Moly Mines Limited
TSX : MOL
ASX : MOL

Moly Mines Limited

September 25, 2007 08:00 ET

Moly Mines Proceeds With Spinifex Ridge Project Execution and Financing

TORONTO, ONTARIO--(Marketwire - Sept. 25, 2007) - Moly Mines Limited, (TSX:MOL)(ASX:MOL) is pleased to announce the completion of the Definitive Feasibility Study ("DFS") of a 20 million tonne per annum molybdenum / copper open pit mine and concentrator for the Spinifex Ridge Molybdenum Project.

The Board of MOL today adopted the findings of the DFS and has approved the continued development and execution of the Spinifex Ridge Project and financing plan.

The DFS has confirmed the technical and economic viability of the Project and was completed using a long term (post 2015) molybdenum price of US$13.80, less than half the current price of approximately US$32.00/lb.

MOL CEO Derek Fisher said "We are delighted with the outcome of the DFS particularly given the challenging development environment within the resources industry, not just here in Western Australia but globally. The large resource at Spinifex Ridge is sufficient to support a long-life mine. We have expanded the plant size by 33% from the 15 mt/a pre-feasibility study and demonstrated a robust project capable of being a significant world producer of molybdenum. All technical disciplines reported in the DFS plus the financial projections have been backed by independent analysis.

World molybdenum market fundamentals look extremely strong fuelled by consistently strong growth and limited new supply. Detailed engineering commenced in August and long lead orders for the comminution circuit were placed in April of this year. We have a clear execution schedule and a highly energetic and motivated team ready to bring Spinifex Ridge to financial close during Quarter 1, 2008 for plant start-up in July 2009."

Key outcomes of the DFS, which models the first 10 years of the mine, are as follows:



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Project Economics
-------------------------------------------------------------------
Pre-tax NPV at 8.50% discount rate (real) A$855M
Pre-tax IRR (real) 21.5%
Average annual EBITDA A$264M
Total Mo revenue generated - 10 years US$4,398M
Total Cu revenue generated - 10 years US$542M
Long Term Mo Price (applied 2015 and beyond) US$13.80/lb
Capital Payback from positive cashflow 36 months


Adopting spot commodity prices at August 31, 2007, key project
economics are:

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Project Economics
-------------------------------------------------------------------
Pre-tax NPV at 8.50% discount rate (real) A$3,464M
Pre-tax IRR (real) 40.9%
Average annual EBITDA A$673M


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Mineral Resources and Reserves Million Mo Grade Cu Grade Ag Grade
Tonnes (%) (%) (g/t)
-------------------------------------------------------------------
Measured and Indicated Resources 469.2 0.058 0.089 1.7
Proven and Probable Reserves 314.6 0.061 0.092 1.7
First 10 Years Mining 197.2 0.065 0.098 1.7


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Production Statistics
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Plant throughput 20Mt/a
Average cash operating cost - 10 years (after Cu, Ag
credits) US$6.92/lb
Ore tonnes mined -- first 10 years 197.2M
Waste tonnes mined (including pre-strip) - first 10 years 264.9M
Strip Ratio 1.3:1
Average mined Mo grade - first 10 years 0.065%
Average mined Cu grade - first 10 years 0.098%
Average Mo recovery rates 85%
Average Cu recovery rates 64%
Annualised Mo Production in Concentrate 24Mlb
Annualised Cu Production in Concentrate 27Mlb
Capital Cost Estimate A$1,071M
(US$852M)


SPINIFEX RIDGE DEFINITIVE FEASIBILITY STUDY

PROJECT SUMMARY AND EXECUTION

The DFS for the Spinifex Ridge Molybdenum Project ("Spinifex Ridge" or the "Project") considers a 20 Mt/a molybdenum ("Mo")/ copper ("Cu") open pit mine and concentrator facility that will produce 24 million pounds of Mo in concentrate and 27 million pounds of Cu in concentrate, on an annualised basis, for an initial 10 years.

The aim of the DFS was to develop and document a single technically and commercially optimised project suitable to be financed and progressed to the execution phase. MOL provided the strategic direction to all participants for the execution of the DFS scope of work.

The DFS report covers numerous disciplines and involved 18 months of comprehensive study across many disciplines with over 73,000 man-hours of technical input.

DFS Process

The DFS has been prepared and managed by WorleyParsons in conjunction with a number of other consultants. ASX-listed WorleyParsons is one of Australia's leading professional services providers to the resources and energy sectors with over 23,000 personnel in 32 countries.

