Avanti puts US$424M price tag on Kitsault

Vancouver — To take a crack at reopening the Kitsault molybdenum mine, 140 km northwest of Prince Rupert, B. C., Avanti Mining (AVT-C, AVNMF-o) will have to shell out about US$424 million in capital costs, according to a recent scoping study.

With Avanti forecasting total operating costs per lb. of moly at US$5.97 and long-term moly prices at US$17.45, the after-tax, net present value for Kitsault comes in at US$681 million. The internal rate of return was pegged at 29.7%.

Avanti picked up the property this summer for US$20 million through Alcoa’s (AA-n) wholly owned subsidiary Aluminerie Lauralco. Under that agreement if Avanti produces a feasibility study, Alcoa has 90 days to decide whether it wants US$10 million cash, the same amount in shares at commercial production, or a 1% net smelter royalty return. Although Kitsault has only been in Avanti’s portfolio for a few months, with reams of data from past-producers Amax and Kennecott, Avanti has been quick to calculate a resource and generate a plan to reopen the mine.

Avanti’s scoping study proposes a 15-year, open-pit mine that would produce 363 million lbs. of moly. Avanti pegs the indicated resource at 158 million tonnes grading 0.1% molybdenum and the inferred resource at 133 million tonnes grading 0.08% moly.

The mine plan starts with two years of preproduction construction, mostly related to the tailings dam. Then, once commissioned, the mining schedule begins with about 2.4 million tonnes throughput in the year 2012. That ramps up to about 13.5 million tonnes for the next 13 years and drops to about 11.6 million tonnes in the final year.

Grades average between 0.07% and 0.117% molybdenum and Avanti estimates recoveries at around 90%.

Avanti would produce a 52% moly concentrate. But since equipment from previous bouts of mining at Kitsault have been completely decommissioned, Avanti’s plan includes installation of a primary gyratory crusher, a semi-autogenous ball mill, rougher-scavenger flotation with regrind mill and four-stage cleaner flotation, also with regrind.

Avanti notes that since metallurgical tests have not yet been completed, the scoping study didn’t factor in a lead-leaching circuit. Instead, Avanti assumed a US$180- million, life-of-mine penalty.

In terms of other infrastructure, Avanti is fortunate that Kitsault is near developed roads, has access to the ocean with its position at the head of Alice Arm and is on the B. C. power grid.

On news of the scoping study, Avanti’s share price held even at 15. The stock has traded in a 12-month range of 4-80.