new molybendum discovery...

Looks good....
And reached ridiculously low prices....


12 March 2008
Company Announcements Office
ASX Limited
Exchange Centre
20 Bridge Street
Sydney NSW 2000
Dear Sir,
ZGM 2008/009 – NEW MOLYBDENUM DISCOVERY
• At the Anthony prospect north of Clermont in Central Queensland initial
scout drilling has identified a molybdenum (“Mo”) discovery
• 12 holes of an initial 13 RC drill hole program completed
• Visible molybdenum mineralisation was noted in 10 of the 12 holes
• Extensive mineralisation with grades up to 1920ppm molybdenum (0.192%)
• Molybdenum grades are similar to those in found in international and
Australian molybdenum developments
• The mineralisation remains open in all directions and at depth
• Highlights of initial assay results received from first ten holes include:
Hole From To Metres ppm Mo
RC08A001 0 150 150 514
including 123 126 3 1430 (0.14%)
RC08A002 0 150 150 487
including 21 24 3 923
105 108 3 1065 (0.11%)
RC08A003 105 150 45 634
including 114 117 3 1850 (0.19%)
RC08A005 126 135 9 618
RC08A008 0 144 144 590
including 63 84 21 827
69 72 3 1480 (0.15%)
117 120 3 1920 (0.19%)
129 132 3 1390 (0.14%)
Background
As outlined in ASX releases dated 15 January 2008 and 5 February 2008, Zamia Gold
Mines Limited (“ZGM”) has identified a large molybdenum soil anomaly 75km north of
Clermont in Central Queensland. The western edge of the anomaly was drilled in 1994
by CRA and molybdenum mineralisation was encountered in two holes (DBT22 and
DBT23). The prospect area is on a low rise and straddles the Gregory Highway. An
initial RC percussion drilling program (see Photo1) commenced at end January 2008.
Exploration program to date
Despite inclement weather 12 of 13 planned holes have now been completed (Location
details of the holes are in Table 2). The holes drilled mostly at a 60 degree angle are
identified on Figure 1 showing the molybdenum soil anomaly. Visible molybdenite
(MoS2) the usual ore-mineral of molybdenum was noted in 10 of the 12 holes within the
fresh sulphide zone (see Photo 2). The holes, mostly drilled to 150m (approximately
130m vertical depth), have successfully intersected an intrusive mineralised porphyry
system. The holes cover an area approximately 450m east-west by 250m northsouth.
The boundaries of the mineralisation have not been defined and most holes have ended
in mineralisation. Part of the soil anomaly occurs to the east of the Gregory Highway
and this area immediately east of RC08A001 and RC08A002 is yet to be tested.
ZGM has received full results from nine of the holes and partially from the tenth. The
molybdenum results, summarised in Table 1, compare favourably to other molybdenum
projects including those under development in Australia and overseas.
Geology
The molybdenum mineralisation occurs in quartz stockwork veins both in intrusive
porphyry rocks (see Photo 3) and metamorphosed sediments. The rocks are generally
weathered to a vertical depth of 60m to 70m. In most holes the weathered zone is
mineralised and studies have been initiated to identify the molybdenum minerals
present. The successful treatment of the mineralised weathered zone would enhance
the economics of any future development.
RC08A 009, drilled at the southern end of the prospect about 400m south of the other
holes, did not intersect significant molybdenum values but ended in anomalous silverlead
mineralisation (147m to 150m, 3m at 37g/t silver, 0.18g/t gold and 0.67% lead).
Precious metal and base metal veins often occur close to porphyry systems and
therefore the mineralisation in RC08A 009 warrants follow-up.
The results of this initial scout drilling program warrant a comprehensive
exploration program to define the extent of the deposit and estimate mineral
resources.
Two Appendices are attached:
• An internal review of the economics of molybdenum projects under
development in comparison to the Anthony prospect (Appendix 1).
• A background on molybdenum use, demand and supply (Appendix 2). Strong
growth is expected in the demand for molybdenum.
Figure 1
For and on behalf of the board,
Colin Seaborn
Executive Director
Mr R N (Sam) Lees (FAIG, FAusIMM), compiled the technical aspects of this report. Mr Lees is Executive
Director -Technical, Zamia Gold Mines Limited. Mr Lees is a Fellow of the Australian Institute of
Geoscientists and has sufficient experience that is relevant to the style of mineralisation and type of
deposits under consideration and to the activity that is being reported on to qualify as a Competent
Person as defined in the September 2004 edition of the “Australasian Code of Reporting of Mineral
Resources and Ore Reserves”. Mr Lees consents to the inclusion of the matters in the form and context
in which it appears.
Table 1 - Summary of molybdenum results.
