Montezuma Mining Company: Scoping Study points to robust economics at Butcherbird

Montezuma Mining Company (ASX: MZM) has received a very positive Scoping Study for the developmentof the extensive manganese mineralisation at its 100% owned Butcherbird Project.

The study was completed by independent consultancy Engenium Pty Ltd and investigated the development of a mine producing between 0.5 million tonnes and 1 million tonnes per annum of lump and chip ore grading a nominal 36% manganese (Mn) with a mine life of at least 10 years.

The study has projected an NPV of up to A$376 million with an IRR of up to 59%, based on the JORC Yanneri Ridge Inferred Resource of 64.7 million tonnes at 11.2% Mn (8% Mn cut off).

A yield of 20% of extractable product at 36% Mn was assumed based on the DMS studies, underpinning potential production of over 12 million of lump and chip product with a 1:1 stripping ratio from this deposit alone.

Importantly,  Montezuma expects resource upgrades based on further drilling to add to the potential product inventory, and may support a longer mine life and/or increased production rates.

Transportation of the product will be via the Great Northern Highway to Port Hedland for a total distance of 580 kilometres.

A camp size of either 125 persons for 0.5 Mtpa or 150 persons for 1.0 Mtpa scenarios is expected. Mining will be undertaken by a contractor and processing to be undertaken by Montezuma.

The study was based on a long term manganese price of US$5.40/dmtu and a long term exchange rate of $0.80 USD/AUD, along with CAPEX including all direct and indirect costs of building the mine and start-up operations.

The manganese mineralisation at Butcherbird is amenable to relatively low cost beneficiation which has contributed to the positive outcome of the study.

The Butcherbird Project hosts the largest onshore manganese occurrence in Australia and is further enhanced by its location which straddles the Great Northern Highway and the Goldfields Gas Pipeline.

As the company progresses towards the Feasibility Study phase of development the economics of the project can be improved by any increase in the market price of manganese ore from current cyclical lows prior to commencement of production.

A reduction in the capital cost required would also boost the project, given the significant contingency built into this analysis.

In addition, an improvement in the delivered product grade above 36% Mn will improve both the unit price and per tonne revenue stream. Work is ongoing in this area and a number of avenues are being investigated.

Analysis

Montezuma will now aggressively push towards production with further engineering investigations and a more detailed Feasibility Study as well as actively investigate potential financing avenues to fund the capital requirements of a manganese mine at Butcherbird.

With the Butcherbird project now having a projected net Present Value of A$376 million against a market cap of just A$18 million, the company's stock price appears to have significant upside.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/21143/montezuma-mining-company-scoping-study-points-to-robust-economics-at-butcherbird--21143.html