The DFS is based largely on data generated by WorleyParsons, MOL and its consultants and contractors over the 40 months since MOL became associated with the Project. MOL also inherited drilling data from previous owners of the property.

The data bank and studies that contributed to the DFS include:

- 238 drill holes for 50,000 metres, including resource drilling, geotechnical drilling, sterilisation drilling, water drilling and large diameter-core drilling for metallurgical samples. The Resource estimate used 137 drill holes for 44,000 metres.

- 17,000 drill samples assayed with every 20(th) sample check assayed.

- 50 pit designs, and tenders from 4 mining contractors for drill, blast, load and haul costs.

- Numerous metallurgical studies and consultations.

- 95 comminution tests, 122 flotation tests, 3 pilot plant runs,

- 47,000 engineering man-hours, 630+ drawings, 58 material take-off's.

- 2.5 year baseline environmental study.

- 2 independent molybdenum market studies.

The mine planning, metallurgical program and process design have all been subjected to independent peer reviews, including experts from South Africa, North America and Australia.

Mineral Resource

SRK Consulting (Australasia) Pty Ltd has prepared the independent resource estimate for the Spinifex Ridge Molybdenum Project. Based on a molybdenum cut-off of 0.03% Mo, total Mineral Resource within the JORC and NI43-101 classification of Measured and Indicated totals 469 million tonnes at 0.06% Mo (2 dp), shown as follows:



Mineral Resource
--------------------------------------------------
Classification Mt Mo Cu Ag
(%) (%) (g/t)
--------------------------------------------------
Measured 187.4 0.065 0.103 1.8
--------------------------------------------------
Indicated 281.8 0.053 0.080 1.7
--------------------------------------------------
Total Measured &
Indicated 469.2 0.058 0.089 1.7
--------------------------------------------------
Inferred 30.7 0.051 0.075 1.6
--------------------------------------------------


Refer to Appendix 1 for further details.

Mining Process

The Spinifex Ridge deposit will be mined utilising conventional large scale open pit mining methods. The DFS has considered an initial 10 year mining operation to support the DFS financial modelling. This exploits approximately 42% of the known resource, with the remainder being available for further exploitation.

The optimal 10 year mine design for the DFS has been determined using Whittle optimisation software which generates a series of nested pit shells based on specific revenue and operating cost assumptions as well as various operating statistics such as forecast plant recovery rates and overall pit angles. The nested pit shells are used as a guide for the practical pit design work and provide an estimate of the most optimal pit based on net present value of cash flows.

The initial 10 year open pit will be approximately 400 metres deep with surface dimensions of 1,100 metres x 1,250 metres.

Mineral Reserve

The Mineral Reserve is the portion of the Measured and Indicated Mineral Resource (adjusted for mining dilution and ore losses) contained within the optimised pit shell and mine design.

Total Mineral Reserve within the JORC and NI43-101 classification of Proven and Probable is as follows:




Mineral Reserve
-----------------------------------------------------
Classification Mt Mo Cu Ag
(%) (%) (g/t)
-----------------------------------------------------
Proven 175.1 0.066 0.103 1.8
-----------------------------------------------------
Probable 139.5 0.056 0.079 1.6
-----------------------------------------------------
Total Mineral Reserves 314.6 0.061 0.092 1.7
-----------------------------------------------------


Refer to Appendix 1 for further details.

During the first 10 years of operations, planned mining activities will mine 197.2 million tonnes of ore or 62% of current Proven and Probable Reserves. A further 117.4 million tonnes of Mineral Reserve and 272 million tonnes of Resource within the JORC and NI43-101 classified Measured and Indicated Resource will remain.



-----------------------------------------------------
Classification Mt Mo Cu Ag
(%) (%) (g/t)
-----------------------------------------------------
Total Mineral Reserves 314.6 0.061 0.092 1.7
-----------------------------------------------------
Mining Depletion During (197.2) (0.065) (0.098) (1.7)
First 10 Years
-----------------------------------------------------
Remaining Reserves 117.4 0.054 0.082 1.7
-----------------------------------------------------


Metallurgy

Detailed metallurgical testwork was completed throughout 2006 and 2007 to develop an understanding of the molybdenum and copper processing characteristics. Bench scale tests were performed to understand the overall metallurgical behaviour of the material and enable the development of process flow sheets. Following this, a Pilot Plant program was undertaken to demonstrate that acceptable product could be derived through metallurgical processes simulating the processing environment of the planned operations. The detailed testwork also allowed selection of the final design for the comminution circuit, in particular the selection of High Pressure Grinding Rolls ("HPGR") as a preferred grinding media to a Semi-Autogenous Grinding ("SAG") mill.

