NMC Resource mines South Korean moly

Molybdenum prices are trading at US$17.10 per lb. and NMC Resource (NRC-V), which owns 100% of a producing molybdenum mine in South Korea, thinks it’s a good time to be investing in the metal.

The junior’s Moland mine, about 170 km southeast of Seoul, started producing molybdenum disulphide in April, after test runs in March at its new mill averaged 800 tonnes per day grading 0.30% moly. The mill produced a marketable molybdenum concentrate with recovery rates averaging 88%.

NMC is a subsidiary of Dong Won Corp., a public company in South Korea, and has sold its first 21,304 lbs. of molybdenum. It says it plans to focus on spot trades for the short term while it negotiates an agreement with a long-term buyer.

“We will be entering a long-term sales agreement pretty soon but we do not want to give anybody exclusivity so we can be more flexible in terms of our sales strategy,” says Do Hyung Kim, the junior’s Vancouverbased vice-president. “Japan and South Korea are quite industrialized and have some of the largest steel mills in the world but we don’t really have mines. So, when we started producing our moly, there were so many companies that wanted to have a long-term agreement with us.”

Moland currently has a National Instrument 43-101 compliant inferred resource of 1.73 million tonnes with an average grade of 0.366% molybdenum disulphide at a cutoff grade of 0.1%. Kim says the company will update its resource estimate some time in 2011.

The inferred resource takes into account drilling and channel sampling from 2008 and is limited to elevations above the 257-metre Seotong Adit.

Kim believes there is potential to expand the resource both in the current workings and in several new areas defined by an aeromagnetic map obtained from Korea Institute of Geoscience and Mineral Resources.

The company has started drilling to define the down-dip extensions of the mineralization, in a program that is being partially funded by Korea Resources Corp. (KORES), a state-owned company that promotes South Korea’s mining industry.

Over the next six months, the company is planning to drill core holes below the current resource for a total of 2,000 metres, to define the grade and limits of the mineralization.

NMC is concentrating on the Jecheon-si administration district southeast of Seoul. The Moland property is made up of three claims totaling 8.2 sq. km. In addition, it purchased 6.2 hectares of land to act as a buffer between the mine property and surrounding agricultural land.

Molybdenum mineralization has been known to exist on the property since 1966, and the first two adits were driven in 1973. Production from these two adits occurred in the late 1970s and early 1980s and amounted to 1,688 tonnes of molybdenum disulphide.

Moland contains a molybdenum-bearing skarn zone hosted in Ordovician carbonate sediments. The skarn is about 800 metres long with molybdenite occurring in fracture zones within the skarn and in disseminated form.

The Moland mine is about 80 to 100 km west of Woulfe Mining’s (WOF-V) tungsten-molybdenum Sangdong mine, one of the world’s largest producing mines between 1947 and 1992. The mine closed in 1992 due to low metal prices.

Sangdong had historical production rates of 600,000 tonnes per year, mainly from the 6-metre thick Main vein. Drilling by KORES during 1980-1987 discovered a deep moly deposit below the remaining tungsten skarn resources.

Molybdenum’s primary use is as an alloy for stainless and full-alloy steels. The metal strengthens steel, allows it to expand and contract and makes it easier to weld. It also has some newer uses, such as in fertilizers and catalytic converters.

“We are primary moly producers already in production with cash flow,” says Kim. “The gap between moly demand and supply is certainly there and that’s going to be the main reason why prices will go up.”

At presstime NMC Resource’s shares were 14.5¢, a 52-week low, while trading at a high of 24.5¢ in April. The company has 35 million shares outstanding.