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Epic & Msn data

Epic	THR
Time:	07:45:22
Mid Price:	0.75
Change Today:	0.00
Change % Today:	0.00
Fifty Two Week High:	8.38
Fifty Two Week Low:	0.75
Market Capital:	0.92

Period & price data

Period	Price
Now:	0.75
3 Months ago:	1.75
6 Months ago:
1 Year ago:

Additional information

Additional	Information
Market:	AIM
Sector:	General Mining
News:	Latest news
Web Site:	Thor Mining
Other Articles:	22-08-200812-08-200830-04-2008

Thor Mining: hammering out a tungsten-molybdenum mine

by Jackie Steinitz

Thor’s share price has been caught in the recent crossfire. But it offers near-term, highly profitable production in two booming specialty metals, uranium exploration upside and minimal political risk.

Market: AIM At the time that Thor Mining was incorporated, on 3rd November 2004 - a Wednesday as it happens, not a Thor’s Day - the price of tungsten (APT) was $92/mtu, uranium was just $25/lb, and at $26/lb, the stellar rise in molybdenum prices was already well advanced, up from $3/lb in 2002.

Since then, uranium prices have risen by around 280% (even after the recent 30% correction down to $95/lb), tungsten is up 155%, whilst molybdenum has maintained its high price, rising a further 20% or so, to $32/lb.

So Thor, which now has a portfolio of seven projects including a tungsten/molybdenum development project, and exploration projects in tungsten and uranium, has invested in booming commodities. Moreover, arguably, they are commodities with solid fundamentals and positive long term prospects. Thor’s assets come with minimal political risk, too; they are all located in Australia’s Northern Territory, a state which is particularly welcoming to juniors and which, unlike some other Australian states, has publicly stated that it will not put up any opposition to uranium projects. As CEO, John Young, says, “Australia is a fantastic place to explore and to work”.

Thor’s flagship project is the Molyhil molybdenum/tungsten prospect, which is located some 225km to the north east of Alice Springs, and can be accessed either by air or by road (150km on sealed roads,130km on unsealed). Tungsten was first discovered here in 1973, and a small 15 metre open pit operated briefly until 1981, when it was closed because of low prices. ASX-listed, Tennant Creek Gold [ASX:TNG] acquired the project in 2004, at the beginning of the tungsten boom, and conducted A$1.4m of exploration work on the site before spinning off the project to Thor in May 2005, in order to focus on its Manbarrum zinc project. As part of the £0.7m package, Thor also acquired two smaller properties that are prospective for tungsten: Hatches Creek and Thring Creek. Subsequently, Thor listed on AIM in June 2005 raising £1.4m to finance the next phase of exploration at Molyhil which included geophysics, drilling, bulk sampling, metallurgical test-work and a scoping study.


In 2006, a Definitive Feasibility Study (DFS) was undertaken, John Young was recruited as CEO, and Thor acquired a large package of uranium projects from Batavia [ASX: BTV] in the area around Molyhil, in exchange for 16 million shares. In September, it listed on the Australian Stock Exchange to raise A$10m (£4m) of which half was ear-marked for uranium exploration and the remainder to progress the feasibility study at Molyhil. The DFS, which was completed in December, suggested that the Molyhil project could have very favourable economics, with a payback period of less than a year on capex of A$45m (£18m), an NPV of A$88m (£36m) and an IRR of 111%.

This year, Thor has continued its exploration programme on all of its major projects, and it recently updated its JORC resource statement for Molyhil which increased both the tonnage of the resource (by 55%) and the confidence of the estimate. However, the combined moly-tungsten grade was lowered to 0.51% so that the estimate of contained metal content remained broadly steady at 8.4 million pounds of molybdenum, and 1.3 million mtus of tungsten (a metric ton unit contains 7.93kg of tungsten metal).

Thor now intends to publish a reserve statement in the very near future, and to update the estimates of the economics made in the DFS to reflect the findings of the recent exploration work. This will enable the company to proceed with the final steps in three key priorities: to secure a life of mine offtake agreement, to secure finance for the project and to obtain all the necessary licences and permits. Thor are currently talking with five interested parties about marketing agreements, but all are waiting on the reserve statement and revised estimate of the economics.

