PERTH (miningweekly.com) – Junior minerals developer Thor Mining has slashed its operating costs forecasts by at least 19% at the A$73-million Molyhil tungsten project, in the Northern Territory.

Operating cost savings of up to 28% were possible if production credits for molybdenum, a potential by-product from mining at Molyhil, were taken into account, Thor reported on Wednesday.

The company initiated an internal review of the project’s cost parameters in a bid to increase Molyhil’s ore reserve, project life, financial outcomes and additional exploration upside.

The revised operating costs of ore processed were now estimated at A$72.24/t compared with A$89.51/t as defined in the project’s 2012 definitive feasibility study (DFS).

The major gains were from focusing on pre-concentrating the ore through ore sorting and a decision to pursue an owner-operator model, rather than use contract miners.

The company said it was investigating further potential savings.

After allowing for molybdenum credits, the project’s operating costs decreased to less than A$90/t compared with the A$125/t defined in the DFS.

The savings offsets come at a minor penalty in construction costs for the proposed mine, with estimated capital expenditure for Molyhil increasing by 5.5% to A$73.6-million, from A$69.7-million originally.

However, some further downwards pressure was expected from ongoing work testing new ore-sorting methods prior to processing, Thor told shareholders.

Executive chairperson Mick Billing said that the optimisation outcomes should lead to additional mining reserve and a much longer mine life for Molyhil at a time tungsten prices had remained firm during calendar 2013 with a positive longer term outlook.

“The review is timely as the 2012 DFS showed that a 7% improvement in revenue factors extends Molyhil’s ore reserves from 1.6-million tonnes to around 2.5-million tonnes and boosts the mine life a further 50% to six years,” Billing said.

“However, our own rework of the project’s financial and operating models is showing that the same gains can be achieved by reducing operating costs by A$15/t.

“To date, our cost savings initiatives have exceeded this objective and we are continuing to investigate other areas of driving costs down.”

Thor recently secured a letter of intent from US major Global Tungsten & Powders Corporation for up to 75% of the yearly production from the Molyhil mine.

The terms apply to offtake for the current planned four-year life of the mine and a right of first refusal to a two-year extension term.

The project has a total indicated and inferred resource of 4.7-million tonnes grading on average 0.28% tungsten for 13 100 contained tonnes and 0.22% molybdenum for 10 300 contained tonnes.

The DFS found that the project could produce 400 000 t/y, delivering 2 200 t/y of scheelite product and 1 250 t/y of molybdenum concentrate.