Introduction
When your mining projects focus on metals that have seen price surges of 400 to 500 percent in recent years, investors are apt to take notice. The rising demand for molybdenum and tungsten gives Galway Resources cause for optimism, and they’ve put together a team to take advantage of these assets in their Nevada and New Mexico projects.
We had an opportunity to talk with Robert Hinchcliffe, the President of Galway Resources, at the PDAC 2007 meeting in Toronto. He said, “we have made tremendous progress since our qualifying transaction about nine months ago. Since the Indian Spring purchase last April, we’ve made two other significant acquisitions. So we’ve gone from an open Tungsten deposit — Indian Springs — to the Victorio Project, our flagship property for molybdenum and tungsten in New Mexico. We also have a copper and silver project in New Mexico [Lone Mountain], which we will be drilling this Summer”
Robert Hinchcliffe worked as Chief Financial Officer of Kirkland Lake Gold Inc. (TSX - KGI) from January 2003 until February 2005, during which time the company raised over $50 million in funds to re-commission the Kirkland Lake Gold Mine and for exploration purposes. Prior to that, he worked for seven years on Wall Street as a Mining Analyst. He has an M.B.A. from Georgetown University, and a B.A. in Economics from the University of Arizona (with a concentration in Mining & Geology).
“We’ve put together a great group of assets and a great geological team which is headed by our Chief Operating Officer, Marshall Himes, former chief geologist for BHP worldwide,” said Hinchcliffe.
At BHP, Himes evaluated projects at the advanced exploration stage, and has been associated with projects involving base and precious metals, as well as industrial metals for 32 years. Earlier on in his career, Mr. Himes was the Project Manager at the Indian Springs Property, responsible for the day-to-day geologic activities of mapping, sampling, drilling and resource estimates.
“Collectively, the three properties represent over 300,000 feet of historical drilling, great infrastructure, and location in mining friendly states, Nevada and New Mexico,” said Hinchcliffe. “Our motto is to take advantage of the cycle, and find projects with a lot of work done on them — and to take advantage of Marshall Himes’ expertise, which is advancing advanced exploration projects.”
Molybdenum and Tungsten Prices Soar
Strong global demand for molybdenum combined with limited additional supply has sent prices from $5 a pound to between $28 to over $30 per pound. Molybdenum is used in producing steel alloys to add hardness, strength, corrosion resistance and endurance to high temperatures. Recent increases in global steel production, particularly in China, are a primary reason for the steep rise in the molybdenum price.
Tungsten prices are now at about $13 per pound, after trading around $2.50 per pound for most of the past two decades. Tungsten is used in tools, machinery, light filaments and artillery. It is sought after for its high melting point and resistance to extreme temperatures. Declines in the amount of mined tungsten output from China, means that other sources are needed for this metal, which has the second highest melting point and second hardest in terms of malleability after diamonds.
Galway Properties in Mine-Friendly States
The Indian Springs tungsten property, located in northeastern Nevada (25 miles north of Montello), is an open, advanced stage exploration property that had undergone extensive exploration drilling and metallurgical testing from 1968 through 1986, with three major mining companies. A historical tungsten resource was defined based upon 336 drill holes. The drill-defined tungsten mineralization has exploration potential along strikes to the northeast and southwest.
Various historical resource and "reserve" estimates exist, ranging from 8.85 million tons @ 0.257% WO3 at a 0.17% cutoff grade to 21.94 million tons @ 0.179% WO3, at a 0.10% cut-off grade; with strip ratios of 4.8 and 1.3 respectively. (Though these are not classified according to CIM resource/reserve categories and should not be relied upon.) Indications are that resource estimation is achievable using the large amount of existing historical drill data.
Victorio
The Victorio molybdenum-tungsten project is an underground, advanced-stage exploration property with favorable infrastructure such as ready access, nearby railway & gas pipeline. Located 20 miles west of Deming, New Mexico in Luna County, it has also been inactive since the 1980s.
