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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (31381)	1/19/2009 3:34:44 PM
From: LoneClone	Read Replies (1) \| Respond to of 196116

Virgin Metals Positions Itself To Benefit From Any Upturn In The Molybdenum Price By Charles Wyatt minesite.com Interesting to see that last month Canadian-listed Virgin Metals agreed to buy a group of molybdenum claims in Nevada from Gryphon Gold Corporation. These claims go together to make up a project known as the Topper molybdenum project and the payment is three million shares in Virgin. The price of Virgin fell from C20 cents to C2 cents between July and the year end, and the price of molybdenum did a nose dive in October alone from US$30 to US$10 per pound, but surely there must be something good that we can say about it all. Chris Davie, the chairman and chief executive of Virgin Metals is completely upfront about it. “No one could have imagined paying the equivalent of C$60,000 for such assets at the end of 2007, but that is what we paid with our shares at C2 cents each.” So the old adage about problems producing new opportunities confirms itself, yet again. No use junior companies climbing into a hole and hoping things will get better. This is a time to look for deals and if you are going to look for deals you have to maintain a reasonably high profile. Mr Davie makes quite clear that he is not spending much money on the new assets at present. “They will go in the back pocket for the time being, as there are no expenditure commitments, but we know we have acquired assets of real value.” Previous exploration work was carried out on the property between 1978 and 1982 by French explorer Seremin, and this traced mineralization in outcrop and in drill holes along a controlling shear for over 1,500 metres. Seramin drilled a total of twenty four holes, and delivered intercepts of up to 0.202% molybdenum over 170 feet – very high grade by any standards - and 0.113% moly over 291 feet. Virgin Metals has obtained these drill results from the referenced reports, but they have not yet been independently verified. Chris gives a clear impression that whether or not they have been verified he’s happy with Seramin’s results and points out the potential they appear to demonstrate for a small scale, high grade underground mine. And that’s his declared target. He already has one mine under his belt at the Los Verdes copper molybdenum property at Sonora in northern Mexico. This property encompasses a modest sized, compact zone of molybdenum, copper, and tungsten mineralization located at the crest of a steep ridge. As a result of this topography it is more likely to become a low cost open pit mine, but it is nonetheless a historic molybdenum producer, and one moreover that was extensively drilled in the 1970s. Virgin Metals has confirmed that drilling by repetition and carried out a pre-feasibility study, the findings of which were announced in July last year. This study was based on a mineable reserve of 7.07 million tonnes of non-oxide ore grading 0.137% moly and 0.657% copper. It gave a net present value of US$96.9 million to a project with an 8.8 year life and an internal rate of return of 23 per cent before tax. The metal prices used, however, were US$25 per pound for molybdenum and US$2.50 per pound for copper. Both of these prices fairly reflected the prevailing pricing situation at the time of the pre-feasibility, even if they are way out now. But instead of criticising the study, Chris Davie sees it as an opportunity to think outside the box. For a start, he is thinking about a bit of high-grading given that there could be around 300,000 tonnes grading 0.2% moly and 2% copper within this mineable reserve. As he points out, this could be worth around US$120 per tonne, so his next thought is to examine the potential to include tungsten recovery and increase the recovery rates for the molybdenum which is only running at 71 per cent in the study compared to 92 per cent for copper. The logical follow-up to this is to find a suitable plant nearby which could treat the ore and give Virgin Metals its first cash flow. Quite clearly Chris Davie, who is based in Nevada, is happy with the longer term prospects for molybdenum. He had not read the latest tome on the metal published by CIBC World Markets, but agreed with the sentiment therein that as demand for molybdenum is traditionally tied more closely to large-scale capital projects than to consumer discretionary spending it is unlikely to encounter a major setback simply as a result of current economic conditions. In other words if demand stems from end users such as atomic power generation units, oil and gas refining, and from pipeline construction, then in the prevailing conditions it should remain relatively consistent. Steel, of course, is the wild card, and it is negative sentiment resulting from the problems in the auto industry that bears some responsibility for the recent fall in price. By the same token the bounce back could be just as sizeable once the steadiness in demand establishes itself. With his small, shallow, high grade, underground mines, Chris Davie is therefore creating a company which will be ready to take swift advantage of any upturn on the price of molybdenum. A number of copper mines producing molybdenum as a by-product have closed or are closing at the moment due to the low price of copper, and it will take time to get them back into production even when the metal price improves. But here is a company led by someone capable of turning problems to his advantage, so worth following even if it will take time to get the shares on the move again. Primary producers, such as Virgin Metals, could now be in a strong position.