Adanac Moly making strides at Ruby Creek

Vancouver – Advancing on its planned path towards mine development, Adanac Molybdenum (AUA-V, ANCGF-O) is gearing up for a mid-year construction start at its Ruby Creek project near Atlin in northwestern British Columbia.

The prospective molybdenum miner recently signed an agreement with AMEC Americas for engineering and procurement services at the large moly deposit. Completion of detailed engineering and design of workings is expected to take about 13 months.

In early-2006, Adanac tabled a preproduction capital cost estimate of about $450 million for Ruby Creek and has set a time-line projecting commercial production by early-2009.

The deposit hosts proven and probable reserves of 143.7 million tonnes grading 0.059% molybdenum, about 187 million contained lbs. of molybdenum.

The feasibility study reviews a projected 21-year mine-life from an open pit operation. A milling rate of 20,000-tonnes-per-day is expected to yield average recoveries of 89% and produce 167.4 million lbs. of molybdenum. Open pit development will enjoy a low modeled strip ratio of 0.95-to-1.

Average operating costs over the initial five years are estimated at $11.61 per tonne milled (about US$5.87 per lb of molybdenum), falling to $8.05 per tonne milled from year 6 through year 21.

Although current molybdenum prices are in the US$25.25 per lb. level, longer-term industry projections expect it to slide to the US$8 per lb. range. Therefore, to benefit from near-term higher prices, Adanac plans to develop an initial “payback pit” to maximize production of the metal over the initial 5 years. Expected molybdenum output is anticipated at about 12 million lbs annually during Ruby Creek’s “payback” phase.

Internal rate of return (IRR) scenarios project a 24.4% IRR in a base case, with a net present value (NPV) of $222 million and a 3.1 year payback period. Sensitivity to the metal price is demonstrated with a 10.5% IRR when the molybdenum price drops by 10%, delivering a $19.7-million NPV and payback over 4.4 years.

Power needs for the operation will initially be met with onsite diesel generators but the company expects to be able to tap into the Yukon electrical grid by about 2012.

In late-2006, a number of drill holes collared in the planned Phase 1 pit area encountered higher-grade molybdenum zones. Adanac launched the drill program for metallurgical testing and to increase definition plus understanding of controls on grade distribution, especially that likely to be encountered in initial mining.

With its 63.5-million shares outstanding, Adanac posts a $73-million market capitalization based on its recent $1.15 per share trading level. The stock has a 52-week range of 55-to-$2.90.