Roca Mines Inc. ("Roca" or the "Company") announces that Hatch Limited ("Hatch"), an independent engineering services company in Vancouver, B.C., Canada has completed its Preliminary Assessment (a scoping level engineering study) of the MAX Molybdenum Project. The Preliminary Assessment demonstrates that at current molybdenum oxide prices the MAX Molybdenum Project has positive economics as a high-grade (greater than 0.5% MoS2) underground mine. Hatch's lead Qualified Person responsible for the Preliminary Assessment is Ms. K. Leong, P.Eng.
Prices for molybdenum products have been increasing since 2002; molybdenum oxide, a product used in making specialty and stainless steels, has exceeded US$15/lb for the past 13 consecutive months and currently trades in the US$38/lb range. The average price for molybdenum oxide in 2004 was in the US$16.50 range and its average price for 2005 (year-to-date) is US$33.25/lb.
The following table provides a 'before tax' cash flow summary of the 500 tonne per day (tpd) scenario producing an estimated 6.1 million pounds of molybdenum (Mo) contained in concentrate, defined as CASE 1 in the Hatch study;
Hatch reviewed the capital and operating costs for two mutually-exclusive underground mining scenarios; a continuously-operated 500 tpd mine (summarized above) working at a 0.50% MoS2 cutoff grade, and a 2,500 tpd mine operating at a 0.20% MoS2 cutoff grade ("CASE 2"). Both scenarios include a conventional concentrator to be constructed onsite that would produce a molybdenite (MoS2) concentrate for direct sale. Both assessments relied upon a NI 43-101 compliant resource estimate previously completed by Mr. T.N. Macauley, P.Eng. (see press release ROK#16-04 dated September 21, 2004). For Case 1 the measured and indicated resource estimate used was 1,380,000 tonnes at a cutoff grade of 0.5% MoS2 and for Case 2 the measured and indicated resource estimate used was 11,350,000 tonnes at a cutoff grade of 0.2% MoS2.
The Hatch study reinforces the Company's assertion that a small, fast-tracked mine with near-term production would provide the most attractive and lowest-risk mine development plans. Working together with its consultants, management is now refining the CASE1 mine plan described above to produce a 'campaigned' plan with rescheduled underground development and used concentrator equipment. That plan would minimize capital costs while also reducing lead time to production under a British Columbia Small Mines Permit application. The implementation of the 'small mine' plan will not reduce or limit the opportunity to expand the operation over time.
The MAX Molybdenum project is located approximately 65 km (39 miles) south of Revelstoke, British Columbia and Roca has an option to earn a 100% interest in the project. The Preliminary Assessment is available via SEDAR at www.sedar.com or on the Company's website at www.rocamines.com.
Case 1 - 500 tpd Summary
The 500 tpd plan includes the development of 25m sublevels and open stopes from the existing adit level. It would produce an estimated 6.1 million pounds of Mo (contained in concentrate) from approximately 476,211 tonnes of mill feed over three years. The mine life could be expanded by developing other areas of the deposit and by backfilling stopes to permit extraction of pillars; these additions to the total tonnage have not been included in the study at this time.
The study is based on a mine development plan and schedule that could yield 500 tpd on a continuous basis over the life of the mine. To facilitate this, a decline ramp needs to be excavated in advance of production representing a large component of the total capital cost of the 500 tpd study. A concentrator was also designed using conventional crushing, grinding, flotation, thickening and dewatering unit operations. All capital and operating costs were based on conceptual designs and benchmarked to operations of similar capacities and nature.
Capital costs for the continuously-operated 500 tonne per day project are estimated to be US$24.16 million based on all 'new' equipment, with mine operating costs of US$44.50/tonne mined and US$20.64/tonne milled. Payback periods of less than 13 months are calculated for commodity prices of +US$20 per pound of contained Mo. All costs are based on the assessment of achievable mining and processing conditions as described in the report. Consistent with a scoping level of engineering the study's cost estimates have been prepared with a level of accuracy range of +/- 30%. Because of its nature, the reader should be aware that this study is intended to provide guidance for further investigation, design and engineering that may change the range of both capital and operating costs, potentially affecting the cash flow analysis.
Case 2 - 2,500 tpd Summary
The 2,500 tpd plan also includes the development of 25m sublevels and open stopes producing an estimated 31.7 million pounds of Mo (contained in concentrate) from approximately 8.66 million tonnes of mill feed over 10 years. The mine plan develops most areas of the deposit that exceed the 0.20% MoS2 cutoff grade and assumes a high extraction ratio by backfilling stopes to permit mining of all pillars.
The study reviews a mine development plan that would yield 2,500 tpd on a continuous basis and includes the development of decline and incline ramps, ventilation raises and sublevel stopes. The concentrator was designed using conventional crushing, grinding, flotation, thickening and dewatering unit operations. All capital and operating costs were based on conceptual designs and benchmarked to operations of similar capacities and nature. Capital costs for the 2,500 tpd project are estimated to be US$104.8 million based on all 'new' equipment, with mine operating costs of US$29.44/tonne mined and US$10.64/tonne milled. All costs are based on the assessment of achievable mining and processing conditions as described in the report. As described previously, all cost estimates have an accuracy range of +/- 30%.
Due to the uncertainty of molybdenum product prices for a 10 year mine life, Hatch opted to prepare a simplified break-even cash flow analysis, rather than a sensitivity to price type analysis. Based on this analysis, and the conceptual designs and cost estimates provided for CASE 2, the project requires prices in the range of US$20/lb for years 1-5, US$15/lb for years 6-8 and US$10/lb for years 9-10 to produce a near breakeven result. Since these prices are significantly higher than that predicted by a February 2005 molybdenum market analysis report relied upon by Hatch, no additional work has been carried out on this model. However, the results indicate the potential for expansion of a small mine if commodity prices are sustained at high levels over an extended period of time.
Hatch's recommendations to advance the Max molybdenum project include; underground inspection, further diamond drilling, geology, metallurgy, and geotechnical investigations at proposed plant and tailings sites. All of these recommendations are currently underway at the Max Molybdenum Project. Underground rehabilitation and ventilation have been completed and access restored to over 2 kilometres of existing adit, crosscut and drifts. The Company is working closely with its engineering, environmental and marketing consultants to complete this work.
Roca's 3,000 metre underground infill drilling program is currently nearing completion. That program is intended to bring sampling in the measured resource area of 260,000 tonnes grading 1.95% MoS2 (at a 1.00% MoS2 cutoff grade) to approximately 20 metre spacing. The infill drill program will provide the basis for a detailed design of a decline ramp and stopes and for a final production decision upon receipt of a B.C. Small Mines Permit.
Mr. David Taylor, P.Eng. is the NI 43-101 Qualified Person supervising the infill drilling and sampling program. Assay results will be announced when they are received and compiled. Mr. Scott Broughton, P.Eng. is the NI 43-101 Qualified Person responsible for the preparation of this news release.
ROCA MINES INC.
Scott E. Broughton, P.Eng. - President and CEO
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