Molybdenum Project confirms viability of a
300,000tpa mining and processing operation.
Thor has decided to proceed with the development which has a rapid capital payback and
strong financial returns.
Financial modelling for the project indicates a pre-royalty EBIT of A$117M over the first 4
years.
A Net Present Value of A$88M discounted at 8% at an average AUD/USD exchange rate of
0.73.
An Internal Rate of Return of 111%.
Significant opportunities identified for reduction of CAPEX through the purchase of secondhand
equipment.
Further drilling planned for the first quarter of 2007, which is designed to increase the life of
mine within open pit designs and to increase the resource at depth.
Thor Mining PLC (ASX and AIM: THR) (“Thor”) today announced the completion of a
Feasibility Study on its 100%-owned Molyhil Tungsten-Molybdenum Project in the
Northern Territory of Australia. The Study confirmed that the project is technically and
economically viable, with strong financial returns and a rapid capital payback.
The Board has today agreed to proceed with a new mine development at Molyhil, subject
to securing all necessary approvals, including a suitable offtake agreement; and
completing financing arrangements in the first quarter of 2007.
The Definitive Feasibility Study (DFS), which was completed over the past 12 months,
paves the way for the financing and development of the Molyhil Project during 2007. The
Company is aiming to complete financing and offtake agreements during the first quarter
of 2007. Thor is currently in discussions with a number of parties in relation to this,
however, at this stage, no terms have been agreed. Construction is targeted to commence
in May 2007 with first production in the first quarter of 2008.
The DFS confirmed the viability of a mining and processing operation based on a JORC
compliant resource for the Molyhil deposit of 2.4 million tonnes grading 0.8% combined
tungsten WO3 and molybdenum MoS2 to a vertical depth of 150 metres.
The operation would be based on an open pit mining operation and 300,000tpa process
plant with an initial 4-year mine life. Drilling is planned in 2007 to extend the mine life
both within the planned pit designs and at depth. This deep drilling is to be completed with
a view to extending the life of the mine by underground mining at the cessation of open
pit operations.
HIGHLIGHTS
Molyhil Feasibility Study Confirms
Viability of New Mine Development
Estimated recoveries based on metallurgical testwork of 67% for tungsten and 77% for
molybdenum, the operation would generate two quality concentrate products, initially by
flotation of molybdenum (MoS2), followed by gravity separation and concentration of
tungsten (WO3).
The estimated capital cost is $A44.5 million, which includes both the Engineering,
Procurement and Construction Management contracts and a contingency. The forecast
total operating cost is A$94/tonne. The Stage 1 and Stage 2 open pits have been designed
to optimise cash flow in the first year of production to take advantage of current strong
commodity prices and achieve an early payback of capital.
Significantly, the DFS indicates that a capital payback period of less than 7 months can be
achieved with the stage 1 pit, with the operation generating a positive pre-royalty cash
flow EBIT of A$117 million over its initial 4-year life, using a base case sale price of
US$20/lb of molybdenum and US$204/mtu for tungsten. At these base case prices the
project has a Net Present Value (NPV) of A$88 million, an Internal Rate of Return (IRR) of
111%, and a capital payback of 7 months. The project financials are highly sensitive to
commodity price changes. For example, if commodity sales prices reduce by 15% from the
base case level then the NPV reduces to A$56 million and the IRR to 74% with a payback
period of 11 months.
Thor has already secured key items of plant and equipment for the Molyhil development,
including an option agreement to purchase a spirals plant and tables and a second-hand
two-stage crushing circuit which was acquired last month at a significantly reduced cost
compared with a new circuit. Additional metallurgical tests to further optimise the flotation
conditions and concentrate grade and recovery forecast are recommended. No change to
the current cleaning circuit is expected however further optimisation of the re-cleaning
circuit is likely to reduce flowsheet complexity and possibly capital cost. A particular area
of focus in the re-cleaning work would be the recovery of Mo in the -75 µm fractions,
especially looking at separation of Mo from both Cu and Fe. As a result of this a discount
of 20% to the current commodity prices has been applied to the financial model.
