Galway looks to improve Victorio economics (April 23, 2008)

Galway Resources (GWY-V) is using the recommendations from a scoping study on its Victorio molybdenum-tungsten project in New Mexico to improve the economics of the project in a prefeasibility study.

The scoping study looked at two different mining scenarios.

Using a block caving mining method, the project could produce 9.4 million lbs. of molybdenum and 9 million lbs. of tungsten per year over 17 years. The net present value of the project, using a 6% discount rate, was more than US$270 million with a pretax internal rate of return of 15% with a development cost of US$442 million.

A selective mining scenario was also considered, where only 6.2 million lbs. molybdenum and 5 million lbs. tungsten would be mined each year over a span of 10 years. The IRR proved higher here at 26% with a NPV of US$95 and capital costs of US$242 million.

Galway first released the results of the feasibility study at the end in February but today announced that it had filed the study on SEDAR and had already begun to proceed with some of the study’s recommendations.

“We believe that there is room for improvement in the economics of the project, particularly in the engineering,” said Galway’s president and CEO, Rob Hinchcliffe, in a statement. “Management is currently focused on exploring strategic alliances in order to creatively advance the Victorio project.”

With completion of a prefeasibility study as the goal, Galway has launched a 12-hole infill drill program at Victorio. The company wants upgrade resources, collect new data for geotechnical evaluation as well as collect sample material for metallurgical and geotechnical testing.

Galway has proceeded with the program as a result of the recommendations made in the study, which suggests possibly combining the two scenarios.

The Victorio deposit has an indicated resource of 67 million tons grading 0.099% molybdenum and 0.101% tungsten totaling 132 million lbs. molybdenum and 134 million lbs. tungsten.

Inferred resources stand at 42 million tonnes grading 0.088% molybdenum and 0.091% tungsten containing 74 million lbs. of molybdenum and 76 million lbs. tungsten.

A cutoff of US$25 per lb. molybdenum was used in calculating the resources.