Galway looks to improve Victorio economics (May 19, 2008)

Galway Resources (GWY-V, GWYRF-O) is using the recommendations from a scoping study on its Victorio molybdenum-tungsten project, in New Mexico, to improve the economics of the project in a prefeasibility study.

The scoping study looked at two different mining scenarios.

Using a block caving mining method, the project could produce 9.4 million lbs. molybdenum and 9 million lbs. tungsten per year over 17 years. The net present value (NPV) of the project, using a 6% discount rate, was more than US$270 million with a pretax internal rate of return (IRR) of 15% and a development cost of US$442 million.

A selective mining scenario was also considered, where only 6.2 million lbs. molybdenum and 5 million lbs. tungsten would be mined each year over a span of 10 years. The IRR proved higher here at 26% with an NPV of US$95 million and capital costs of US$242 million.

Galway first released the results of the feasibility at the end of February but in April announced that it had filed the study on SEDAR and had begun to proceed with some of the study’s recommendations.

“We believe that there is room for improvement in the economics of the project, particularly in the engineering,” Galway president and chief executive Robert Hinchcliffe said in a statement. “Management is currently focused on exploring strategic alliances in order to creatively advance the Victorio project.”

With completion of a prefeasibility study as the goal, Galway has launched a 12-hole infill drill program at Victorio. The company wants to upgrade resources and collect new data for geotechnical evaluation, as well as collect sample material for metallurgical and geotechnical testing.

Galway has proceeded with the program as a result of the recommendations made in the study, which suggests possibly combining the two mining scenarios.

The Victorio deposit has an indicated resource of 67 million tons grading 0.099% molybdenum and 0.101% tungsten totalling 132 million lbs. molybdenum and 134 million lbs. tungsten.

Inferred resources stand at 42 million tonnes grading 0.088% molybdenum and 0.091% tungsten containing 74 million lbs. molybdenum and 76 million lbs. tungsten.

A cutoff grade of US$25 per lb. molybdenum was used in calculating the resources.