If all goes well, Thor envisages that everything could be ready to roll by the end of September. Construction can then begin and is expected to take around 12 months. The ball mill will be the only item with a long lead time (these can take from 8-14 months to deliver, depending on the size) but Thor has been investigating the availability of second-hand ball mills, and other equipment, on the basis that second hand equipment could save both money and time.

Thus, there are a number of bull points favouring an investment in Thor:

- Although relatively small and with a mine life of just 4 years, the Molyhil deposit is uncomplicated, the processing plant will be simple, the mineralogy is well known and the economics are highly favourable with a projected IRR of 111%.

- There is considerable upside potential at Molyhil. The current resource is still open at depth, and drilling to 100 metres below the current resource estimate has confirmed that mineralisation is still present. Moreover, other prospects on the 800 square kilometre property should be relatively easy to locate because of the strong geophysical signature

- Revenues from Molyhil are likely to be derived, fairly equally, from sales of tungsten and molybdenum. Both metals seem to have favourable prospects.

- Tungsten has a number of significant characteristics such as the highest melting point but the lowest expansion coefficient of all metals, a high density, extreme hardness when in the form of tungsten carbides, and high thermal and chemical stability. Indeed, it is described on the informative International Tungsten Industry Association website as a metal of superlatives! Its uses, therefore, are many and varied – it is used primarily in hard metals, mill products, steel, chemicals and as tungsten carbide. In recent times, demand has been rising ahead of supply with Chinese growth exceeding 20%pa. A supply gap of 4,000 tonnes pa (equivalent to around 7% of annual production) is forecast to persist for the next 5 years

- Similarly, Molybdenum has a number of unique properties including high temperature strength, high thermal and electrical conductivity, low thermal expansion and environmental stability. When used in steel manufacture it enhances strength, hardenability, weldability, toughness, and corrosion resistance. Prices have moved onto a new plane since 2003 and are expected to remain high thanks to the combination of rising Chinese demand, but limited supply growth potential, at least until 2010/2011.

- The mining plan has been optimised to take advantage of current strong commodity prices. The payback period could be as little as seven months, though this figure, of course, will depend on prices and is subject to revision.

- The project appears very robust. Projected cash costs are currently $5.26/lb of molybdenum and $136/mtu of tungsten, compared with spot prices today of $32/lb for molybdenum and $235/mtu of tungsten. Prices could fall by more than 40% from current levels and the project would still be income neutral.

- The Northern Territory offers a favourable political environment, both for exploration and mining. Thor has a good relationship with the traditional owners, local communities and authorities. There are no native title issues

- The uranium properties offer over 3000 square kilometres of prospective uranium potential, for both large tonnage sandstone roll front and paleo-channel deposits, in areas which have been previously explored by, for example, Alcoa and PNC. Some of the properties are close to known discoveries. The most advanced targets are shallow and may have the potential for open pit mining.

- The fundamentals of the uranium market are sound despite the recent correction in the market with rising demand, supply limitations and dwindling inventories.

- If Thor is successful in developing a robust geological model for uranium in central Australia, it may gain a dominant position in the area

On the downside, however

- As with any exploration company there are many risks – pages 12-14 of Thor’s AIM prospectus provide a detailed list. Perhaps the greatest of the risks is commodity price risk. While the company stands to benefit significantly from any realised prices above those assumed in the DFS, the converse is also true; it will suffer proportionately if prices fall below the assumptions.

- The company had a setback on its timetable this year when Chinese company, Hunan Nonferrous Metals Holdings Group, withdrew from its memorandum of understanding with Thor. Any further delays could reduce the opportunities for Thor to enjoy the current window of high prices. Delays could occur because of the tightness in the labour, equipment and consumables markets.

- The company does not have a history of uranium development or production. Recent exploration results were not as positive as expected. While the findings supported the geological model that Thor is working on (a paleo-channel hosted roll-front deposit type), the grade of uranium found from the first tranche of drilling and geophysics was not economic.

Thor’s share price has been on a roller coaster this year. After starting the year at 10p, it had doubled by 10th April to 21p, but has since plummeted by 60% to 7.9p, a response to the uncertainty created by the revision to the grade at Molyhil and the general affliction which has hit all mining stocks, and uranium stocks in particular.

Nonetheless, analysts at corporate research company, Hardman, concluded in June that the risks of Thor are low and that the average pre-tax asset value for Molyhil alone is 37.6p per share, with considerable upside for uranium potential.

Now could be a good time to put Thor on your radar.

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