Early investors in Geodex Minerals Ltd. (TSXV:GXM), along with staff at the Department of Natural Resources, might soon want to order in the champagne.
The junior mining company released the results of an independent preliminary economic assessment Friday, conservatively indicating molybdenum and tungsten worth $693 million at Sisson Brook in northern York County.
Christopher R. Anderson, Geodex vice-president business development, said from Vancouver on Friday more recent drill results show more ore and better grades.
"It is big news and it only gets better," said Anderson, who sees clear sailing to opening in mid-2011 a mine that would process at least 20,000 tonnes of ore per day for 31 years.
He said the company still needs to conduct pre-feasibility and feasibility studies before it starts building the facilities for an open-pit operation.
Under the current schedule, an estimated $353 million in capital construction would begin in 2010, allowing an 18-month window before startup.
"This is a glowing endorsement to proceed with the project so, by all optics, it looks full steam to go ahead," Anderson said. "That's (the Sisson Brook project) something we believe strongly is going to go into production."
Without a feasibility study in hand, Anderson could not say how many people the mine would employ.
Wardrop Engineering Inc. of Vancouver did the preliminary economic assessment on the site.
Wardrop determined from drill results that Geodex could process 6.8 million tonnes of ore a year that would yield 3.3 million pounds of molybdenum and 8.1 million pounds of tungsten.
Based on a molybdenum price of US$21.60 per pounds and tungsten at $8 per pound, Geodex would pay back the C$353-million capital cost of building the mine in 2.7 years.
Anderson said mining companies normally allow closer to five years to pay back startup costs.
He also said that, based on today's prices, the resources cited in the Wardrop assessment would fetch more than a billion dollars - instead of $693 million, pre-tax, based on conservative projections of future metal prices.
Anderson said that, based on the Wardrop study, each tonne of ore from Sisson Brook should yield revenue of about $50, enough to make a mine feasible with operating costs at $9.16 per tonne, excluding taxes.
However, Anderson explained that Wardrop based these calculations on only 25 per cent of the drilling results for 2007 plus those from 2006.
He said that drilling since then has intersected more ore, including a "sweet spot" with higher values for molybdenum and tungsten.
He said the ore from the sweet spot might yield $120 per tonne with operating costs, again, at $9.16 per tonne.
Besides the fact that Geodex can use an open pit to get at the Sisson Brook ore, Wardrop cites several factors that will keep production costs low.
The area already has permanent roads, a nearby rail line and a power line crossing the property.
The projected mine site sits near Napagogan to the north, Stanley to the east, with the provincial capital of Fredericton only 100 kilometres away, and the port of Saint John another 100 kilometres beyond that.
Wardrop concludes that an open pit mine "would be profitable and a viable financial investment. The results are significantly robust to justify proceeding with studies at the preliminary feasibility level, the next stage of development."
Besides the factors cited by the Wardrop study, Anderson said New Brunswick's geology, as well as provincial government policies, make the province an attractive place for mining companies.
He said a "glacial till" of only five metres covers the bedrock across the province and that, until recently, New Brunswick was among the least-staked places in Canada.
The Sisson Brook ore sits under provincial Crown land without private owners or aboriginal issues to deal with.
Anderson said that Geodex, which does not have a producing mine right now, has all of its claims staked in New Brunswick. He said that 14 staff currently work in Geodex's office in Fredericton.
He said that, unlike many mines around the world, people working at Sisson Brook can commute to work.
To prove a point, he recently had a group of mining industry writers stop at Tim Horton's on the way to a tour of Sisson Brook.
