Mine expansion back on track
August 7, 2009 | Gordon Hoekstra, Prince George Citizen
Thompson Creek Metals Co. Inc. has approved the resumption of its $374-million expansion of the Endako molybdenum mine west of Prince George which was halted eight months ago because of the global recession.
The Toronto-based company cited an improvement in molybdenum prices which, however, did not occur early enough to significantly impact the company's $400,000 loss for the second quarter ending in June.
The resumption of the project is subject to approval by Endako's joint-venture partner, the Japanese-based Sojitz Corp. Thompson Creek is contributing a 75 per cent share, or about $252 million, to the project, while Sojitz is responsible for the remaining 25 per cent.
"The molybdenum price increase will have a positive impact on the company's third-quarter financial results, and it raises our confidence that a sustained recovery of the molybdenum market is underway," said Thompson Creek chairman and CEO Kevin Loughrey.
The Endako mine, about 175 kilometres west of Prince George, employs about 260 people. Prince George is a supply and service centre for mines in the region.
Thompson Creek has already spent $53 million on the Endako expansion and expects to spend an additional $32 million this year.
The remaining $167 million on the expansion project is expected to be spent in 2010.
The company had a solid financial position at the end of June with cash and short-term investment position of $262 million, and debt of $15.6 million.
The Endako expansion project had been caught in in a slowdown in world demand for commodities because of turmoil in financial markets and a tightening of credit.
Molybdenum prices had plummeted from a high in the $30 US per pound-range in 2008 to the $8 level, before starting to climb this summer. Recently, the price reached $16.
The company's major upgrade is meant to expand the Endako mine's capacity from 28,000 to 50,000 tonnes of ore per day and reduce average production costs.
Recently, the mine announced it had estimated it had reserves to run 27 years, two decades longer than a previous estimate. The estimates were based on increased molybdenum prices.
Molybdenum started a run in prices beginning in the spring of 2004 and peaked in the $40 to $50 per pound range in mid-2005.
Molybdenum is used in the manufacture of aircraft parts, electrical contacts, industrial motor and filaments because of its ability to withstand extreme temperatures without significantly expanding or softening.
Thompson Metals earlier postponed the Davidson project near Smithers. The Davidson project involved sinking a shaft into a mountain to mine high-grade molybdenum and then transporting it to its production facility at Endako.
The company is not the only miner to announce a halt to a mine project. Western Canadian Coal, operating in the Tumbler Ridge area 200 kilometres north of Prince George, announced it was stopping construction on its $100-million Willow coal mine project because of economic uncertainty.
Last year, Terrane Metals also pushed back the start date of its proposed $917-million Mount Milligan gold and copper mine to the spring of 2010 at the earliest. The Vancouver-based company has been hoping for a construction start in the fall of this year, but was also squeezed by the global credit crunch.
