minesite article

August 31, 2012
Thor Mining Looks East For Funding For Molyhil
By Sally White

Thor Mining looks as though it’s on its way at last. That at least is what the Aim and ASX-listed explorer’s share price is indicating, now off the bottom at 0.95p after a fall of over 30 per cent in the last year.

The Spring Hill project
All the recent news has read positively and Thor is now tantalisingly close to commercial development at its flagship Molyhil tungsten-molybdenum project in Australia’s Northern Territory.

The long-awaited definite feasibility study on Molyhil has at last shown the project to be viable, enabling Thor’s Mick Billing to get on with the task of securing off-take agreements and project finance.

The feasibility study has followed by an extremely helpful result at the company’s Spring Hill gold project, also in the Northern Territory, where drilling found near-surface gold mineralisation of up to 12 grams per tonne.

But Molyhil remains centre stage. Word is that Mick is in preliminary talks with two Far Eastern groups on Molyhil offtake. There is also the possibility of partnering on financing.

“Given an offtake agreement with a quality customer and financing, the orebody would become a cash generative mine very quickly”, comments research group Hardman.

The capital costs are likely to be A$70 million, according to the feasibility study, and the pre-tax surplus over investment is put at A$62 million.

Thor has to go overseas for its off-take agreement as the Molyhil scheelite concentrates need to be put through an ammonium paratungstate plant. There are no such plants in Australia, so Mick has been talking to companies in Europe, North America and Asia.

“Our construction period should be complete by the end of 2013”, he says. “And that should allow us to ship the first batch of concentrates early the following year. We plan to operate the mine at 400,000 tonnes a year, which might seem to be a fairly modest production rate, but we are dealing with quite high-value commodities in tungsten and moly.”

According to consultant Runge there is a probable open cut ore reserve of 1.64 million tonnes at Molyhil, grading 0.42% tungsten and 0.13% molybdenum. The tungsten grading appears to be fairly consistent, regardless of depth.

Hardman says that at current prices, around US$400 per metric tonne unit of ammonium paratungstate for tungsten, and between US$12 and US$13 per pound for molybdenum roasted concentrates, roughly 75 per cent of the value lies in the tungsten.

The feasibility study reckons the mine life at Molyhil at four years, and puts the net present value (NPV) at A$28 million, using an eight per cent discount rate. It suggests a production cost of A$125 per metric tonne unit of concentrate, after deducting molybdenum by-product credits.

Those numbers look pretty robust when set against the likely revenue figure of A$354 per metric tonne unit.

Higher metal prices would improve the picture at Molyhil still further, of course. “There is a weak spot in grading below which it is not currently economic to mine”, explains Hardman. “Higher metal prices, particularly a higher molybdenum price would in the future open up the possibility of deeper mining.”

And there is another chance of increasing returns. The engineers have assumed a conservative slope to the open pit of 48.3 per cent. If it were possible to mine with a steeper pit the returns rise dramatically.

Working with a 56 per cent gradient could, says Hardman, treble the internal rate of return (IRR), currently at a post-tax 24 per cent. It would also increase the size of the recoverable ore body by 50 per cent.

So, Thor is keeping on with the enhancement programme at Molyhil, even as it explores nearby prospects.

Meanwhile, at the Spring Hill gold project 2,350 metres of drilling are planned for the current year, to examine mineralisation below the existing Hong Kong lode. Thor also wants to check out the Caillie-style mineralisation at depth and examine other satellite targets within the lease area.

Mick describes Spring Hill as “a very, very attractive exploration play”, with the potential to deliver a very large gold ore body for shareholders. The current drill program is likely to be completed sometime in September.

The current resource estimate for Spring Hill, based on drilling conducted in 2003, stands at 3.64 million tonnes in the indicated category, at a grade of 2.34 grams per tonne, using a one gram cut-off.

“The drilling qualifies under the JORC code, which is important,” says Hardman. “Tests have suggested that gold recoveries above 85% could be obtained.”

So Thor has a busy quarter ahead. That, as Mick says, means that the company will need to raise more funds, though there are a number of options for that.

In May the company raised £640,000, and then a further £555,000 in June for additional working capital. And if the company keeps up the excellent news flow, shareholders could have an appetite for more.


http://minesite.com/news/thor-mining-looks-east-for-funding-for-molyhil