minesite article march 03

http://www.minesite.com/nc/minews/singlenews/article/thor-mining-waiting-for-chinese-takeaway/1.html

'March 03, 2008

Thor Mining Waiting For Chinese Takeaway


By Rob Davies



Patience is a vital ingredient for small company manager and John Young, chief executive of Thor Mining, needs plenty. He told Minews that he is waiting to finalise the details of an offtake agreement with an unnamed Chinese company that will take the molybdenum and tungsten concentrate from his Molyhil deposit in the Northern Territories east of Alice Springs. This time last year his company all but had a deal with Hunan Nonferrous Metals Holdings in the bag, but the Chinese company pulled out in April 2007 after deciding that the deposit was too small. That meant the hunt for an offtake agreement had to start all over again. And after many visits to Beijing and much negotiating John is confident that an agreement will be signed in the next few weeks.
Hunan might think the deposit is too small but the reality is that there aren’t that many tungsten deposits to choose from. Molyhil has a mining reserve of 2.15 million tonnes grading 0.49% tungsten (WO3) and 0.22% molybdenum (MoS2), all of which can be accessed from an open pit. That figure was determined in August last year following an extended drill campaign which also increased the resource figure to 3.73 million tonnes at 0.51% combined tungsten and molybdenum.

While not massive, that’s not to be sneezed at and when you look at the potential return the numbers really get quite juicy. On a capital cost assumption of A$71 million and an operating cost per tonne of A$76, the project will generate an operating cash flow of A$116 million. Those numbers are based on a 400,000 tonne per year production rate and prices of US$32 per pound for molybdenum and US$240 per metric ton unit for tungsten, and factor in a 10 to 15 per cent discount for concentrate. The plan is to freight the concentrate by road to Adelaide then take it by sea to China where it will be refined. That might seem a long way to haul concentrate but at 51% it’s a pretty high grade and valuable material.

As soon as John gets the offtake agreement signed he will be out raising money to build the mine. Bearing in mind that Thor is only capitalised at £7 million that will be quite a task to undertake. However, he says he had offers before Christmas so he is optimistic. Almost as difficult is sourcing the equipment needed to build the mine, with lead times for some items stretching out two years. John has located a second-hand ball mill which could be refurbished in eight months and he thinks that the plant could be built in twelve months. One thing he will be doing is building in scope for a ten to twenty per cent expansion which could ultimately generate significant unit cost savings. As he points out, the mine plan at the moment is only for open cut, when in fact the additional resource could be exploited from underground.

Molyhil is the company’s most important project but it is also exploring for uranium in the Harts Range and at Bundey River not far from Molyhil. In the Harts Range it’s waiting on permission to do RC drilling at Daicos where it has a pegmatite prospect. At Bundey River an EM survey generated good targets and an RC drill rig is now required to get through the clay and test it. Interesting as these are, it’s the decision from China that John, and his shareholders, are waiting for.'