The strong rise in molybdenum prices during the past three years has attracted a growing number of Western Australian mining companies to the rare metal.
The strong rise in molybdenum prices during the past three years has attracted a growing number of Western Australian mining companies to the rare metal.
The most advanced of these is Moly Mines Ltd, which is planning to develop the $600 million Spinifex Ridge project in the Pilbara region.
Marengo Mining Ltd announced last week it was proceeding with a bankable feasibility study for an even bigger copper-molybdenum project in Papua New Guinea, which could cost more than $1 billion to develop.
UK company Thor Mining plc is pursuing a smaller project in the Northern Territory, while newly-listed Carnavale Resources Ltd has recently purchased a molybdenum project in Brazil.
The strong interest has been fuelled by the rise in molybdenum oxide prices from as little as $US5 per tonne during the 1990s to a recent peak of $US34/t.
This has been driven by increased demand for molybdenum as a strengthening agent in iron and steel, and particularly as a component in the making of stainless steel and oil pipelines.
China, one of the world’s biggest producers, has become so concerned about the tight market it has imposed export quotas and export taxes on its domestic producers.
Moly is due this month to release the results of its bankable feasibility study, which was seeking to achieve 20 per cent cost savings over the $622 million capital cost estimate in its preliminary feasibility study.
The project’s water supply and power supply were two areas Moly was seeking substantial savings.
The feasibility study is built on base case mine production of 15 million tonnes per year, but Moly has started a scoping study into the expansion of output to between 23mt and 25mt.
Moly has already placed $51 million of orders for long-lead capital items from German engineering group ThyssenKrupp.
Marengo said the results of its conceptual mining study for its Yandera copper-moly mine were strong enough to commit to a bankable feasibility study.
The study was based on an initial mining rate of 25mt for the first two years rising to 40mt.
The initial capital cost would be $US942 million ($A1.1 billion) with the major components being the process plant ($US356 million) and the railway infrastructure ($A224 million).
The railway would run about 100 kilometres from the mine to the coastal city of Madang, where the process plant would be built.
Marengo would have to spend a further $US198 million to lift output to 40mt.
Thor Mining, which recently listed on the ASX, has suffered some setbacks in its Molyhil tungsten-moly project, which is based on modest throughput of 300,000t/year.
China’s state-owned Hunan Nonferrous Metals agreed earlier this year to participate in the 300,000t/year project but then withdrew.
Thor has responded by seeking to negotiate an off-take agreement, which will assist with locking in financial backing.
The estimated capital cost of its project is $45 million, which has been reduced by the use of ‘build, own, operate’ contracts for the accommodation village, power station, fuel storage facilities and support buildings.
The price of the BOO contracts is reflected in the process plant’s high operating costs of $63.10/t of ore treated.
By comparison, Marengo has estimated cash operating costs of $US10.09/t of ore.
A new entrant to the sector is Balcatta-based Carnavale Resources, which has agreed to acquire the Frei Martinho moly project in Brazil for up to $US4 million and the issue of one million shares.
The full payment will be necessary only when the project commences mining activities.
Carnavale has been hedging its commodity bets, by agreeing to also buy three iron ore projects in Brazil.
