Avanti Mining's (TSX-V: AVT) final feasibility study for its Kitsault molybdenum property in northwest British Columbia has increased the project's net present value from the pre-feasibility study by 46%, the company said Monday.
The final study, prepared by Amec, reported an after-tax net present value, at an 8% discount rate, of $798 million and an IRR of nearly 27%, assuming a base case average molybdenum price of $16.76/lb. Initial capital costs were estimated at $770 million, with an expected payback period of 2.6 years.
"We are pleased with the projects robust economics and plan to utilize this study as the basis for negotiating strategic partnerships to assist with the financing plan for Kitsault," said president and CEO Craig J. Nelsen.
"The principal reason for the approximately $250 million improvement in the NPV over our Prefeasibility study is the decrease in initial and sustaining capital of almost $200 million and a long term improved outlook for molybdenum prices."
The report assumed an average annual production of 23.4 million pounds of molybdenum for a 16 year mine life at an operating cost of $4.76/lb, with the first five years averaging 29.6 million pounds per year.
The feasibility study also indicated a boost to the project's mineral resources, now estimated to contain Measured and Indicated resources totaling 298.8 million tonnes grading 0.072%molybdenum and 4.20 g/t Ag containing 472.5 million pounds of Mo and 40.3 million ounces of Ag, at a cut-off of 0.021%.
This represents a 9.7% increase of contained molybdenum and an 18% increase of contained silver over the company's prior estimate for measured plus indicated mineral resources, Avanti said.
In addition, the Inferred category now totals 157.1 million tonnes grading 0.050% Mo and 3.65 g/t Ag containing 172.2 million pounds of molybdenum and 18.4 million ounces of silver, an increase of 330% of contained molybdenum and 360% of contained silver from the pre-feasibility study results.
The Kitsault property, which is located about 140 km north of Prince Rupert, includes three known molybdenum deposits: Kitsault, Bell Moly, and Roundy Creek.
The Kitsault mine produced molybdenum between 1967 and 1972 and from 1981 to 1982, with total production during both periods of approximately 31 million pounds of the metal.
According to the current mine plan based on open pit extraction methods, molybdenum production for the life of the mine is estimated at 373.9 million pounds with a production rate of 40,000 tonnes per day. Total molybdenum recovery is estimated to average 89.9%.
"We also expect to add by-product silver recovery after we complete additional metallurgical test that should enhance further the projects economics," added Nelsen.
The Kitsault project has road access to the mine site and is serviced by the BC Hydro transmission grid. The company anticipates receiving permits for the property toward the end of next year, with initial production expected in 2014.
Avanti was up nearly 7% on Monday morning, trading at $0.32 as of 10:11 am EST.