Roca Mines Inc (C-ROK) - News Release
Roca's MAX scoping study favours 500 tpd mine
2005-06-01 19:04 ET - News Release
Shares issued 32,166,601
ROK Close 2005-06-01 C$ 0.29
Mr. Scott Broughton reports
MAX MOLYBDENUM PROJECT; INDEPENDENT PRELIMINARY ASSESSMENT DEMONSTRATES ECONOMIC POTENTIAL OF 500 TPD HIGH-GRADE MOLYBDENUM MINE
Hatch Ltd., an independent engineering services company in Vancouver, B.C., Canada, has completed its preliminary assessment (a scoping level engineering study) of Roca Mines Inc.'s MAX molybdenum (Mo) project. The preliminary assessment demonstrates that, at current molybdenum oxide (MoS2) prices, the MAX Mo project has positive economics as a high-grade (greater than 0.5 per cent MoS2) underground mine. Hatch's lead qualified person responsible for the preliminary assessment is K. Leong, PEng.
Prices for Mo products have been increasing since 2002; MoS2, a product used in making specialty and stainless steels, has exceeded $15 (U.S.) per pound for the past 13 consecutive months and currently trades in the $38-(U.S.)-per-pound range. The average price for MoS2 in 2004 was in the $16.50-(U.S.) range and its average price for 2005 (year to date) is $33.25 (U.S.) per pound.
The following table provides a before-tax cash flow summary of the 500-tonne-per-day scenario producing an estimated 6.1 million pounds of Mo contained in concentrate, defined as Case 1 in the Hatch study.
CASE 1 -- CASH FLOW SUMMARY
CONTINUOUSLY OPERATED 500 TONNE-PER-DAY
MINE AND MILL WITH NEW EQUIPMENT
MoS2 IRR (1) NPV (1) Payback
price 0% 5% period
(U.S.$/ discount discount (1)
pound) (U.S.$ (U.S.$
millions) millions)
15 (year
one) -5.8% -2.87 -4.58 n/a
10 (year
two to
three)
20 59.5% 48.33 37.35 13 mos.
30 112.4% 110.47 88.71 7 mos.
Note (1): All cash flow results are calculated on a before tax basis.
Hatch reviewed the capital and operating costs for two mutually exclusive underground mining scenarios; a continuously-operated 500-tonne-per-day mine (summarized above) working at a 0.50-per-cent MoS2 cut-off grade, and a 2,500-tonne-per-day mine operating at a 0.20-per-cent MoS2 cut-off grade (Case 2). Both scenarios include a conventional concentrator to be constructed on-site that would produce a MoS2 concentrate for direct sale. Both assessments relied upon a National Instrument (NI) 43-101-compliant resource estimate previously completed by T.N. Macauley, PEng (see news release ROK No. 16-04 in Stockwatch dated Sept. 21, 2004). For Case 1 the measured and indicated resource estimate used was 1.38 million tonnes at a cut-off grade of 0.5 per cent MoS2 and for Case 2 the measured and indicated resource estimate used was 11.35 million tonnes at a cut-off grade of 0.2 per cent MoS2.
The Hatch study reinforces the company's assertion that a small, fast-tracked mine with near-term production would provide the most attractive and lowest-risk mine development plans. Working together with its consultants, management is now refining the Case 1 mine plan described above to produce a campaigned plan with rescheduled underground development and used concentrator equipment. That plan would minimize capital costs while also reducing lead time to production under a British Columbia small mines permit application. The implementation of the small mine plan will not reduce or limit the opportunity to expand the operation over time.
The MAX Mo project is located approximately 65 km (39 miles) south of Revelstoke, B.C., and Roca has an option to earn a 100-per-cent interest in the project. The preliminary assessment is available on SEDAR on the company's website.
Case 1 -- 500-tonne-per-day summary
The 500-tonne-per-day plan includes the development of 25-metre sublevels and open stopes from the existing adit level. It would produce an estimated 6.1 million pounds of Mo (contained in concentrate) from approximately 476,211 tonnes of mill feed over three years. The mine life could be expanded by developing other areas of the deposit and by backfilling stopes to permit extraction of pillars; these additions to the total tonnage have not been included in the study at this time.
