Molybdenum

[Lone Clone]

High grade molybdenum could give Virgin hot start

http://www.mineweb.com/mineweb/view/mineweb/en/page66?oid=38906&sn=Detail

A small high grade moly-copper deposit in Mexico could be the precursor of good things for Canadian junior Virgin Metals.
Author: Lawrence Williams
Posted: Friday , 26 Oct 2007

LONDON -

Virgin Metals is a junior exploration and development company which is rapidly heading towards becoming an important producer of one of today's hot metals - molybdenum or moly for short. As we commented in a story on Mineweb yesterday,- Many moly positives in London - not only has the recent moly price performance been spectacular, but a continuing likely supply/demand gap will almost certainly keep prices strong in the short to medium term, particularly as the metal, primarily used in stainless steel alloys, has so far proven to be relatively price insensitive.

Chris Davie, the company's President and CEO has, not surprisingly, a hugely positive view on its outlook as it works towards bringing firstly a relatively small high grade molybdenum-with-copper project to fruition and using that as a leapfrog towards developing a very much larger copper/moly porphyry - both project being located in the mining-friendly nation of Mexico.

The most advanced, but smaller, deposit is the Los Verdes property in Sonora in Mexico. It has, like many of the Mexican projects of interest these days, seen mining activity in the past, with a small open pit exploiting high grade molybdenite in the 1950s and has been optioned in the 1960s and 1970s by companies such as Homestake, Newmont Penoles and Cominco which all carried out exploration work there, but low moly prices dampened interest. This does mean that Virgin has had access to older drilling results as well as bulk samples from an adit into the deposit.

Drilling has been expanded by Virgin and an NI 43-101 compliant resource has been estimated, and this is currently being updated. But nevertheless the currently estimated resource is very positive with Measured and Indicated resources totalling some 10.5 million tonnes grading 0.124% Mo (note not MoS2), 0.46 percent copper and 0.085% tungsten.

Furthermore, the deposit has, according to Davie, favourable geometry for a simple mining operation; it can be brought to production very quickly; and is close to good infrastructure with a power line being installed and a location only 5km from a major road. Metallurgy is simple, to generate recoveries of 89% for the moly element and 86% for copper, but this may be able to be bettered by fine tuning.

An ongoing feasibility study for a 1 million tonne/year mining operation is under way and Davie anticipates a mine life of at least 10 years at this mining rate, with excellent chance of extension as exploration continues. Production could be under way in 2 years or less and at a not unreasonable $25/lb price for moly and $3/lb copper (current levels are around $34/lb for moly and $3.55 for copper neither being at their recent high points), revenues would be some $86 million a year. It should still be a robust project at prices of around one third of this level.

What could make it really interesting though, is that moly is, because of its structure, can give low grade estimates in the analysis procedure as it can lose material when drill core is cut - and the higher grade the moly, the more likely that is to occur. Interestingly investigations in an adit into the deposit had to be abandoned because of a collapse, but a bulk sample was still pulled out and analysis here gave a phenomenal moly grade of 1.2% - some prospective new big low grade molybdenum mines are being developed at average grades of 0.05 or 0.06% which gives an indication of how highly 1.2% material rates.

Obviously it is unlikely that any subsequent mine will produce head grades at this level, but it is an indication that there are could be substantial very high grade elements in the deposit which will help it maintain a good blended head grade at perhaps a tenth of this level. But could also mean that earnings could be erratic as very high grade zones come into and out of the mined mix.

But ultimately, the jewel in the crown for Virgin could be its other major project - Cuatro Hermanos, also in Sonora. This is a potentially huge porphyry deposit containing good copper and moly values. Again it has been drilled by various parties over the years and a host of drill data is available to Virgin, which is conducting its own new drilling programme.

So far the drilling has outlined a porphyry system extending over 4.5 km2 with some drill holes containing excellent grades over substantial widths. Cuatro Hermanos is not quite as accessible as Los Verdes, but nowhere in this area of Mexico is too far from decent infrastructure so it would rate highly in comparison to remote northern Canadian operations, or prospects in less mining-friendly locations.

This is at an early stage yet, but Davie is obviously very keen on this project, and as a mining and metallurgical engineer with considerable experience over the years in both the operational and financial elements of the mining sectors, his views should be taken seriously.