This young man finds a sword, the blade turns to dust to reveal a mystic blade of light
At the end of the movie he is able to conjure the blade without the handle.

His people were slaves in a mine they got there food from a large transport vessel

I think it was between 86-89 I saw it on the movie network TMN.

This is the 1985 animated flick Starchaser: The Legend of Orin (http://en.wikipedia.org/wiki/Starchaser:_The_Legend_of_Orin).

Nice one I just thought of finding out the title of this movie, all I had to go on was memory of around the time I saw it, the star character slave from these mines, wasn't a mile away with orion, finds a sword with no blade, there was a ship who's captain might have been called Doug, the fortune teller in it, at the end when he doesn't need the swords handle, and some quotes from the movie like, "i am not a robot, i am the robot" and "damn it" from Doug said a few times?

But thanks to the previous posts I found it :)