The Pilot Plant testwork has also provided detailed analysis of grade / recovery profiles and allowed determination of ultimate recovery rates for both molybdenum and copper. The Pilot Plant produced molybdenum and copper concentrates which were assessed for impurities and tested for suitability for downstream processing by two major international roasting organisations, as well as being assayed by three independent laboratories.

Results of the testwork indicated that the selected processing design for Spinifex Ridge ore produces marketable concentrates capable of direct sale or toll treatment.

Process Description

The proposed processing plant will consist of a two stage crushing of ROM ore, followed by a HPGR and primary ball milling circuit. Molybdenum and copper will be recovered by flotation into a bulk concentrate. Molybdenum will be separated by copper depression and further flotation. The molybdenum and copper streams are then subject to separate regrinding and cleaning processes to produce final saleable molybdenum and copper concentrates.

Roasting

The DFS scope did not include a roaster for the molybdenum concentrates. There is currently sufficient world molybdenum roasting capacity to accommodate the Project's concentrate output. Estimates for roasting toll treatment charges based on discussions with toll roasters have been included within the Project's economic analysis.

Tailings

Mining and processing operations at Spinifex Ridge will produce around 20 million tonnes of tailings per year. Tailings will be filtered to recover approximately 85% of the process water for recycling. The filtrate is then conveyed to a stacking system using a GPS controlled moveable stacking conveyor system.

The overall environmental impact of the tailings storage will be small, and is a more efficient and environmentally friendly treatment alternative to conventional tailings disposal systems.

Infrastructure

Total Project water demand is estimated at 10.6 GL/a. The water supply system will source water from two bore fields to the north of the project. These areas are covered by water licence applications held by the company.

The workforce will operate on a Fly-in/Fly-out basis and as such a permanent village has been planned. A jet-capable airport to service the mine has been designed and costed.

Power

Power will be either generated on site from natural gas to be brought to the project by a dedicated pipeline or via reticulated power through an overhead power line. For the purpose of the DFS a Build Own Operate proposal has been considered using an independent power provider supplying power "over the fence" to the Project.

Permitting and Tenure

In September 2007 MOL announced it had reached agreement with the Njamal people, the only native title registered claimant group over the Spinifex Ridge Project area. The Land Access Deed provides a process for the unopposed grant of all future mining and other tenure required for the Spinifex Ridge Project development.

In August 2007 MOL submitted the Public Environmental Review ("PER") document for public comment. Environmental approval is expected by end of Quarter 1 2008.

All mining leases required for the mine have been granted.

Capital Cost Estimate

The capital cost estimate for the proposed 20 million tonne per annum facility is shown below. It is recognised that the capital cost to progress the Spinifex Ridge Project to first production is significantly higher than the pre-feasibility study estimate of approximately 2 years ago. In recent times there has been a worldwide trend of escalating capital costs of major mining projects and this has impacted on Spinifex Ridge. However a significant portion of this rise is attributable to the 33% increase in the mining and throughput rate.



Capital Cost
---------------------------------------------------------------
Item of Plant and Equipment A$M
---------------------------------------------------------------
Mining 21.3
Crushing & Grinding (i) 120.8
Concentrator 335.3
Plant Infrastructure 108.9
Tailings 55.5
Plant Utilities 26.0
Accommodation Village, General Infrastructure 60.5
Water Supply 58.5
Site Services, Construction Support & Owners Costs 101.8
--------
Sub total 881.6
EPCM Allowance 84.1
Contingency 98.3
--------
Total (ii) 1,071.0
--------

(i) Total crushing and grinding costs include payments of
A$7 million already made by MOL.
(ii) Sustaining capital over the initial 10 year mine plan
is estimated at A$53 million.



Cash Operating Cost Estimate

Operating Cost
---------------------------------------------------------------
Area A$/Tonne
Milled
---------------------------------------------------------------
Mining 6.53
Processing 7.12
Selling, General & Administration 1.64
--------
Total Cash Operating Cost 15.29
--------


Molybdenum and Copper Price Forecasts

Two independent molybdenum market studies were undertaken by MOL in order to support price forecasts. Both studies have been completed by international companies experienced in market analysis and price forecasting. Both studies conclude that molybdenum oxide prices should remain strong in the near term before declining to a long term price between US$13.80/lb and US$14.60/lb The Spinifex Ridge Project economic analysis has been based on the Study 2 conclusions.