Galway’s Hinchcliffe believes these two advanced-stage projects can be moved forward to active mining stage quickly, when combined with a strong team, good infrastructure, high commodity prices and mining-friendly legislatures.
“We just came out with our first NI 43-101 Resource Estimate on Victorio, which is 31 million pounds of molybdenum and 33 million pounds of tungsten. At today’s value that is $3 billion of molybdenum-tungsten with incredible infrastructure, right off the highway, a gas pipeline that intersects the property, 20 miles away from the nearest town. Low capital would be required to put that into production, it’s quite favorable,” said Hinchcliffe.
New Resource Estimate for Victorio
On January 29, 2007 Galway reported on a new resource estimate for Victorio, noting that the deposit contains over 65 million pounds of molybdenum and 57 million pounds of tungsten (WO3) in the Indicated Category, and 31 million pounds of molybdenum and 33 million pounds of tungsten (WO3) in the Inferred Category.
Approximately 65% of the stated resources fall in the Indicated category, with the balance falling into the Inferred category. The resource is based on data from 71 holes (over 165,000 feet of drilling) completed in the late seventies by Gulf Minerals.
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Resource Total Average Grade Contained Metal in Pounds
Category Tons (millions) Mo (%) WO3 (%) Molybdenum Tungsten
Indicated 21.5 0.15 0.13 65,000,000 57,000,000
Inferred 11.7 0.13 0.14 31,000,000 33,000,000
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Cutoff grade is based on dollar rock value calculated from contained molybdenum valued at $12 per pound combined with the contained tungsten (WO3) valued at $8 per pound. The metal prices used in arriving at the different cut off values are considerably lower than the current molybdenum and tungsten prices. The cut-off used to arrive at the numbers provided in the prior table is $40 per ton.
Lone Mountain
Galway’s Lone Mountain is in a major Southwestern U.S. porphyry copper district, in Grant County, New Mexico. Extensive past drilling indicates that the Lone Mountain property contains a porphyritic intrusion with oxide copper mineralization and highly mineralized sediments lateral to the intrusion. Galway will pursue the shallower mineralized sediments where drilling has revealed intercepts of 26.3 feet averaging 1.63% Cu, 13.73% Zn, 2.54% Pb, 0.04 oz Au/ton and 3.38 oz Ag/ton.
“Lone Mountain is in the middle of two huge copper mines that are being worked by Phelps Dodge. Our idea there is that we think we could potentially triple it, from 8 million tons to 25 million tons of high grade copper, zinc and silver. This is our exploration project and we will start drilling there in the middle of March.”
Video Highlights Favorable Factors for Investment
Using this geological and topographical information, Galway Resources has produced a new video that describes the Victorio project. Found at www.galwayresources.com, it enables viewers to understand easily the favorable infrastructure and get a sense of the favorable geometry of the mineralization.
Indian Springs
The Indian Springs Tungsten Property, located in northeastern Nevada (25 miles north of Montello), is an advanced stage exploration property that has been inactive since the early 1980's due to low tungsten commodity prices. The project had undergone extensive exploration drilling and metallurgical testing during the period of 1968 through 1986, including the activities of three major mining companies; Placer Amex, Union Carbide, and Utah International; for a total estimated expenditure ranging between US$3.0 to $5.0 million. A historical tungsten resource was defined based upon 336 drill holes, representing over 82,000 feet of drilling and thousands of feet of trenching, geologic mapping, sampling, along with metallurgical testing. The drill-defined tungsten mineralization has exploration potential along strike to the northeast and southwest.
On May 1, 2007 - Galway Resources Ltd. (GWY: TSX-V) ("Galway or the "Company") announced an independent "National Instrument 43-101" (NI 43-101) compliant resource estimate prepared by S.R.K. Consulting (U.S.), Inc.
