To: pogbull who wrote (69887) 12/18/2006 3:53:25 PM
From: zoo york of 69889
Hi POGbull!
Well the magazine has published the article on GPXM, so here it is since you asked...
Good golly, Miss Moly!
The richest molybdenum mine in the world resumes commercial production.
The long road for development at the Ashdown Mine in northern Nevada has seen many detours and roadblocks that were lying in the path, but operations have returned to commercial production at the richest molybdenum mine in the world. Like most other metals, moly prices have been rallying strongly since a few years ago. Recovering from bear market lows in the range of just $3 per pound, moly now fetches upwards of $26 per pound on the spot market, and the fundamentals for the metal suggest there is potential to support even higher prices in the months ahead.
Ashdown actually began its life as a gold mine. At the turn of the century, underground workings had been developed targeting vein structures bearing gold grades averaging 10 grams per tonne. After many years of production, as development progressed to greater depths, the miners began to encounter significant grades of molybdenum ore. In 1979 American Copper and Nickel, a U.S. subsidiary of INCO, acquired the property and began evaluating the molybdenum potential. Exploration drilling defined the Sylvia vein and nearly 2000 feet of decline was dug to open mining access points at the richest segment of the ore body. As bulk sampling of the vein progressed, the worldwide market price for molybdenum collapsed and the mine was closed without ever going into production.
But it was not just the commodity price that collapsed. The moly zone had been emplaced as a result of a fault structure that enabled the circulation of mineralizing fluids to concentrate the very high grades of the ore. However, that intensely fractured fault zone also undermined the structural stability of the underground workings, and much of the historic tunneling caved in during the years when the mine was inactive.
Since acquiring control of the mine at a time when the moly market was mired at bear market lows, Win-Eldrich Mines Ltd [TSX-V: WEX] had been patiently waiting for improving conditions in order to contemplate the resumption of mining operations. With a clean balance sheet, and an extremely tight share structure, the company is highly leveraged to a successful restart of mining at Ashdown. However it did not have the operating experience in-house to manage the transition from a holding company to an ongoing mining business, so the solution was to find a partner with management strength that could tackle the challenge of restarting operations.
Enter Golden Phoenix Minerals Inc [OTC: GPXM] in 2003, under a joint venture agreement to earn a 60% ownership interest in the project and become the operator, and it seemed that the critical components were in place to move the project forward. What in fact came to pass was a prolonged period of regulatory delays, developmental challenges, financial stress, and some philosophical friction between the partner companies. Needless to say, a great deal of investor angst was also part of the story. All of this came to a climax 24 months ago, and resulted in an investor uprising at Golden Phoenix, along with the replacement of most of the former management team by a new group of motivated and competent individuals installed at the senior executive level of the company. Winning back the confidence of investors has been a gradual process, but the current low price of the stock should be recognized as an opportunity and not a fair value of the future outlook.
Once the decision was made to return the mine into production, the fragmented rock structure of the deposit became a challenge as engineers attempted to drive a decline ramp around the collapsed workings and open new avenues to access the high grade zone. Several costly efforts were launched and aborted due to unsavory conditions before the company was finally able to chart a route extending development and reestablish a conduit to reach the target zones.
Fast forward now to the present, and it seems that the long awaited objective is in hand. The mining operations have been structured into a limited corporate partnership, the Ashdown Project LLC. And it appears that the prize has been worth the years of work and struggle as this new venture launches production.
The corporation was able to announce in November that it had been granted the long awaited final approval for full-scale mining activity by the Bureau of Land Management. This followed a comprehensive process during which the corporation was required to demonstrate that the operations of the mine would not compromise the surrounding environment. Thus with permit in hand, the company has now become the first primary molybdenum mine to restart production since the resumption of bull market conditions for the sector.
During the early production phase the plans are to gradually ramp up production to reach a target of about 100 tonnes per day. This relatively small scale of operations is due to the extremely high-grade nature of the deposit. Wide intervals of the ore zone have yielded assay results in the range of 5-20% moly, which is astronomical by the standards under which this metal is usually encountered. There may be no metallurgist alive today that has ever created a recovery process for such rich feedstock. A wide variance of the ore grades along the mineralized zone is also a challenge that will affect the recovery percentage. It has been proposed that the company attempt to dilute the head grade of the ore at the mill by blending material from both higher and lower grading zones to achieve a more stable processing regime.
Assuming an average of head grade bearing in the range of 5% moly at the mill, the project metallurgist is confident that more than 90% of the contained metal can be recovered through processing. The milling facility is a modern, fully automated plant with operations fully tuned specifically to handle the high-grade moly ore. Redundant processing loops ensure that all operating parameters can be monitored and material can be recirculated through each phase for treatment at optimum levels through a floatation cell recovery process. The plant is designed so that it can run 24-hours per day with a minimum staff requirement and limited downtime for maintenance.
As a footnote to underscore the impressive grades of the ore at Ashdown, it should be noted that even under the expectation of 90% recovery rates, the tailings discharged after full processing through the mill would still be of higher grade than the ‘ore’ that other molybdenum producers hope to extract from their deposits. Further, even running at capacity with only 100 tonnes of production from the mine, the concentrates produced from the Ashdown Mine would be of higher value than the output from other producers that have planned operations to run more than 2,500 tonnes per day.
Okay, case closed… mortgage the house and buy all the shares of the partner companies tomorrow morning right? Not so fast – there are still many issues and challenges ahead that warrant consideration. Perhaps the biggest of these is the limited tonnage that has been defined at the moly zone. At present, perhaps 40,000 tonnes of mineralized material has been outlined, and even this is not proven and compliant within the guidelines mandated under NI43-101 regulations. So, while the company plans an aggressive exploration effort in its 4 square miles of claims, an estimated mineral inventory that could last perhaps 3 years production at current capacity may or may not be increased by future exploration efforts.
As development work at the mine continues, the issue of low competency levels in the host rock will remain an ongoing challenge to deal with. The added time and expense of installing reinforcing structure within the workings will also have an outcome on the profitability of operations. And the long-term price stability of moly itself is open to question, as the metal has traditionally behaved in a series of boom and bust cycles.
Suffice to say that the outlook for the project has never been stronger than it is at the current time, but there are also significant risk factors that will have to be considered as well. As stable production is achieved, the promise of strong cash flow will help to offset some of the challenges in the path as the project grows and development progresses.
Based on results outlined in historic drilling and sampling data, there is a strong possibility that new resources will be discovered once comprehensive exploration work resumes at the mine. This will be a priority in order to build the mineral inventory necessary to secure longer term production. Also, there remains the potential for development of an economic gold deposit at the higher levels of the mine that warrants investigation and could serve to further extend the mine life and profitability.
Going forward, the corporate partners expect that a period of several months will be required to tune the recovery plant and advance through the complex learning curve that goes with restarting operations at a mine. An exceptionally talented operating staff, many of whom have senior management experience on their resumes from work at larger mines, have been recruited to continue the mine development at Ashdown. This hand picked team will represent a valuable asset for the company in order to run the mine efficiently under less than optimum conditions.
Like many other aspiring junior mining companies, Win-Eldrich Mines and Golden Phoenix Minerals certainly have attractive upside potential to warrant consideration from investors. The partners have forged their working relationship during a stressful learning curve, but now appear to be a good fit to advance the project. Together, these companies have already achieved a level of success that most other juniors will never reach, now that production has commenced at their mine. If they can build on this momentum and follow through on their growth and development objectives, then these two companies will become great turnaround stories to watch in the months ahead.
cheers!
COACH247 |
