Updated Technical Report Based on Current Costs and Projected Molybdenum Prices
Ruby Creek Project Highlights:
• 2007 combined Measured and Indicated Mineral Resource estimate using a 0.04%Mo cut-off is 212,907,000 metric tonnes, with a grade of 0.063%Mo and 295,699,000 pounds of molybdenum
• 2007 Mineral Reserve Estimate of Proven and Probable Reserves at 157,685,000 tonnes grading 0.058%Mo. This is based on a 0.04%Mo mining grade cut-off and a 0.03%Mo milling grade cut-off
• Open Pit Mine life – 21 years
• Tonnage milled – 157.6 million tonnes (average grade = 0.058%Mo)
• Milling rate – 23,000 tonnes/day
• Strip ratio – 1.11 : 1.00 (waste/ore)
• Molybdenum in concentrate – 81.7 x 180.1 million lbs
• Pre-production capital – CDN $640 million
• Average operating cost – US $7.60/lb. Mo (first five years full production) US $7.99/lb. Mo (remaining years of production)
• The Base Case has an internal rate of return (IRR) of 18.9% and net present value (NPV) of CDN $295 million at an 8% discount rate, over a 21 year mine life. Payback of the pre-production capital is estimated to take 3.2 years
Adanac Molybdenum Corporation (TSX: AUA) (Pink Sheets: AUAYF) (Frank: A9N) today announced it has received the revised and updated NI 43-101 technical report on its Ruby Creek Molybdenum Project from Golder Associates Ltd. ("Golder").
Golder recommended ADANAC continue to develop the Ruby Creek Project through the ongoing detailed engineering (by AMEC Americas Limited), and the planned construction (by LEDCOR Construction Limited).
"This is exciting news for ADANAC as it moves us closer to becoming a producing molybdenum mine," said Michael MacLeod, President and CEO. "The revised technical report indicates that molybdenum at Ruby Creek can be extracted economically with proven mining technologies based on current costs and based on the future price expectations of molybdenum. Detailed engineering and procurement of long lead time items have also been underway since November 2006, and March 2007, respectively."
An updated Mineral Resource Estimate for the Ruby Creek property was announced in a news release by ADANAC on March 20, 2007, as a letter report ("the February 22 Mineral Resource Estimate"), which was reproduced in Golder’s report entitled "Mineral Resource Estimate Update, Ruby Creek Molybdenum Project" and dated July 23, 2007 ("the July 23, 2007 Mineral Resource Update"). The July 23, 2007 Mineral Resource Update does not include any drilling information collected during the 2007 drilling exploration program for the Ruby Creek Project. The July 23, 2007 Mineral Resource Update was used in the 2007 Feasibility Study Update. The combined Measured and Indicated Mineral Resource estimate using a 0.04%Mo cut-off is 212,907,000 metric tonnes, with a grade of 0.063%Mo and 295,699,000 pounds of molybdenum.
An updated Mineral Reserve Estimate was developed from the February 22, 2007 Mineral Resource Estimate as shown in Table 1. The mine design was adjusted to account for cost savings attributable to using high pressure grinding rolls rather than a SAG mill. ADANAC also increased the average milling rate to 1,100 tonnes per hour, from 906 tonnes per hour.
Based on the results of the revised feasibility study, the estimated Proven and Probable Reserves stand at 157,685,000 tonnes grading 0.058%Mo.
Capital Costs
The capital costs have been updated to reflect current conditions and the revised operating plan. Actual materials and equipment purchase costs were incorporated as available. Current escalation rates for labour, construction equipment, fuel and consumables were applied. Commissioning and pre-stripping activities completed in Year 1 have been accounted for in the capital cost estimates.
The total initial capital cost for the development of the Ruby Creek Project is estimated to be CDN$640 million. The cost estimate has been carried out to an accuracy of +/-15%.
A summary of the major capital costs is shown in Table 2.
Operating Costs
Mining costs were developed from first principles using site specific factors for labour, consumables and fuel; and were compared to actual costs from similar mines.
The mine has been designed and costed as an owner-operated mine. The average unit mining cost was determined to be CDN$1.39 per tonne mined or CDN$3.94 per tonne ore milled, for the first five years of full production and CDN$2.47 per tonne ore milled for the remaining years of operation. Process operating supply costs are based on budgetary prices of the consumables and reagents from vendors. The costs for General and Administration (G&A) include mine management, transport, insurance, warehouse and security personnel and general management. Tailings dam maintenance costs have been estimated from published costs from other mines using similar construction techniques.
The total operating cost for mining is estimated to be CDN$13.08 per tonne of ore milled for the first five years of full production and CDN$8.11 per tonne of ore milled for the remaining years of operation. The operating costs for mining, processing, power, tailing dam operation, general administration and ADANAC’s related costs were prepared by in house professional engineers and reviewed by independent qualified persons to confirm that the work conforms to good engineering practice. Tables 3 and 4 present the operating costs summaries for the first five years of full production and thereafter to the end of the mine life respectively (year 21).
The molybdenum price outlook is shown in Table 5 and was provided by CPM Group of New York.
To take advantage of the expected higher metal prices in the early years of the Project, an initial phase of the mining operation has been included in the mining schedule which will maximize molybdenum production during the first four years of operation. During this phase of the mining, the mine cut-off grade was raised to 0.06%Mo. However, material grading between 0.04 and 0.06%Mo would be stockpiled for processing at a later date. By processing a higher grade feed to the mill during this phase, net revenues are maximized allowing a faster pay-back of the initial capital investment, as outlined in Table 6.
After the initial four years of production, the mine cut-off grade is predicted to decline to 0.04%Mo and the focus of operations will be on maximizing overall project cash flow.
Internal Rate of Return and Net Present Value Results
A pre-tax economic model has been developed from the estimated costs and the open pit production schedule. The Base Case has internal rate of return (IRR) of 18.9% and net present value (NPV) of CDN $295 million at an 8% discount rate, over a 21 year mine life. Payback of the initial capital is estimated to take 3.2 years. A sensitivity analysis and varying molybdenum prices, capital and operating costs are shown in the following table:
Detailed engineering and procurement of long lead time items has been underway since November 2006 and March 2007, respectively. The Company previously announced a production decision in September, 2007 and received the Environmental Assessment Certificate for the project on September 10, 2007. ADANAC is in the process of arranging equity and debt financing to build the mine and infrastructure.
ADANAC’s goal is to become a producer as soon as possible, as the timing of the project is critical to take full advantage of the current high molybdenum prices. The decision has been made to use diesel-electric power generation initially in order to expedite the proposed development schedule. This has added significantly to both capital and operating costs but enables the project to start-up at least two years earlier than otherwise could be achieved. ADANAC believes that connection to grid electric power from Yukon will occur by the end of 2013.
This news release has been reviewed by John W. Fisher, P.Eng. a qualified person pursuant to National Instrument 43-101.
On Behalf of Management
ADANAC MOLYBDENUM CORPORATION
Michael MacLeod,
President & Chief Executive Officer
