Thor Mining (LON:THR, ASX:THR) today revealed its progress toward the completion of a definitive feasibility study for the Molyhil tungsten and molybdenum project in Australia’s Northern Territory.

The study is assessing the proposed Molyhil project. And if successful it will advance the project through to the development stage. The report will include a total ore reserve calculation and mining schedule. 

It is expected that the report will be published in June at the earliest. 

Earlier this month Thor announced an increase in tungsten recovery from the Molyhil Project to 85%, up 27% on the figure estimated in the project’s Feasibility Study.

Executive chairman Mick Billing said today that the increase in recovery grades was likely to improve the economic outcome of Molyhil.

“With previous estimates showing A$900,000 in additional revenue per each 1% of tungsten recovery, the 100%-owned Molyhil project looks increasingly robust,” Billing said.

“It should make a difference to the early economics and early payback of capital, it could also mean that the mine life will hopefully will be a little longer than we would earlier have assumed, because blocks of ore that previously weren’t economic now should be.”

Thor Mining (LON:THR, ASX:THR) shares advanced over 11 per cent in early deals after it significantly enhanced the economics of the Molyhil tungsten and molybdenum project in Australia’s Northern Territory.

The findings of metallurgical testwork have lifted tungsten recovery to 85%, up 27% on the figure estimated in the project’s Feasibility Study.

Executive chairman Mick Billing told Proactive Investors today that the increase in recovery grades was likely to improve the economic outcome of Molyhil.

The strong open in London follows a 19 per cent rise in Australian trading.

“With previous estimates showing A$900,000 in additional revenue per each 1% of tungsten recovery, the 100%-owned Molyhil project looks increasingly robust,” Billing said.

“It should make a difference to the early economics and early payback of capital, it could also mean that the mine life will hopefully be a little longer than we would earlier have assumed, because blocks of ore that previously weren’t economic now should be.”

The increase has been achieved through adding a flotation step to the tungsten recovery process, after gravity separation.

This process was identified by test work undertaken by metallurgical testing and mineral beneficiation consultants Nagrom & Co. 

Results from this test work will be incorporated into the economic ore reserve and mining plan calculations for the Molyhil Definitive Feasibility Study.

Following the completion of the Feasibility Study, Thor will need to secure offtake agreements and finance for Molyhil before the company will move to tender for design, construct and EPCM work.

Billing says Thor is on track for production from Molyhil in late 2013.

“If we can commence development early in the second half of this year, and at this stage we’re relatively optimistic that we can, then there’s a construction period of roughly 12 months,” he explained.

“By September 2013 we could well be putting out our first truck load of concentrate.”

Thor shares closed the day 20% higher at $0.024, on turnover of almost six million shares.

With the tonnage increase, contained tungsten has grown 10% to greater than 13,100 tonnes, while contained molybdenum has increased 46% to more than 10,400 tonnes.

An updated ore Reserve and mining plan are due in February 2012, based on results from 12,839 metres of reverse circulation drilling, 1,816 metres of diamond drilling and three underground exploration shafts and cross cuts.

Chairman Mick Billing told Proactive Investors the nature of the tungsten intersected could allow for early cash flow.

“The grades near surface are very high tungsten grades indeed, and that suggests to us that we’ll get a very quick pay back on the capital for the project,” Billing said.

This would also depend on the mining plan and Feasibility Study.

In addition, Billing told Proactive Investors that a mine life increase could be on the cards.

“The consistency of the deposit and the grade of the deposit probably allows us to continue to mine the operation for longer than previously planned, so instead of it being a 3.5 to 5 year mine life operation we might get an extra couple of years out of that and that’s an outstanding outcome.”

Mining consultancy Runge Limited prepared the Resource update, and is expected to release a Reserve upgrade for Molyhil next month, along with an updated Feasibility Study.

“We are relatively confident we’ll have that out before the end of February, and while we’re doing that we’re working with a bunch of people to try and secure the agreement for the concentrate so we can sell this stuff,” Billing said.

In addition, Proteus EPCM Engineers is preparing an optimisation addendum to the previous capital and operating cost estimates to reflect the recently announced process improvements.

These improvements lifted the projected metallurgical recovery of tungsten for Molyhil to 75%, up from the previous estimate of 67%.

Of the tungsten in this stream, 30% should be recoverable at relatively low cost.

Following the completion of the Feasibility Study, Thor will need to secure offtake agreements and finance for Molyhil before the company will move to tender for design, construct and EPCM work.

Billing said Thor could be potentially turning the first sod at Molyhil early in the second half of this year.

“If we can commence development early in the second half of this year, and at this stage we’re relatively optimistic that we can, then there’s a construction period of roughly 12 months,” Billing told Proactive Investors today.

“We should be in production in the second half of 2013.”

In a stock exchange statement this morning, the company revealed that these putative off-take partners have also proposed “various alternatives for financing the project”.  

“These discussions are ongoing,” it added.

The capital cost, as estimated by Proteus EPCM Engineers, is put at A$66 million and the cash costs at A$80 a tonne.

The update comes at a crucial stage for Molyhil, with a definitive feasibility study and resource extension expected at some point this quarter. 

Thor also said that an independent metallurgical assessment of the planned tungsten processing system for Molyhil has recommended an additional stage in the process. 

This, it reckons, will help to achieve an improvement on the previous 67 per cent recovery estimate.

At Spring Hill, the company’s gold project in Northern Territory, six of the ten diamond drill holes have been completed.

Unearthed from hole SHDD005 was a 0.7 metre section at 36.2 grams per tonne of the precious metal and 0.1 metres at 78.5 grams. The best section from SHDD004 was 31.4 grams per tonne.