The study is based on a mine development plan and schedule that could yield 500 tonnes per day on a continuous basis over the life of the mine. To facilitate this, a decline ramp needs to be excavated in advance of production representing a large component of the total capital cost of the 500-tonne-per-day study. A concentrator was also designed using conventional crushing, grinding, flotation, thickening and dewatering unit operations. All capital and operating costs were based on conceptual designs and benchmarked to operations of similar capacities and nature.
Capital costs for the continuously-operated 500-tonne-per-day project are estimated to be $24.16-million (U.S.) based on all new equipment, with mine operating costs of $44.50 (U.S.) per tonne mined and $20.64 (U.S.) per tonne milled. Payback periods of less than 13 months are calculated for commodity prices of plus-$20 (U.S.) per pound of contained Mo. All costs are based on the assessment of achievable mining and processing conditions as described in the report. Consistent with a scoping level of engineering the study's cost estimates have been prepared with a level of accuracy range of plus/minus 30 per cent. Because of its nature, the reader should be aware that this study is intended to provide guidance for further investigation, design and engineering that may change the range of both capital and operating costs, potentially affecting the cash flow analysis.
Case 2 -- 2,500 tonne-per-day summary
The 2,500 tonne-per-day plan also includes the development of 25-metre sublevels and open stopes producing an estimated 31.7 million pounds of Mo (contained in concentrate) from approximately 8.66 million tonnes of mill feed over 10 years. The mine plan develops most areas of the deposit that exceed the 0.20 per cent MoS2 cut-off grade and assumes a high extraction ratio by backfilling stopes to permit mining of all pillars.
The study reviews a mine development plan that would yield 2,500 tonne-per-day on a continuous basis and includes the development of decline and incline ramps, ventilation raises and sublevel stopes. The concentrator was designed using conventional crushing, grinding, flotation, thickening and dewatering unit operations. All capital and operating costs were based on conceptual designs and benchmarked to operations of similar capacities and nature. Capital costs for the 2,500 tonne-per-day project are estimated to be $104.8-million (U.S.) based on all new equipment, with mine operating costs of $29.44 (U.S.) per tonne mined and $10.64 (U.S.) per tonne milled. All costs are based on the assessment of achievable mining and processing conditions as described in the report. As described previously, all cost estimates have an accuracy range of plus/minus 30 per cent.
Due to the uncertainty of Mo product prices for a 10-year-mine life, Hatch opted to prepare a simplified break-even cash flow analysis, rather than a sensitivity to price type analysis. Based on this analysis, and the conceptual designs and cost estimates provided for Case 2, the project requires prices in the range of $20 (U.S.) per pound for years one to five, $15 (U.S.) per pound for years six to eight and $10 (U.S.) per pound for years nine to 10 to produce a near-break-even result. Since these prices are significantly higher than that predicted by a February, 2005, Mo market analysis report relied upon by Hatch, no additional work has been carried out on this model. However, the results indicate the potential for expansion of a small mine if commodity prices are sustained at high levels over an extended period of time.
Conclusions
Hatch's recommendations to advance the MAX Mo project include: underground inspection, further diamond drilling, geology, metallurgy, and geotechnical investigations at proposed plant and tailings sites. All of these recommendations are currently under way at the MAX Mo project. Underground rehabilitation and ventilation have been completed and access restored to over two kilometres of existing adit, crosscut and drifts. The company is working closely with its engineering, environmental and marketing consultants to complete this work.
Roca's 3,000-metre underground infill drilling program is currently nearing completion. That program is intended to bring sampling in the measured resource area of 260,000 tonnes grading 1.95 per cent MoS2 (at a 1.00 per cent MoS2 cut-off grade) to approximately 20-metre spacing. The infill drill program will provide the basis for a detailed design of a decline ramp and stopes and for a final production decision upon receipt of a B.C. small mines permit.
David Taylor, PEng, is the NI 43-101 qualified person supervising the infill drilling and sampling program. Assay results will be announced when they are received and compiled. Scott Broughton, PEng, is the NI 43-101 qualified person responsible for the preparation of this news release. |
