Moly Mines Limited (TSX:MOL)(ASX:MOL) has announced that it has commenced mining iron ore at Spinifex Ridge, 50km northeast of Marble Bar in the Pilbara of Western Australia.
Mining has commenced at an annualized rate of 1 million tonnes of iron ore per annum with approximately 18,000 tonnes of ore stockpiled ready to be crushed.
Dr Derek Fisher, the CEO/Managing Director of Moly Mines commented that "the commencement of operations at Spinifex Ridge is a wonderful achievement for our Company and I congratulate all our staff. It has been achieved within 20 months of first drilling of this iron ore occurrence. At current prices, the project will be cashflow positive immediately."
Moly Mines expects the first shipment of iron ore fines to occur in mid December. Iron ore prices remain strong with 62% Fe CFR China prices trading above US$160/t. Moly Mines export schedule was set many months ago based on the anticipated completion of Moly Mines' ore stockpile facilities at the Utah Point export facility at Port Hedland. Those facilities are now ready to receive Spinifex Ridge ore.
Construction of the processing plant and associated infrastructure is substantially complete and plant commissioning has commenced. Commissioning has identified some rectification work required to the conveyor on the stacking system, which is not expected to affect project schedule.
Moly Mines has also commenced studies to increase the project production rates from 1 million tonnes per annum. This is expected to be achieved with limited capital as current mining and crushing operations are currently day shift only. Exploration activities are also ongoing to expand the existing iron ore resource base.
Molybdenum Project Finance
Moly Mines is negotiating a fixed price lump sum EPC contract (Engineering, Procurement and Construction) with a Chinese engineering group which will include substantial Australian engineering input and advisory services.
Negotiations for the US$500 million project finance facility for the Spinifex Ridge Molybdenum Project continue with the EPC contract being an integral aspect of this process. Hanlong Mining Investment Pty Ltd, the Company's major shareholder, remains confident that the project finance loan facility can be achieved by 31 January 2011.
Molybdenum Price and US$ Depreciation
Molybdenum price has recently been on an upward trend having risen from US$15.00/lb to US$16.50/lb. This is likely to be further impacted by reports from China that the government is planning to restrict the mining of molybdenum. This will certainly impact on supply as China in the last two years has become a net importer of molybdenum as its rapidly expanding specialty steel industry demands more of this alloying metal.
From an Australian perspective this rising metal price has recently been countered by the appreciation of the Australian currency against the US$.