Finally, a detailed flora and fauna study was submitted to the Western Australia Department of the Environment to support the proposed drilling programme on the Dundas Gold project.

Thor acquired a 25% interest in Spring Hill, located in the Northern Territory, from Western Desert Resources (ASX: WDR) in early 2011, and has the right to increase its holding to 80%.

In 2012, Thor plans to continue drill testing extensions to the existing resource along with known mineralisation nearby.

The company will also undertake scoping studies to assess the potential to accelerate mine development.

Callie-style deposit

Thor believes the Spring Hill gold deposit could indicate the presence of substantial sheeted vein mineralisation system similar to that at Leighton Holdings’ (ASX: LEI) giant Callie Gold Mine.

Callie has production and resources totalling more than 5 million ounces of gold at a grade of 5-6g/t gold.

The Tanami Inlier where Callie is located lies a few hundred kilometres south west of Spring Hill, and Thor says the geological characteristics of this inlier are comparable with those of the Pine Creek Inlier where Spring Hill resides.

Molyhil Tungsten and Molybdenum Project – Northern Territory

Last month Thor Mining received positive early outcomes from a definitive feasibility study (DFS) on its Molyhil Tungsten and Molybdenum Project, which shows a compelling economic case for the development of the project.

Importantly, current supply shortages of tungsten due to export restrictions from China have seen the tungsten price skyrocket this year, which has added value to the project.

The DFS highlighted potential cash operating margins of A$98 per tonne of ore processed for a phase one pit of 1.4 million tonnes of ore.

Capex is estimated at $66 million for an annual throughput of 400,000 tonnes per year and operating costs of $79 for each tonne of ore mined and processed.

Spring Hill Gold Project – Northern Territory

During the September quarter Thor Mining began a 10 hole diamond drilling program to confirm and extend the existing Spring Hill resource in the .

Additional drilling is planned to follow up high grade intercepts from drilling undertaken in 1989-92 that returned 26 metres at 2.56 grams per tonne (g/t) from 59 metres including 16 metres at 4g/t from 63 metres.

Drill testing these targets is scheduled for the beginning of the 2012 dry season.

Thor Mining is earning up to an 80% interest from Western Desert Resources (ASX: WDR) in the Spring Hill Project.

Dundas Gold Project - Western Australia

Due to persistent wet weather, work at Dundas has focused on progressing permitting for the planned drill testing of the Algron, Bifrost, and Asgard prospects.

A detailed flora and fauna study was submitted to the WA Department of the Environment in support of proposals for the scheduled drilling programs. Approval for the program is still pending.

Approval and commencement of the proposed drill program is anticipated during the December quarter.

This high grade mineralisation is in addition to the project's current 3.75 million tonne resources - at 0.32 per cent tungsten, 0.19 per cent molybdenum and 28 per cent iron.

Thor unearthed this additional mineralisation through its reverse circulation drill programme. The identified mineralisation is said to have underground mining potential.

The highlighlights of today's drill results included 16 metres at 0.81 percent tungsten oxide and 0.44 per cent molybdenum disulphide;13 metres at 0.38 per cent tungsten oxide and 0.13 per cent molybdenum disulphide; and 21 metres at 0.07 per cent tungsten oxide, 0.19 per cent molybdenum disulphide and 28.5 per cent iron.

“These are very positive results and suggest that the life of the proposed Molyhil mining operation has strong potential to be profitably extended," said chairman Mick Billing.

“While a revised resources estimate has yet to be prepared, and this will follow the receipt of the diamond drill assay results, we look forward to the outcome with keen anticipation” 

Today's results complement drilling assays from 2009 which tested down plunge extensions to the resource, with a best result of 53 metres at 0.23 per cent tungsten oxide and 0.24 per cent molybdenum oxide, the company.

The latest round of results are from the first stage of a two stage drilling program, carried out mid-2011, with six reverse circulation holes to test for additional down plunge resources. In the second stage of the program, six diamond holes were drilled to enhance confidence in the near surface resource.

Changes to the overall resource will be subject to confirmation by resource modelling, which will begin once diamond drill assays have been received.

Thor commissioned a Definitive Feasibility Study for Molyhil in June 2011. In September, the company released capital and operating cost estimates for the first phase of production.

Capital expenditure was estimated to be $66 million for an annual throughput of 400,000 tonnes per year and operating costs of $79 per tonne of ore processed.

The final results of the Definitive Feasibility Study are expected by the end of November.

It said that the early results underline the economic rationale for the development of Molyhil.

 Based on a phase one pit of 1.4 million tonnes of ore the report highlighted potential cash operating margins of AU$98 per tonne of ore processed. Capex is estimated at AU$66million, while the mine would have annual throughput of 400,000 tonnes per year and operating costs of AU$79 for each tonne of ore mined and processed.

Thor said that a revised ore reserve and mining plan in progress and the DFS is expected to be completed next month.

"These are very positive early outcomes and provide us with a great deal of confidence in the results of the feasibility study. While much more work is required, these cost estimates, along with current metal prices, are key to the study outcome,” said chairman Mick Billing.

“The improving commodity price for tungsten, in particular, has added value to Molyhil, and the medium term prospects for tungsten are positive.”

Thor said that potential enhancements to the project include up to 100,000 tonnes per annum of high grade magnetite, which would be mined and extracted as part of the process of producing tungsten and molybdenum concentrates. And potential value of any contribution from this commodity is still being assessed.

The company explained that the next phase of the DFS involves re-estimating the ore reserve and the preparation of a new mining plan for Molyhil.

“The outcome of this work has some potential to vary both the total tonnage of ore to be mined from Pit Phase 1 and also the grade of that ore,” it said. “Following these steps the Molyhil financial model will be updated to reflect all the revisions to operating parameters.”