Creston And Tenajon Join Forces

VANCOUVER — A proposed merger of Creston Moly (CMS-V) and Tenajon Resources (TJS-V, TJSAF-O) is set to create a molybdenum development company with a strong pipeline of projects.

The two juniors are planning a friendly merger wherein Creston will issue 0.84 of a share for each Tenajon share. The 53.2 million shares Creston would issue in the deal are worth roughly $8.5 million, based on Creston’s 16¢ volume-weighted average share price for the month of May.

The post-merger company would own three sizable molybdenum projects, all at different stages. Creston Moly brings to the merger its Creston project, in Mexico’s Sonora state, which completed a prefeasibility study in February. Tenajon would contribute two Canadian moly properties: the Moly Brook deposit in Newfoundland, which is nearing scoping-study stage and the Ajax project in British Columbia, which has an initial resource.

The boards of both companies have unanimously approved the deal, but it still requires approval from Tenajon shareholders. Those shareholders would constitute just over 30% of the shareholder base of the new company, which would have 175 million shares outstanding.

Creston Moly, formerly Georgia Ventures, has been advancing the Creston project since acquiring it in 2007. Sitting some 150 km northeast of the city of Hermosillo, Creston has seen exploration efforts since the 1970s, when several major mining companies — Amax, Peoles, and Fresnillo –took turns working the area. Fresnillo took the deposit to feasibility stage in the early 1980s but, as the price of moly fell in 1984, the major mothballed the project. Eventually, the claims lapsed and two Mexican nationals staked the ground.

Creston Moly has since brought the project through prefeasibility studies; the studies considered both owner and contract mining scenarios. Both were based on an operation mining 40,000 tonnes of ore daily from an open pit with a strip ratio of 1.23. Given an average head grade of 0.077% molybdenum, the operation would produce 20 million lbs. molybdenum and 12 million lbs. copper annually.

The Creston project was found to carry a pretax net present value of US$465.3 million with contract mining, or US$502.9 million with owner mining, using an 8% discount rate. Contract mining produced a 28.2% pretax internal rate of return (IRR); owner mining resulted in a 27.2% pretax IRR. Payback is achieved in 3.6 years, while mine life currently sits at 11 years.

To develop a contract mining operation is expected to cost US$511.6 million. Owner mining raises that cost slightly, to US$576.2 million. Processing costs come in at US$6.57 per lb. moly with contract mining, or US$5.74 per lb. molybdenum with owner mining.

The project hosts 146.7 million tonnes of proven and probable reserves grading 0.077% molybdenum. Measured and indicated resources total 176.9 million tonnes averaging 0.071% moly, while inferred resources sit at 16.3 million tonnes of 0.051% moly. And Creston Moly believes there is potential to expand the resource base through two nearby zones, known as Red Hill and Alejandra. Both are close to the main deposit and bear outcropping molybdenum mineralization but have seen only limited exploration.

Tenajon’s Moly Brook project is near the hamlet of Grey River on Newfoundland’s southern coast. A 2009 estimate pegged the project’s resources at 86.8 million indicated tonnes grading 0.065% molybdenum plus 31.2 million inferred tonnes averaging 0.056% moly. The estimate also confirmed that most of the delineated resource sits within a pit shell with an estimated strip ratio of 2.03. In its centre, the deposit hosts a high-grade zone that could house a starter pit with a strip ratio of only 1.09.

The deposit has been traced for 750 metres along strike, to 300 metres depth, and across 500 metres width. Mineralization occurs primarily as molybdenite within a sheeted vein and fracture system. Two other zones that have seen only limited exploration lie within the same 2.5-km-long trend. At the Wolf Pond zone, which is located 800 metres south, rock sampling has outlined a 270 by 200-metre zone of surface mineralization grading as high as 0.22% moly. And at Chimney Pond, 600 metres farther south, a historic soil survey outlined a 400 by 300-metre zone of anomalous molybdenum geochemistry. Neither area has yet been drilled.

Bench-scale metallurgical work showed flotation produced molybdenum recoveries better than 90% from Moly Brook rock. And the property sits less than 4 km from a deepwater, ice-free, navigable fjord.

Tenajon’s other molybdenum property, Ajax, also hosts a defined resource. Sitting 13 km north of Alice Arm, Ajax is home to 69 million indicated tonnes grading 0.065% moly plus 483 million inferred tonnes averaging 0.061% molybdenum. The deposit was discovered in 1965 by Newmont Mining (NMC-T, NEM-N); despite drilling 26 holes that indicated a considerable deposit, Newmont allowed the claims to lapse in the late 1990s because of the failing price of molybdenum. Tenajon then staked the ground and held it until 2005.

Since then, the company has completed 4,550 metres of drilling, which increased the historic resource. The Ajax property is also fairly well located with respect to infrastructure, in that there is deep tidewater access and hydroelectric power available 16 km south, at Kitsault.

On news of the proposed merger, Creston Moly’s share price lost 3.5¢ to close at 14.5¢. The company has a 52-week trading range of 5-44.5¢ and 121 shares outstanding. Tenajon’s share price fell a penny to 14¢; it has a 52-week share price range of 4-46¢.