Junior goes it alone in South Korea
BETTER TUNGSTEN, MOLY PRICES SPARK RENEWED INTEREST
Why Vancouver’s Oriental Minerals
(otl-v, omnlf-o) is the only foreign mining
company in South Korea right now is
anyone’s guess, but director and co-chair
Damien Reynolds says he’s not looking for
the answer.
“We are not the first company to be
there — we’re sure we’re not going to be
the last — but currently we’re the only
(foreign miner) that we can find listed,”
Reynolds says.
Oriental Minerals recently started
drilling at its newly acquired, dormant
Sangdong tungsten-molybdenum mine
— formerly one of the world’s largest.
The mine, located southeast of Seoul,
closed in 1992 due to low metals prices
and was acquired by Oriental from a local
title holder.
Reynolds points out that South Korea
has high-quality infrastructure, is an
advanced consumer of metals, allows
100% foreign investment and has a solid
legal system. And of course, there are also
the resources, which Reynolds describes
as “world class.”
He says Korean companies seem to be
more focused on the downstream —
refining, processing, milling and fabrication
— over exploration.
Since Sangdong’s closure, tungsten
prices have risen to US$70 per lb. from
US$4 per lb., while molybdenum prices
have skyrocketed to around US$38 per lb.,
up from less than US$2 per lb.
Tungsten is the hardest of all metals
and is used for a diverse range of
commercial, industrial and military
applications. It’s used as a substitute
for lead bullets, for lamp filaments
and in tools used to drill or cut rock
and concrete.
Molybdenum’s largest use is as an
alloy for stainless and full-alloy steels.
The metal strengthens steel, allows it
to expand and contract and makes it
easier to weld. It also has some newer
uses, such as in fertilizers and catalytic
converters.
Oriental Minerals first sent a team to
South Korea two years ago to examine
potential properties. Since then, the company
has built up its portfolio to include
22 projects there.
“There’s tungsten, molybdenum, gold,
silver, uranium and a myriad of other
base metal opportunities in South
Korea,” Reynolds says. “We’re going to
develop to a point where we can rationally
say whether they can be spun out into
separate companies.”
He notes that the company now has $3
million for exploration, but is about to add
to its treasury.
“We’re going to do a financing and turn
all that money into the ground,”
Reynolds says.
Now, Oriental Minerals is verifying
numbers from the former state mining
company, Korea Resources. In 1989, it
estimated that Sangdong still had
reserves of 189 million lbs. WO3 from
15.6 million tonnes grading 0.5% WO3
in the main orebody and 1.4 million
tonnes grading 0.55% WO3 in the east
orebody.
A molybdenum deposit beneath the
existing tungsten mine was also estimated
to contain a resource of 16 million tonnes,
or 140 million lbs., of molybdenum sulphide
grading 0.4% MoS2. A historical,
global resource at the project stands at
120 million tonnes, or 340 million lbs.,
grading 0.129% MoS2.
“They are historical numbers that we
have complete confidence in,” Reynolds
says.
Oriental Minerals expects to drill its
first hole, SD-01, to a depth of 750 metres
over two months. The core will then be
sampled on a 1-metre interval basis and
sent to the ALS Chemex Laboratory in
Brisbane, Australia, for analysis.
To acquire Sangdong, the company has
agreed to pay more than US$800,000 cash
and US$800,000 in stock, to be issued at a
10-day market average price at closing by
Feb. 28, 2007. At six, 18 and 30 months
after closing, Oriental Minerals will pay
US$2.4 million cash and US$800,000 in
company stock.
In the first and second years, the company
must spend US$800,000 followed by
US$2.4 million during each of the next
three years, unless it is undertaking commercial
production, in which case it must
spend US$16 million.
Oriental Minerals will earn 51% of the
ownership interest at closing, another
19% by completing a prefeasibility study
within five years and the final 30% if it
starts a feasibility study during year five
and completes it within 18 months.
“We are going to move very aggressively
towards a bankable feasibility
study through 2007 on Sangdong,”
Reynolds says.
Other properties the company recently
acquired in the country include: the
Chongyang molybdenum-tungsten
mine, which closed in 1977; the Muguk
gold-silver mine, formerly the country’s
largest producing gold mine; and the
Gasado gold-silver project on Gasado
Island, 5 km off the southwest coast.
Exploration is also under way at the
company’s Geodo gold-copper project on
the northeastern part of the peninsula.
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