Avanti puts US$424M price-tag on Kitsault mine

Vancouver To take a crack at re-opening the Kitsault molybdenum mine, 140 km northwest of Prince Rupert, BC, Avanti Mining (AVT-V) estimates capital costs of US$424 million in its scoping study of the project.

With Avanti forecasting total operating costs per lb. of moly at US$5.97 and longterm moly prices at US$17.45, the after-tax, net present value for the Kitsault project came in at US$681 million. The internal rate of return was 29.7%.

Avanti picked up the property this summer for US$20 million through Alcoa’s (AA-N) wholly owned subsidiary Aluminerie Lauralco. According to that agreement if Avanti produces a feasibility study Alcoa has 90 days to decide whether it wants US$10 million cash, that equivalent in shares at commercial production, or a 1% net smelter royalty return.

Although the Kitsault property has only been in Avanti’s portfolio for a few months, with reams of data from past-producers Amax and Kenecott, Avanti has been quick to calculate a resource and generate a plan to re-open the past-producing Kitsault moly mine.

In the scoping study Avanti proposes a 15-year, open-pit mine that would produce 363 million lbs. of moly. Avanti pegs the indicated resource at 158 million tonnes grading 0.1% moly and the inferred resource at 133 million tonnes grading 0.08% moly.

The mine plan starts with two years of pre-production construction, mostly related to the tailings dam. Then, once commissioned, the mining schedule begins with about 2.4 million tonnes throughput in the year 2012. That ramps up to about 13.5 million tonnes for the next 13 years and drops to about 11.6 million tonnes in the final year.

Moly grades average between 0.07% and 0.117% and Avanti estimates recovery of around 90%.

Avanti would produce a 52% moly concentrate. But since equipment from previous bouts of mining at Kitsault have been completely decommissioned, Avanti’s plan includes installation of a primary gyratory crusher, a SAG ball mill, rougher-scavenger flotation with regrind mill and 4-stage cleaner flotation, also with regrind.

Avanti notes that since metallurgical tests have not yet been completed the scoping study didn’t factor in a lead-leaching circuit. Instead Avanti assumed a US$180-million, life-of-mine penalty.

In terms of other infrastructure Avanti is fortunate that Kitsault is near developed roads, has access to the ocean with its position at the head of Alice Arm and is on the BC power grid.

On news of the scoping study Avanti’s share price held even at 15.