“We are pleased with the new resource estimates, and believe we have made a lot of progress advancing the Indian Springs Project in a short period of time. The resource estimate and implied metal value for this deposit demonstrates its vast potential," states Robert Hinchcliffe the President of Galway Resources.
Indian Springs NI 43-101 Resource Estimate*
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Category Tons WO3 Pounds of
(Millions) (%) Grade Tungsten
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Indicated 10.8 0.171 37,000,000
Inferred 8.2 0.167 25,000,000
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* A cut-off grade of 0.10% WO3 was used for this resource estimate.
Project Assessment
In assessing these projects, Hinchcliffe said, “The assets are attractive: 300 feet of historical drilling that would take many years and $20 to $25 million dollars to duplicate. Our focus has been on mine-friendly states with good infrastructure.”
Galway’s involvement with specialty metals, such as molybdenum-tungsten, that are experiencing a sharp price increase and a surge in demand, creates a favorable climate for financing agreements. Indeed, coming just a year and a half after their first acquisition, with a million dollar investment, Galway is moving to scoping studies for two projects in the next several months.
“A major part of our philosophy has also been not necessarily going for the mega projects. I think sometimes investors are led astray by thinking that the 150 million ton and 500 million ton projects are the most interesting. But the capital investment required for those projects and the impact that has on dilution, is in my mind, not favorable. There is also greater lead time. The bigger the project the longer it takes to put into production,” Hinchcliffe said.
A Diverse and Complementary Team
In addition to Robert Hinchcliffe, the President of Galway Resources, other members of the team are: Galway Director Dave DeWitt, has over 20 years experience financing public and private companies and structuring and negotiating major transactions with particular expertise in the mining industry. He has held various positions with a number of public mining companies. DeWitt is a founder of Pathway Capital Ltd., a private venture capital company, and is currently a director of Bear Creek Mining Corp. and Full Metal Minerals.
Marshall Himes, Director, Chief Operating Officer, has a career as a geologist and manager in the mining industry that spans 32 years, primarily in metals exploration. He has also held positions at mines that were in production, which would include but not limited to: Butte-MT, Pima Mine-AZ, Island Copper Mine--BC, and the Ok Tedi Mine--PNG.
Director Leigh Freeman, brings solid technical skills to the team, with over 30 years working in the mining industry. He has developed a strong industry and financial contact base, that he will use to aid Galway in staffing and strategic planning.
Ron Guill, Director, has over 30 years in the development and mining of underground mines located principally in North America. Mr. Guill is the owner of SMD Inc. mining company which he established 25 years ago to provide underground mine contracting services. He was recently recognized by NWMA with the 2006 Platinium Award for Corporate Excellence "In recognition of more than two decades of customer focused professional and innovative leadership in mechanized underground mining."
Paul Valenti, Vice President of Project Development, has spent the past 20 years advancing mining projects towards production and managing of operating mines. Mr. Valenti’s background includes precious metal, base metal and molybdenum deposits, developed as both open pit and underground mines on projects with capital investments ranging from $100 million to $400 million.
Hinchcliffe credits his team. “Considering the scarcity of qualified labor and technical people, I give kudos to Marshall Himes and his great reputation in the mining industry. We’ve been able to plug into very experienced geologists and local experts. And each of the projects that they’re working on, individually, has the ability to become a mine. I’m impressed with the enthusiasm, and confident in our ability to advance these projects,” he said.
Additions to the Board
Additions to the board include Lee Freeman and Ron Guill and Paul Valenti recently joined the management team which complements very well the company’s seasoned geological team.“Our business model of looking for projects with a lot of work done on them is essential, but I can’t emphasize enough the importance of a team that is complimentary, with experience,” Hinchcliffe said.
“It’s easy for investors to be led astray, but they should look at the track records of management and the particulars of the project, and infrastructure, and what that implies for the capital needed to bring a project to production. I think we have the pieces of the puzzle and we’re putting them together, and we’re excited.”
Galway Resources Ltd.
Robert Hinchcliffe
President and Director
1-800-475-2412