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Eerie Similarities???
Endako's Past - Ruby Creek's Future
Michael Alexander
Endako Mines Ltd. was created in British Columbia in 1962 around a pure molybdenum deposit near Fraser Lake and commenced production in May 1965.
They amalgamated with Placer Development Ltd in February 1971. Interestingly, prior to the amalgamation Placer owned 75.6% of Endako.
The amalgamation saw 1 share of Placer Development given for every 2.25 shares of Endako. During the course of the amalgamation Placer was trading at a low of $17.88 and a high of $38.75 that year. As best as I can tell, as the numbers get a little dusty after 35 years, Placer was trading around $36.00 at the time of the deal.
Endako faced a $22 million start up in 1965 on a 12,000 tpd (tons per day) mill, which is $140 million at today's prices. Over the next three years milling was increased to 28,000 tpd, and they re-paid the $22 million in loans in 1967.
From 1965 to the mid 1970's the average price of molybdenum was $2.00 per pound. This is significant as it points to what had to be a very low operating cost once all was up and running. Especially considering how with that average price of molybdenum, the mine payback was achieved in a short span of just over 2 years.
Looking at the reserve size and grade in 1969, you'll discover a reported reserve at the time of 192.6 million tonnes grading 0.087% Mo or 0.1392% MoS2
These numbers should be looking very familiar to those who have done their due diligence on Adanac.
For those who have not or need a refresher, consider the following;
Ruby Creek is proposing a 20,000 tpd mill with a proposed 20 year operating life, with 206 million tonnes grading 0.063% Mo or 0.1008% MoS2. This translates to 285.6 million lbs (measured and indicated), based on a cut-off grade of 0.04% Mo.
More stunning yet, is the fact that Kerr/Noranda in their feasibility studies in 1970 upgraded the Ruby Creek reserve, based on their underground work. The work showed a better grade of molybdenum from a 10,000 ton bulk sample (taken from area surrounding 6 diamond drill holes) than the grade indicated by those diamond drill holes. They went on to publish in their feasibility tonnes and grade of 91.2 million tonnes grading 0.100% Mo or 0.16% MoS2
Neither Placer nor Adanac upgraded their reserve.
Also interesting to note, in the Endako financial report in 1970, they mentioned additional drill data which indicated an extension to the west of at least 1000 feet, which is exactly the same position that Adanac is in today. With Ruby Creek also showing an extension of the resource at least 1000 feet to the west.
Furthermore, the long term projections on Ruby Creek from the pre-feasibility studies, 43-101 reports and the engineering reports received thus far from the final bankable feasibility are eerily similar to the Endako mine. This is absolutely key as Endako's grade, recovery, reserve size and mine life also saw an increase as time went on and their costs per pound decreased over that same period.
Thus is the nature of an open pit operation where the metal is molybdenum. Molybdenum can be tricky to grade as much of it runs out of the drill core during extraction. This is what made the underground work and bulk sampling so important on Ruby Creek and why I can say quite comfortably that the Ruby Creek project is unfolding in the exact manner Endako did.
In fact it is Ruby Creek alone that can be even remotely compared to the Endako operation, not only comparable, but its virtual twin.
On the production side of Ruby Creek, which is slated to begin in late 2007 or early 2008, the first five years of operation for Ruby Creek will average 0.085% Mo or 0.136% MoS2.
So what has Endako done?
Endako was initially a 12 year mine life at 12,000 tonnes per day. 45 years later the mine is still operating and has been for the last 42 years at 28,000 tpd. Over this life, up to the end of 2004 it had produced 422 million lbs of molybdenum.
In 2004 it produced 11 million lbs from an average grade of 0.066% Mo.
Molybdenum demand continues to be strong and there are no signs pointing to that changing whatsoever. In fact many analysts are forecasting a 2% to 3% growth in molybdenum in the next several years which translates to 6 to 9 million lbs this year. Actually the growth has been approximately 7% in each of the last 2 years which equates to 20 million lbs this year.
We have a very rare opportunity here as investors. We can get tomorrows lottery numbers today. What does the future hold for Adanac and Ruby Creek? Just do what I have done and look at Endako Mines Ltd. There you will see Adanac's future as clearly as if you have been gifted with a crystal ball.
2 March 2006
Michael Alexander
President
Accelerated Capital Investments Ltd.
Phone: 519-471-3243
E-mail: m.alex@acil.ca
Website: www.acil.ca
Disclaimer: The opinions expressed above are those of Accelerated Capital and Michael Alexander. Michael Alexander is not an IDA accredited analyst nor a licensed broker and as such the above is not intended to be taken as investment advice. It is to be taken as opinion, with an invitation to perform further due diligence to assist you in making a more informed investment decision. Michael Alexander is employed by Adanac Moly Corp. to perform Investor and Public Relations for which a remuneration is received. Michael Alexander also owns AUA personally.
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