Positive PEA for TTM Resource’s Chu project

Vancouver – In a challenge to skyrocketing equipment costs, TTM Resources (TTQ-V) considered used mining equipment in developing a preliminary economic assessment (PEA) for its Chu molybdenum project in central British Columbia and found out it could save half a billion dollars.

“It’s a real reflection of the increased costs of mining equipment and of waiting in line to get that equipment,” says Crichy Clarke, TTM’s president and CEO. “The difference in cost for new and used is remarkable in fact, it’s beyond me why everyone wants to buy new equipment. The costs are now simply prohibitive.”

Capital costs, including working capital and a 20% contingency, comes in a $1.25 billion in order to outfit the mill with all new equipment. The cost drops down to $750 million with the company sources used parts.

The PEA found that, in a base case scenario with a molybdenum price of US$20 per lb. and assuming an even divide between debt and equity financing, the Chu project carries a net present value (NPV) of $1.04 billion if TTM buys all new equipment for the mine. The NPV increases to $1.44 billion if the equipment purchased is used.

The impact on the internal rate of return (IRR) is similarly significant. The base case scenario with new equipment carries an IRR of 27.3%; with used equipment the IRR climbs to 47%. Payback could be achieved in three years for used equipment but it would take five years to pay back the costs of new equipment.

In fact, only the price of molybdenum impacts the economics of developing Chu more than the decision to buy new or used equipment. The third critical economic parameter is the project’s debt-to-equity ratio.

Clarke says the company is now in the process of sourcing and negotiating for used mining and milling equipment appropriate for the Chu project.

The PEA included an updated resource estimate that boosted Chu’s molybdenum count by 7% and improved confidence in the resource numbers by transferring tonnes from inferred to indicated. Chu now hosts 252.6 million indicated tonnes grading 0.067% molybdenum as well as 200.9 million inferred tonne averaging 0.062% moly.

The PEA also established an in-pit resource based on a preliminary pit design. Combining indicated and inferred tonnes, the in-pit resource came in at 672.6 million tonnes grading 0.05% molybdenum, for 738.3 lbs. of moly metal.

“We’re certainly glad to get this out,” Clarke says. “Now we can keep moving ahead we still have lots of work to do.”

There are currently two drills working on infill drilling at Chu while a third rig tests a geophysical anomaly roughly 1 km to the north. Clarke says the company is working to relocate and expand the camp facilities; once that is done TTM will add a fourth rig to the operation. Clarke wants to complete sufficient infill drilling to upgrade the entire deposit to indicated status.

Chu is located next to an all-weather road in central B.C., close to sources of power and skilled labour.

TTM currently has $8.5 million in working capital as well as a $3-million B.C. mining exploration tax credit. Clarke says the company’s burn rate is roughly $750,000 per month with three drill turning; he expects it to increase to $1 million per month when the fourth drills gets going.

On news of the PEA TTM lost 15 to close at 85. The company has a 52-week share price range of 67 to $1.75 and has 50 million shares issued.