---------------------------------------------------------------
Year US$/lb US$/lb
Study 1 Study 2
Applied to
DFS
2007: Real 2007: Real
---------------------------------------------------------------
2009 31.00 31.80
---------------------------------------------------------------
2010 30.00 28.70
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2011 20.00 24.60
---------------------------------------------------------------
2012 18.00 22.60
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2013 14.50 20.00
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2014 14.50 16.40
---------------------------------------------------------------
2015 14.50 14.90
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2016 onwards 14.60 13.80
---------------------------------------------------------------


Assuming the price of molybdenum oxide averages US$30.00/lb for 2007, the recent historical average price of molybdenum oxide will be US$23.42/lb for the last 5 years and US$13.57/lb for the last 10 years (in 2007 real terms).

A copper price of US$3.00/lb has been applied from 2009 with a gradual decline to US$1.50 by end of 2017. Copper revenue represents approximately 10% of Project receipts and, as such, copper price assumptions have a relatively minor impact on NPV for the initial ten year mine plan.

The following table demonstrates key financial outcomes based on various commodity pricing scenarios, holding all other assumptions constant.



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Pre-Tax Pre-Tax Average
NPV IRR EBITDA
Scenario (A$M) (real) (A$M)
---------------------------------------------------------------------
Spot prices as at August 31, 2007
(Mo:US$32.63/lb, Cu:US$3.44) 3,463.8 40.9% 673.0
3 Year Price Average
(Mo:US$27.69/lb, Cu:US$2.35) 2,340.5 32.0% 510.8
DFS Base Case (Study 2 above and details
above) 854.8 21.5% 264.3
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Financing Plan

MOL, together with its financial advisors, Azure Capital, have developed a detailed, comprehensive financing plan for the Project covering the equity and debt capital markets, potential joint venture partners and molybdenum end users. During the DFS, MOL has taken the opportunity to meet with many such parties and the level of interest in molybdenum production exposure and particularly for involvement in the Spinifex Ridge Molybdenum Project is very high. Following this release, MOL will commence its financing program. This program, planned and tested over the last several months, will involve engaging equity and debt arranging institutions in the next two months and completion of the financing by 31 March 2008, ensuring that the July 2009 commencement of production is maintained.

To facilitate the financing process MOL appointed Behre Dolbear Australia as the Independent Technical Expert and they have commenced their review of the DFS including making a visit to Spinifex Ridge.

Strategy for Project Execution

The schedule for the execution phase of the Project has been developed to achieve the earliest practicable completion of the construction and commissioning works to enable commencement of production operations in July 2009.

To achieve completion within that time-frame MOL has retained the services of a range of key commercial and technical professionals complemented by specialist service providers in the areas of mining development, engineering design and project delivery.

Critical path items include the delivery of long lead comminution equipment and the various services that support these items of equipment. Commitment to the supply of the comminution equipment was provided in April 2007 and full-form contract documents have now been executed. The manufacture of that equipment is on schedule.



Key Project milestones include:

Order of primary crushers, HPGR's and ball
mills April 2007
Commence detailed engineering August 2007
Statutory Approvals March/April 2008
Construction Mobilisation April 2008
Start Pre-strip July/August 2008
Delivery of long lead equipment February/April 2009
Start up July 2009


Conference Call

A conference call and webcast will be hosted in Toronto to discuss the DFS.



--------------------------------------------------------------------
Conference Call Details
--------------------------------------------------------------------
Toronto
Date September 25
Time 4.30pm
Perth
Date September 26
Time 4.30am
Call Numbers
Local (Toronto) 416.641.6127
North America Toll Free 1.866.542.4238
International Toll Free 1.800.8989.6323
Ask for the "Moly Mines conference call"
Local (Toronto) 416.695.5800
Replay (International) 1.800.408.3053
Replay Passcode 3236185
Replay available until midnight, Tuesday October
2(nd), 2007
Webcast Details_URL www.molymines.com


APPENDIX 1

MINERAL RESERVES

Table 1 below details Mineral Reserves.

These Mineral Reserves are based on Measured and Indicated Mineral Resources of 469.8 million tonnes at 0.06% molybdenum, 0.09% copper and 1.7g/t silver as reported in the October 2006 MOL Prospectus NI43-101 Technical Report. Mineral Resource details are listed in Table 2 below.



Table 1: Spinifex Ridge Mineral Reserves

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Mineral Tonnes Mo Contained Cu Contained Ag Contained
Reserve Mo Cu Ag
Classification (million t) (%) (tonnes) (%) (tonnes) (g/t) (million oz)

Proven 175.1 0.07 116,000 0.10 181,000 1.8 10.1
Probable 139.5 0.06 78,000 0.08 110,000 1.6 7.1
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Total 314.6 0.06 194,000 0.09 291,000 1.7 17.2
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Notes:

- Effective date of Mineral Reserves is 25(th) September 2007.