HOLE NO
HOLE
DEPTH FROM TO WIDTH PPM Mo COMMENTS
RC08A 001 150 0 150 150 514
0 60 60 478 Weathered
60 150 90 538 All sulphide
including 96 135 39 642
123 126 3 1430
RC08A 002 150 0 150 150 497
0 81 81 515 Weathered
including 21 24 3 923
81 150 69 475 All sulphide
including 81 120 39 603
105 108 3 1065
RC08A 003 150 0 105 Await results
105 150 45 634 Sulphide
including 114 117 3 1850
RC08A 004 150 Low values
RC08A 005 150 0 150 150 345
0 72 72 345 Weathered
87 135 48 408 Sulphide
including 126 135 9 618
RC08A 006 150 138 141 3 388
RC08A 007 132 0 69 69 389 Weathered
including 33 39 6 684
RC08A 008 144 0 144 144 590
0 63 63 608 Weathered
63 144 81 576 Transition & sulphide
including 63 84 21 827 Transition
69 72 3 1480
117 120 3 1920 Sulphide
129 132 3 1390 Sulphide
RC08A 009 150 147 150 3 Low 37.3g/tAg, 0.67%
Pb, 0.18g/t Au
RC08A 010 150 0 111 111 383 Weathered
including 54 81 27 495
111 123 12 410 Sulphide
Samples are 3m composites, sampled by spear. Analyses are either XRF and/or MEICP61.
There is a good correlation between both methods and ZGM is examining the
most appropriate method.
Table 2 - Drill Hole Locations
HOLE NO EAST NORTH AZIMUTH DIP
RC08A 001 529276 7532606 N -60
RC08A 002 529219 7532709 E -60
RC08A 003 529215 7532711 N -60
RC08A 004 529121 7532705 E -60
RC08A 005 529066 7532859 N -60
RC08A 006 529017 7532704 E -60
RC08A 007 528920 7532705 E -60
RC08A 008 528820 7532706 E -60
RC08A 009 528700 7532252 N -60
RC08A 010 529219 7532610 N -60
RC08A 011 528820 7532610 N -60
RC08A 012 528820 7532800 -90
RC08A 013 528950 7532850 Proposed
Photo 1 - RC Percussion Drilling – Anthony prospect
Photo 2 - Percussion chip showing molybdenite in quartz.
Photo 3 - Stockwork veining in a porphyry outcrop
Appendix 1 - Economics of Molybdenum Deposits
As an indication of the potential economics of the Anthony molybdenum project three
projects currently under development have been compared based on publicly available
information. They are Moly Mines Limited’s Spinifex Ridge project in the Pilbara,
Western Australia, Adanac’s Ruby Creek project in British Columbia, Canada and
General Moly’s Mt Hope project in Nevada, USA. Production is due to commence
between mid 2009 and second half 2010. Each prospectus has a 2 to 3 year
development time scale.
• Spinifex Ridge – average Mo grade at about 640ppm (0.064%) with about 15%
additional credit for copper and silver; mine stripping ratio 1.3:1 (waste to ore)
and mine plan to 400m depth; expected net cash operating cost $US6.92/lb Mo
• Ruby Creek – average Mo grade 580ppm (0.058%); mine stripping ratio 1.11/1
and mine plan to over 200m depth; expected cash operating cost $US7.60 to
7.99/lb
• Mt Hope – average Mo grade 940ppm (0.094%) over first ten years and 860ppm
(0.086%) over 32 year life to 400m depth in first 20 years; expected cash
operating cost $US4.67/lb Mo including roasting to MoO3. Korean Steel Maker
POSCO is injecting $170m for 20% equity in Mt Hope project. In addition,
POSCO will be responsible for 20% capital & operating costs from Jan 1, 2008.
This will entitle POSCO to 80% of Mo output from the mine. (from
www.generalmoly.com February 2008).
In summary the three projects have:
1. Ore grades are between 580ppm (0.058%) and 940ppm (0.094%)
- Anthony has achieved significant intersections with assays at least
equal to these grades in a number of holes in the initial scout drilling
program.
2. Mine plans are based on depths of over 200m to 400m vertical depth
- Drilling at Anthony generally has only been to 130m vertical depth.
3. Operating costs are forecast to be between $US5 and $US8/lb of Mo. This
compares to a current price for Mo of $US32/lb
Appendix 2 - Molybdenum Background
Overview of Molybdenum use
The potential growth of the molybdenum market makes it an attractive commodity.
The price has risen rapidly and now exceeds US$30/lb (more than US$66,000/t). World
demand is expected to rise from 200,000 tonnes per annum to 500,000 tonnes per
annum by 2030.
Molybdenum is a high melting point metal used to produce stainless steel, tool steel,
cast iron and high temperature superalloys. It is also used as a catalyst in the oil
industry and molybdenum sulphide is used as a lubricant.
