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Highgrade: Mongolian Moly resource a beast

by : Chris Cann in London 

21 March 2012

PRIVATE company Moly World has come up with a maiden resource of more than 200 million tonnes at its Mandal molybdenum project in Mongolia, which has shown early signs it could become a major, low cost producer.
The JORC-compliant resource came in at 203.4Mt grading 0.1261% molybdenum using a 500 parts per million cut-off for more than 250,000t of contained molybdenum metal.
The news was released by 20% stakeholder, Origo Partners, a London-listed private equity group focused on natural resources developments in China, primarily, but also increasingly in Mongolia. The group also holds 28% of Mongolian copper-gold explorer Kincora Copper as well as 15% of Gobi Coal and Energy.
Mining consultancy Runge produced the resource at Mandal along with a full geological interpretation on the back of a seven-month drilling program with eight rigs that ploughed more than 43km worth of holes into the project area. Despite the comprehensive program, the deposit remains open to the southeast giving Origo hope that the resource numbers may get significantly bigger still. Drilling later this year will test the possible extension.
Runge has been kept on to complete a scoping study, which has already started and will include the results from metallurgical test work under way.
As far as early stage mining projects go, it doesn’t get to look much better than Mandal. The resource is high grade and near surface, and could conceptually support a large scale openpit mine producing around 12.25Mt per annum of molybdenum equivalent, which would make Moly World one of the largest primary producers.
Origo said independent studies had also indicated that “cash costs and capital intensity levels” would come in “significantly below the industry average”.
London investment bank Liberum Capital, which covers Origo, was impressed by the results and said they validated Origo’s decision to invest $US10 million in May last year. At that point, independent conceptual project reviews had predicted a 190Mt molybdenum resource grading of 0.1% or 0.125% molybdenum equivalent (including associated tungsten mineralisation). The project was also predicted to be capable of supporting a 10Mtpa operation for 17-19 years.
More importantly, Liberum stressed that demand for molybdenum was extremely strong with China’s continued growth and the Western world waking up to the scarcity of raw materials.
“Molybdenum is used primarily in the production of high-strength steel alloys and as such is essential for the construction of buildings, bridges, power plants and cars,” the bank said. “Given these industrial uses China is therefore an obvious growth market for molybdenum and as such Moly World, and consequently Origo, should be ideally placed to benefit.
“Indeed, Chinese authorities have designated molybdenum as a ‘strategic resource’ and are planning to build reserves of these metals. Currently, China uses approximately 50% of the world’s steel output, but only 30%-35% of the world’s molybdenum. As such, as China increases its production of high value steel alloys, Chinese demand for molybdenum is expected to increase.”