- These Mineral Reserves are a subset of the Mineral Resource.

- The term "Mineral Reserve" of NI43-101 is equivalent to the term "Ore Reserve" of the JORC code.

- The contained molybdenum and contained copper quanta in this table are included for ease of reference, but is not intended to suggest that actual recoveries of minerals would be in such amounts.

- Contained metal is calculated on exact tonnes and grades

- Ore loss and dilution factors were subjectively applied to blocks located on the outer margins of the mineralised envelope, however due to the large dimensions of the mineralised body, total ore tonnes were reduced by less than 4% with negligible reduction in grade.

- Pit optimisation was completed using Whittle software. Assumptions included: overall slope angles of 43degrees, mining costs per bench derived via contract tender process, A$7.63 total cost for ore processing /tonne, base case prices of $US12.50 /lb for Molybdenum and $US1.50/lb for Copper, total selling costs of A$2.53 /lb Mo.

- The mine design process takes inputs from the optimisation process, the physical environment, metallurgical, and production requirements to create practical mine designs that address the anticipated production environment. Additionally, the design takes into account a requirement for accelerated access to high grade ore, and a targeted initial 10 year operating mine life.

- There are no additional environmental, permitting, legal, title, taxation, socio-political, marketing or other issues that will materially affect the estimates of Mineral Resources and Mineral Reserves.



MINERAL RESOURCES

Table 2 below details Mineral Resources.

Table 2: Spinifex Ridge Mineral Resources

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Mineral Tonnes Mo Contained Cu Contained Ag Contained
Resource Mo Cu Ag
Classification (million t) (%) (tonnes) (%) (tonnes) (g/t) (million oz)

Measured 187.8 0.07 122,200 0.10 192,600 1.8 10.9
Indicated 282.0 0.05 150,000 0.08 225,900 1.7 15.4
---------------------------------------------------------------------------
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Total M&I 469.8 0.06 272,300 0.09 418,500 1.7 26.3
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Inferred 30.8 0.05 15,800 0.07 23,100 1.6 1.6
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Notes:

- Effective date Mineral Resources is 20 October 2006 as disclosed in MOL Prospectus NI43-101 Technical Report.

- The term "Mineral Resource" of the JORC code is equivalent to the term "Mineral Resource" of NI43-101.

- Mineral Resources are quoted inside a nominal 0.03% molybdenum wireframe: a minor amount of lower grade material was included for geological continuity.

- The contained molybdenum and contained copper quanta in this table are included for ease of reference, but is not intended to suggest that actual recoveries of minerals would be in such amounts.

- Contained metal is calculated on exact tonnes and grades.

- Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements", which are subject to various risks and uncertainties that could cause actual results and future events to differ materially from those expressed or implied by such statements. Investors are cautioned that such statements are not guarantees of future performance and results. Risks and uncertainties about the Company's business are more fully discussed in the Company's disclosure documents filed from time to time with the Canadian and Australian securities authorities. Readers are cautioned not to rely solely on the summary of such information contained in this release, but should read the Moly Mines Limited financial statements for the year ended June 30, 2007, the Moly Mines Limited final prospectus dated October 20, 2006 and related technical reports posted on Moly Mines website (www.molymines.com) and filed on SEDAR (www.sedar.com) and any future amendments to such reports. Readers are also directed to the cautionary notices and disclaimers contained herein. All currency in this release is in Australian dollars unless otherwise stated.

COMPLIANCE STATEMENT

The information contained in the report to which this statement is attached relating Mineral Resources and Ore Reserves is based on information compiled and verified under the supervision of Dr Derek Fisher who is a Fellow of The Australasian Institute of Mining and Metallurgy.

Dr. Fisher is CEO of Moly Mines Limited and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' and as a Qualified person for purposes of National Instrument 43-101 of the Canadian Securities Administrators.

Dr Fisher consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

Contact Information

  • Moly Mines Limited
    Derek Fisher
    CEO & Managing Director
    (416) 777-1801
    or
    Moly Mines Limited
    Andrew Worland
    Company Secretary
    (416) 777-1801
    or
    Moly Mines Limited
    Natalie Frame
    Investor Relations Manager
    (416) 777-1801
    (416) 777-1802 (FAX)
    Email: info@molymines.com
    Website: www.molymines.com