Additional testwork focusing on the recovery of the fine tungsten, currently excluded from
the flowsheet and recovery forecasts, is recommended and represents an upside recovery
of 15%.
Based on the positive results of the DFS, Thor has decided to proceed with the Molyhil
project, subject to determining a number of key outcomes, such as finalisation of the offtake
agreement and finance package as well as State Government and Native Title
approvals.
Commenting on the DFS results, Thor’s Chief Executive Officer, Mr John Young, said: “We
are very pleased with the outcome, which confirms the viability of a mining development
at Molyhil to underpin Thor’s transition to production next year. The DFS indicates a rapid
capital payback and strong financial returns, with the key to this Project being rapid
development to take advantage of current strong commodity prices.”
“We have also identified several opportunities to significantly reduce the estimated capital
cost through the acquisition of suitable second-hand equipment,” he added. “This has the
potential to enhance returns and improve the overall economics. Our focus now is on
securing all necessary approvals and completing financing and off-take agreements over
the next few months”
Yours faithfully
THOR MINING PLC
John A Young
Chief Executive Officer
The information in this report that relates to exploration results, mineral resources or ore reserves is
based on information compiled by John Young, who is a Member of The Australasian Institute of
Mining and Metallurgy. John Young has sufficient experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves’
www.thormining.com
M I N I N G P L C
Enquiries:
John Young
Chief Executive Officer
Thor Mining PLC
John Simpson
Nominated Adviser
ARM Corporate Finance Ltd
Jos Simpson/Leesa Peters
+ 44 (0)20 7429 6603/+44 (0)78 9987 0450
Public Relations
Conduit PR Ltd
+ 61 (0)419 954 020
+ 44 (0)20 7512 0191
Nicholas Read
Jan Hope & Partners
+ 61 (0)8 9388 1474
APPENDIX 1
EXECUTIVE SUMMARY
The Molyhil Tungsten-Molybdenum Project (Molyhil Project) is a proposed open cut mine
and processing facility to be constructed in the Northern Territory. The main objective of
the proposed facility is to produce scheelite and molybdenite concentrate for sale.
Thor Mining PLC (“THOR”), through its wholly-owned Australian subsidiary Sunsphere Pty
Ltd, owns 100% of the Molyhil Project, which comprises EL 22349, totalling 829 km2 in
area, and includes Mining Lease (ML) 23825 which covers the deposit (former open pit,
waste dumps and Run-of-Mine stockpile). In 2004, THOR applied for ML 24429 to further
extend the mining operation and recently MLA 25721 to cover the project infrastructure
requirements. The combined mining lease applications cover an area of 247 ha.
The Definitive Feasibility Study report has been prepared by a number of consultants
including Proteus Engineers, AMC and Golder Associates and covers the technical and
economic feasibility of developing the Molyhil Project. The Definitive Feasibility Study
(DFS) includes preliminary design, engineering and cost estimates for the mining, process
plant and associated facilities for a 300,000tpa operation. The DFS Mineral Resources and
Ore Reserve estimation was classified in compliance with the JORC Code. All prices are in
Australian Dollars unless stated to the contrary.
The Ore Reserve estimate has been established through a series of mine optimisations
and mine designs. The current pit model has proved and probable reserves of 1.094Mt at
0.21% (Mo) and 0.62% (W).
A two-staged pit design has been recommended, providing 201,621t of ore grading 0.26%
(Mo) and 1.28% (W) in stage 1 and 892,237t of ore grading 0.20% (Mo) and 0.47% (W)
in stage 2. Stripping ratios are 8.0:1 and 7.4:1 respectively. Mining is planned to be
undertaken by conventional truck and shovel operations under contract mining
arrangements.
