Resource World Magazine

40 www.resourceworld.com o c t o b e r / n o v e m b e r 2 0 1 4 MINING W ith permits in hand, Avanti Mining Inc. [AVT-TSXV] began construction in late June on its 100%-owned Kitsault molybdenum project in northwest coastal British Columbia. The Kitsault Project, previously operated by Kennecott and Amax, produced over 30 million lbs of molybdenum intermit- tently between 1969 and 1982. When the mine was closed in 1982 due to low prices, some 95% of reserves remained to be mined. The project is about 140 km north of Prince Rupert, and south of the head of Alice Arm, an inlet of the Pacific Ocean. The site is accessed via an 83-km long gravel road from Nass Camp on the Nisga'a Highway, 120 km north of Terrace. Pre-existing infrastructure consists of a 42 km-long, 138-kV power line that connects the project to the BC electrical grid; ocean and road access make it a very attractive production asset. After purchasing the mine (for US $20 million) in 2008, Avanti Mining has been busy advancing, upgrading and expanding the project and patiently waiting for molybdenum prices to provide the opportunity for a second crack at production. Avanti believes that time has come. According to CPM Group, demand for the strategic metal is expected to rise, pushing prices as high as an estimated US $17.50/lb by 2022, with an average price over that eight-year period of US $13.85/lb. Long-term prices after 2022 are assumed to be stable at US $14.50/lb molybdenum. With production envisioned to start in 2017, Avanti anticipates that the Kitsault Project will have a cash operating cost at the mine site of $6.58/lb of molybdenum (Mo) produced. This drops to $5.60 (US $5.21), when a silver by-product credit of $0.98/lb of Mo is realized. Total cash cost including transportation and smelter charges would be $7.07/lb (US $ 6.57) of moly. The Kitsault property contains three known moly deposits: Kitsault, Bell Moly, and Roundy Creek. The host rocks for min- eralization for these three deposits are thermally metamorphosed interbedded argillite and greywacke sediments and a series of related intrusions. Kitsault Mineral Reserves: Effective Date 14 March 2014 (cut-off 0.032% Mo) Metallurgical recoveries averaged 90% Molybdenum and 39% Silver. In November 2013, Avanti released an optimized economic model for the mine. The study update assumes a long-term aver- age molybdenum price of US $14.50/lb for revenue purposes. The after-tax NPV at an 8% discount rate over the estimated mine life is $417 million. The after-tax IRR is 17.3%. Payback of the initial capital investment is estimated to occur in 4.4 years after the start of production. Avanti intends to build a 45,500 tpd mining facility which would produce an average 23.4 million lbs of molybdenum per year over a 14-year mine life. The Kitsalt Mine is expected to pro- vide over $6.4 billion of export revenue to Canada while paying $382 million in Federal income tax. An additional $660 million would be paid in Provincial and resource taxes to BC. When in full production, the mine is expected to produce 5% of the world's molybdenum supply. Initial capital costs, including working capital, are estimated at $812 million and the life-of-mine (LOM) sustaining capital at $132 million. During the two-year construction phase the mine will gen- erate 700 jobs and 300 full time jobs over the 16-year mine life. The project is also expected to provide an additional 700 indirect jobs providing goods and services to the mine and local community. The Kitsault Mine received an Environmental Assessment Certificate from British Columbia in March 2013 and an amended Mines Act Permit in June 2014. Later that same month the Federal government granted the mine's environmental assessment application. "We are delighted with the decision of the Government of Canada to approve our environmental application," said Gordon Bogden, President and CEO of Avanti. The company has also recently concluded a Kitsalt Mine Benefits Agreement with the Nisga'a Nation. The agreement addresses a number of outstanding Nisga'a concerns in respect of environmen- tal protection, provides economic benefits to the Nisga'a Nation (including a NSR royalty of up to 2% based on prevailing molybde- num prices), and resolves all outstanding litigation. "We are pleased to have finally reached an agreement with Avanti that will enable the project to proceed while ensuring that our treaty rights are respected and our Nation's environment is pro- tected," said Mitchell Stevens, President of the Nisga'a Nation. "We wish to congratulate Avanti's new executive team who approached us with a sincere interest in addressing our concerns with the proj- ect, which we were then able to work through without delay." Avanti has also secured a Memorandum of Understanding with the Wilp Luuxhon Nation that includes the provision of certain road maintenance contracts to Wilp Luuxhon contracting Classification Tonnage Molybdenum Silver Lead Contained Contained (Million tonnes) (%) (g/t) (%) Moly Silver (Million lbs) (Million oz) Proven 129.5 0.092 5.2 252 263.6 21.5 Probable 101.6 0.070 5.4 264 156.7 17.7 Proven & Probable 231.1 0.082 5.3 257 420.3 39.2 Avanti Mining kicks off construction at Kitsault moly mine by Thomas Schuster

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