Avanti Mining Inc. found its centerpiece molybdenum asset where few others were looking – the kitsault mine in west-central British Columbia.
Not all of a successful mineral development firms’ exploration happens in the ground. In the case of Avanti Mining Inc., the company discovered a hidden gem that is now the centerpiece of its strategy, but the only thing it had to dig through was layers of documents. President and CEO Craig Nelsen says the firm was founded to purchase byproduct molybdenum assets, but had a difficult time finding any in the first few months.
“In that space, there were probably 15 to 20 potential candidate copper producers that had byproduct molybdenum, and we were unsuccessful in talking to any of them about selling us a life-of-mine molybdenum stream,” Nelsen says.
Nelsen blames the situation on the rise in commodities prices at the time, and says he and his partner, CFO AJ Ali, would have had better luck with copper producers if they had tried a year earlier.
Nevertheless, Avanti was undaunted and continued to search for a molybdenum asset that was close to development. Eventually, it identified the Kitsault Mine in west-central British Columbia. Nelsen says the property escaped the industry’s notice as a molybdenum asset because of its ownership. “It was a little under the radar because it was owned by the large aluminum company Alcoa,” he says. “Nobody could really make the obvious connection there.”
Avanti began discussions with Alcoa concerning the property in 2007, eventually winning a private bid for the property and closing the agreement in June 2008. Alcoa came to own the property after its original owner, Amax, spent nearly $200 million in the early 1980s to develop a mine that only operated for about nine months, after which the moly market bottomed out, and it was forced to close the mine. Amax transferred the mine to its profitable aluminum company, Alumax to harvest the capital tax loss on the mine. Alcoa took over Alumax in the mid-1990s, thus inheriting the Kitsault Mine.
A Proven Asset
Nelsen says Avanti is excited to have the Kitsault property as the focal point of its portfolio because of its proven history and potential for future development. “There are basically three things that are really significant about the property,” Nelsen says. “First off, it’s a past producer; it’s not a greenfield start-up.” The property already has a history of development and proven production, he adds.
The second significant aspect of the Kitsault mine is that past development has provided it with a lot of established infrastructure, including access roads, power lines and access to ocean shipping. “With that kind of infrastructure, we have a lot less development cost on the property, and we have the ability to tap into very reasonably priced power,” Nelsen says.
Thirdly, the property is a high-grade asset, with a stripping ratio of less than 1-to-1, which will keep milling and mining costs reasonable, Nelsen says. The property is one of the top-five primary molybdenum development assets worldwide, according to the company. About 30 million pounds of molybdenum was produced at the site between 1968 and 1972, and for the brief period in 1981 and 1082.
Looking Ahead
Nelsen says Avanti is in the process of securing the permits necessary to begin production at Kitsault, as well as preparing a feasibility study that should be completed by October 2010. He says the company hopes to begin production at Kitsault by the end of 2012.
Before that happens, however, the company has to figure out how to accommodate the construction of a land-based tailings storage facility at the site to dispose of mine tailings. The weather typically experienced in the region makes it difficult to find the perfect spot, Nelsen says.
“This is a very high-rainfall climate,” he says. “It gets about two meters of rain a year, and it’s also very rugged landscape, so finding a suitable facility for 200 million tons of tailings in a very wet climate is the first challenge. Having said that, we are confident we can design a solution that will be environmentally safe and economically prudent.”
In the meantime, the company remains optimistic that progress will be made on the property soon. Nelsen says the company is looking forward to beginning the feasibility study and anticipates positive results once it is completed. “We’ve got our head down trying to complete this feasibility study,” Nelsen says. “We expect to have a fairly high-quality prefeasibility study completed this fall.”
Add this page to your favorite Social Bookmarking websites