The metallurgical testwork and resultant process flowsheet indicate the recovery of 889
tonnes per annum (tpa) of dry Molybdenite concentrate (77.0% Recovery of Mo) and
1,511tpa of dry Tungsten concentrate (67.20% Recovery of WO3) at saleable
specifications. Additional testwork is being commissioned to finesse the recovery/grade of
both concentrates. No change to the current cleaning circuit is expected however further
optimisation of the re-cleaning circuit is likely to reduce flowsheet complexity and possibly
capital cost. A particular area of focus in the re-cleaning work would be the recovery of Mo
in the -75 µm fractions, especially looking at separation of Mo from both Cu and Fe. As a
result of this, a discount of 20% to the current commodity price has been applied in the
financial model. Additional testwork focusing on the recovery of the fine tungsten,
currently excluded from the flowsheet and recovery forecasts, is recommended and
represents an upside recovery of 15%.
The suggested process flowsheet is a partial secondary crush SAG comminution circuit,
followed by flotation to produce a molybdenite concentrate. A final stage of flotation
removes pyrite prior to a gravity separation of the tungsten concentrate, with subsequent
magnetic and high tension separation of the dried tungsten primary concentrate to reject
the remaining magnetic and conducting minerals to produce a saleable tungsten
concentrate.
Geochemical testwork on representative tailings samples has been commissioned with
results anticipated in January 2007. Provision has been made in the design of the tailings
storage facility for the installation of a liner and underdrainage system if geochemical
testing of the tailings and tailings liquor indicate that the installation would be required.
The cost of three subsequent 1.5m lifts to contain the final tailings volumes has been
included in the operational costs.
While it is anticipated that the project will require a formal assessment through a Public
Environmental Review, no environmental or heritage concerns have been identified that
cannot be managed within the framework of an Environmental Management Plan.
The estimated capital cost for the Molyhil process plant and facility, including an allowance
for contingency, EPCM and Owner’s costs is A$45.5 million. No allowance has been made
in the base case for escalation over the project life. The effect of escalation on the capital
cost is illustrated in the sensitivity analysis.
The capital cost of the project has been reduced through the use of BOO contracts to
provide the accommodation village, power station, fuel storage facilities and support
buildings. These costs are reflected in the process plant operating cost which has been
estimated at A$63.10/tonne of ore treated. The average operating cost of the mining
operation has been estimated at A$31.04/tonne of ROM ore produced.
In addition, there are also opportunities to reduce the direct capital cost of the process
plant and facilities by A$3.6 million through the use of second-hand equipment or by
reducing design and construction specifications due to the relatively low project life
required.
The operating cost includes transporting the concentrate to Darwin Port, but no allowances
have been made for any shipping or handling charges ex Darwin Port as no definite sales
arrangements have been agreed to date.
The Base Case scenario uses the following assumptions:
• A constant Molybdenum price of US$25 per pound less 20% discount.
• A constant Tungsten (APT) price of US$255 per mtu less 20% discount.
• No allowance for taxation, Northern Territory Government royalties or Central Land
Council royalties.
• A commission of 0.75% paid on revenue received.
• Capital expenditure of A$45.5 million inclusive of A$1.0M of owner’s costs, EPCM
and a 10% contingency.
• Salvage value of the plant and equipment is assumed to be sufficient to meet final
closure obligations.
• Operational insurances and duties are assumed to be $500,000 pa.
• Discount rate 8% and an average AUD/USD exchange rate of 0.73 has been used
• 100% equity finance.
Based on these assumptions the project has a Net Present Value (NPV) of A$88 million, an
Internal Rate of Return (IRR) of 111%, and a capital payback of 7 months. The project
financials are highly sensitive to commodity price changes. For example, if commodity
sales prices reduce by 15% from the base case, the NPV reduces to A$56 million and the
IRR to 74% with a payback period of 11 months.
The DFS confirms that the project is technically and economically viable and it is
recommended for development.

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