As reported by the International Molybdenum Association (www.moly.imoa.info)
major end use sectors include:
• Engineering & Machinery
o Chemical & petrochemical, offshore
o Vessels, tanks, heat exchangers
o Packaging, pulp & paper
o Energy generation
• Transportation
o Automotive
o Shipbuilding
o Aircraft and aerospace
• Tubular products, tools, fasteners
• Catalysts, colours, pigments, lubricants
Other
1%
Lubricant &
Pigments
5%
Cast Iron
3%
High Performance
Alloys
5%
Full Alloy Steel
15%
Tool & High Speed
Steel
10%
Molybdenum Alloys
7%
Stainless Steel
28%
Catalysts
8% Carbon Stee
9%
HSLA Steel
9%
Global trends suggest that molybdenum will continue to be critical in facing
technological challenges including:
• Control of Greenhouse emissions (use as catalysts)
• Vehicle weight reduction and trend towards higher strength materials
• Diesel engines for improved fuel efficiency
• Fuel cell powered vehicles
• High pressure pipelines for long distance gas and oil transportation
• Higher operating temperatures of fossil power plants for better efficiency and
reduced emissions
Demand impacts
Overview: It has been projected that worldwide demand for molybdenum (Mo) will grow
from about 200,000 tpa currently to 500,000 tpa by 2030, based on a 4.5% annual
growth rate. Among the key assumptions behind these projections are that many new
gas pipelines are being built, special steels utilizing Mo will be increasingly used in
construction and vehicles will use more high strength low weight products.
Pipelines: The growing pipeline demand was strongly reflected in Petroleum & Gas
Journal's 2006 Worldwide Pipeline Construction Survey which shows 81,593 miles of
new and planned oil and gas pipelines are either under construction or planned. Using
just 0.2 – 0.5% Mo in these pipelines represents a high demand on molybdenum. For
example the proposed, 3,600 miles of 52 inch diameter, thick walled, high pressure pipe
“Alaska Pipeline" has been estimated to require 10,000,000,000 lbs or more of pipeline
Steel. At 0.5 % Mo content, the huge quantity of pipeline steel to be smelted and
formed would use approximately 50,000,000 pounds (around 22,700t or 10% of current
annual production) of Mo. At a conservative 0.2% it is still over 9000t (4.5% of current
world usage) of Mo used in the pipeline. If 0.2% Mo is used in all 81,593 miles at the
same dimensions then over 200,000t of Mo would be needed (equivalent to around one
year’s annual production currently ) - from Ken Reser’s Molybdenum Report (Feb 06)
Cars: There is projected to be a growing use of Mo in cars. A typical vehicle produced
today contains just under one pound of Mo. The move to include high strength steels to
reduce weight to strength ratios in cars will increase Mo demand (Dennis Battrum,
market friendly report, Nov 20, 2007). Also molybdenum’s use as a catalyst is expected
to grow to meet environmental considerations.
Construction: Mo use as an alloying element in the production of special steels is also
anticipated to grow as construction moves forward particularly in countries such as India
and China. An indication of the expected growth in overall steel demand is reflected in
the increasing iron ore production. Special steels tend to grow at a faster rate as
increasing quality demands are placed on many steel products to satisfy usage
requirements.
As an indication of rising demand, New York Commodity analyst (The CPM Group) is
predicting that world demand for molybdenum will rise almost 6% in 2008 with
increasing need for the metal in pipelines.
Supply Impacts
While a number of new Mo mines are due to come on stream in the next few years, the
production of Mo from by-product Cu – Mo mines has generally been declining in recent
years even with an increasing Mo price.
For example Chile’s Mo by-product production has been falling since 2005 (down by
about 20 million lbs from 105 million lbs). Canada’s output has reduced by about 9
million lbs since 2004. China’s production has also been reported to have reduced in
the last few years.
It has been reported that some by-product mines are intending to bring back their
molybdenum circuits so this trend may reverse to some extent.
Price
With the projected demand and supply issues taken into account commodity analysts
are predicting a decline in the real price of Mo to just under 50% of where it is now to
approx $US15/lb in real terms around 2013 – 2016 and then hold at that level. Even at
this value 700ppm Mo in an ore can be valued at over $US22.70/t of ore compared to
an operating cost range of $4.67 to $8 for the three projects quoted above.
POSCO’s investment in the Mt Hope development indicates that it is concerned about
locking in Mo supply for its steel production.
Summary
Overall the molybdenum market appears attractive even with additional mines coming
on stream in the next few years. Profitability will depend on molybdenum grades and
costs. The Anthony prospect’s good location and terrain present the opportunity for
attractive economics provided further drilling can confirm appropriate grades and
tonnages.