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Thor Mining

Thor Mining - seven projects and on the prowl for more

Thor Mining (AIM & ASX: THR), which has a portfolio of seven projects - including a tungsten/molybdenum development project, and exploration projects in both tungsten and uranium - has seen a lot of recent changes.

Western Desert Resources (ASX: WDR), an exploration company operating in Australia, acquired a 16.7% interest in Thor and appointed Mick Billing, Norman Gardner and Michael Ashton to the board. At the time, Thor Mining said it believed that the new strategic shareholder would assist in advancing the development of its 100% owned Molyhil Tungsten Molybdenum Project, in the Northern Territory.

In fact, a lot of the grunt work at Molyhil is already complete. Molyhil is a well-known region for tungsten; located some 225km to the north east of Alice Springs, it can be accessed by air or road. 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.

Australian mining and exploration company, 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-lead-silver 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.

Since June 2005, Thor Mining has also: completed a secondary listing on the Australian Stock Exchange; defined a JORC compliant mining reserve of 8.4 million pounds of molybdenum and 1.3 metric ton units of tungsten, with an average grade of 0.51%; been granted three mining leases required to develop the project; signed a native title mining agreement; completed a definitive feasibility study; and has even secured a 100% off-take agreement with CITIC Australia Commodity Trading, for the molybdenum and tungsten concentrates over the initial 5.7 year mine life, during which 4.9 million tonnes of molybdenum metal and 700,000 mtu’s of tungsten are to be produced. Molyhil comes with minimal political risk, too; all of its projects are located in Australia’s Northern Territory, a state that is particularly welcoming to mining.

So what does Western Desert bring to the table? - Quite simply: cash, contacts and experience. Western Desert and Thor Chairman, Mick Billing, has over three decades of experience of working in the Australian mining sector, including Chief Financial Officer roles at WMC Resources and Bougainville Copper. He is adept in project finance, corporate governance and project evaluation. Sitting quietly behind Mick is Norm Gardner, who owns a construction business and has worked on a number of mine developments in Australia. Michael Ashton also brings plenty of experience to the table, in the creation and development of mining companies. The trio appears to supplement Thor quite nicely. In many ways, Western Desert’s investment in Thor is a big “thumbs up” for the potential of Molyhil to be a commercial mine. With nearly every permit in place, the skills of Western Desert will soon be put to the test, as the company tries to secure the required capex to develop the project.
 
This number was based on the results of a Definitive Feasibility Study completed in December, which suggested favourable economics at recent metal prices, with an NPV of A$88m (£36m) and an IRR of 111%. 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.

There are, however, a few issues that still stand in way of developing Molyhil. Most pressing is the collapse of liquidity in the credit markets, and the dearth of fresh capital available via the equity markets. For Molyhil, this is a major issue as the company will have to raise capital from the markets, which would be heavily dilutive at the current share price, and securing financing from a bank is a hell of a lot more tricky now than it was eighteen months ago.

One possible solution for Thor will be to revise the flow sheet to extract magnetite, which represents around 25% of the tonnage projected to pass through the mill. In a recent quarterly update, Thor confirmed that it is looking at the benefits it could supply. The magnetite from Molyhil, which was not really a commercial option only a few years ago, can now fetch well north of $100/tonne, as it is in high demand. Nagrom, a specialist metallurgical company, recently completed a gravity concentration trial to extract magnetite, concentrate molybdenum and tungsten together. Preliminary results confirmed that a magnetite product is possible, and a 10 to 1 beneficiation is possible, turning 400,000 tonnes of ore into 40,000 tonnes of concentrate. The hitch was higher losses of the molybdenum and some minimal loss of tungsten.

John Young, CEO of Thor Mining, told Proactive that reworking the flow sheet to include the extraction of magnetite would add a third dimension to cash flow projections, and could make securing finance more realistic in today’s tight credit environment. He also confirmed that Thor is considering other options to lower the capital and operating costs, including placing the secondary plant at Alice Springs, where electricity would be one third of the cost on site.

There was more interesting news from Thor, but not from Molyhil; Thor has also been conducting exploration at Hatches Creek - which in Australian terms, is only up the road from Molyhil - and has returned some interesting results. The Hatches Creek Prospect contains the historical Hatches Creek mining field, which was known as the Wolfram Field, where numerous mines exploited quartz veins containing wolframite, a tungsten mineral.

Rock chip and grab sample results from the five main groups of workings on the Hatches Creek Project, returned an average tungsten grade from 174 samples of wolfram - quartz veins of 2.19%, with a “strong silver-bismuth-copper association with average results of 1.92%, 5.36ppm and 0.22% respectively.” The rock chip sampling was focused on old workings from abandoned stockpiles from previous mining conducted between 1913 and 1957. Thor also noted a “strong gold association” at the Pioneer Mine, and “favourable” molybdenum assays, as high as 1.98% from the Hit and Miss prospect at Hatches Creek. Thor now plans to treat some of the gold veins and target more drilling at the old workings. John Young, Chief Executive Officer of Thor encapsulated the mood: “These exciting results have confirmed the prospectivity of this historic area which has not been subject to modern exploration. Drilling targets have been identified and we look forward to starting drilling as soon as possible, subject to availability of appropriate drilling equipment.”

Thor has also posted encouraging results from grassroots uranium exploration projects in the Northern Territory of Australia, where drilling is underway.

This leaves investors with an enticing prospect. The share price of Thor has been beaten into submission in the last few months; some will see this as a buying opportunity, to pick up unloved companies with interesting assets. Thor certainly falls into the unloved category, and if the revised flow sheet at Molyhil can help secure finance, the bubbly will be out. Results from Hatches Creek and the company’s uranium exploration continue to encourage, too, and it seems only a matter of time before Western Desert helps bring some new projects into the company.