We can sit this out as long as we have to – Adex chief

TORONTO (miningweekly.com) – TSX-listed Adex Mining, which hopes to exploit molybdenum, tungsten, tin and indium mineralisation at its flagship New Brunswick property, has the cash resources and patience to wait until market conditions improve before committing itself to any further expenditure, president and CEO Kabir Ahmed said on Wednesday.

The firm has completed an NI 43-101-compliant resource estimate and a preliminary economic assessment for the moly/tungsten Fire Tower Zone (FTZ), at its Mount Pleasant prospect, and expects to have an updated resource statement for the neighbouring North Zone, where the company has found tin and indium, by January at the latest.

The next step was to have been a bankable feasibility study on the FTZ, which the company plans to put into production first.

Ahmed estimates that the feasibility study would cost arout C$1,5-million, which could easily be covered by the company's current cash resources of C$4-million.

However, because of the turbulence in financial and commodity markets, tied in with demand uncertainty for steelmaking metals like moly and tungsten, the firm will instead freeze all activities until some stability returns to global markets.

“Basically we will go into a wait and see mode,” Ahmed said in an interview at the company's Toronto offices.

“But the important thing is that we are able to trigger feasibility at any time when the opportunity arises.”

Once the technical reports for both the FTZ and North Zone are finalised, the firm will have a nominal burn rate – essentially a small corporate office and a handful of employees to keep an eye on the project site.

“So we can ride this out for the next two, even three years if we had to.”

However, Ahmed said that he expects economic stimulus efforts in China, the US and India will result in demand recovery for industrial metals by mid-2009.

"I think we will have a lot more bad news over the next two quarters, but I am confident that by the beginning of the third, and going into the fourth, quarter of 2009, we should start seeing a return of confidence in the international market, a return to infrastructure development...which will mean that companies like ours can start initiating a pathway to production again.”

In the current environment, and with share valuations continuing to probe new lows, explorers and developers are turning into easy prey for larger rivals with cash in the banks.

Ahmed declined to comment on whether the company had received any expressions of interest, but pointed that that potential suitors - the likes of Teck Cominco, BHP Billiton or Xstrata Resources - all appear to have their hands full keeping their own houses in order.

C$1,16BN REVENUE ESTIMATE

The updated resource estimate for the FTZ includes includes an indicated resource of 13,5-million tons, as well as an inferred resource of 841 700 t, and the scoping study completed by Aker Metals estimates that a mine at the FTZ could generate some C$1,16-billion in revenue over a 13-year life.

The Mount Pleasant mine was built and developed by the then Billiton in the eighties, but was closed and flooded in 1985, after less than three years in operation, as sliding metals prices meant the mine was no longer economic.

Adex bought the property in 1995, and began taking steps towards reopening the mine over the last couple of years, encouraged by surging prices for molybdenum and tungsten.

However, molybdenum, which traded on the spot market above $30/lb earlier this year, fell off sharply in October, and currently sits at around $9/lb this week, as global demand for steel feels the effects of recessionary concerns.

Both tungsten and molybdenum are used to strengthen steel and prevent corrosion.