TORONTO (miningweekly.com) – The molybdenum price will need to rise significantly from the current level around $10/lb, if the industry is to invest in new production that will be needed to meet future demand, Thompson Creek Metals CEO Kevin Loughrey said on Wednesday.
Molybdenum, which is used to strengthen steel, traded on the spot market above $30/lb during the first half of last year, but fell off sharply in October, bottoming at below $8/lb in April 2009.
Producers, including Thompson Creek, responded by curtailing production and freezing capital spending on new projects, although the company announced earlier this week that it has since revised its production forecasts upwards for the year, following a firming in the market.
Last year, Thompson Creek put a mill expansion at its Endako mine, in British Columbia, on hold, and has postponed development of a new underground mine nearby.
The company would want to feel confident of prices in the $12/lb to $13/lb range before it goes ahead with the Endako expansion, Loughrey said in an interview after a presentation in Toronto.
“If the price was there and we felt confident that it would stay there, we would look seriously at firing up the Endako expansion.”
The project, which was approved in the first quarter of 2008, envisaged the expansion of milling capacity at Endako from 28 000 t/d to 50 000 t/d of ore beginning in 2010.
The company had some $22-million worth of material on order for the expansion project before the decision was made to suspend it in December. Instead of paying cancellation fees, the firm opted to completed the purchases, and will be ready to go ahead with the project “as soon as the moly price warrants”, Loughrey said.
Thompson Creek owns 75% of Endako and Japanese metals trader Sojitz Corporation holds the balance.
The firms had also been in talks on Sojitz potentially buying into the nearby Davidson underground asset, before the project was postponed in November last year.
The C$109-million Davidson project is currently planned as a simple mining operation, an adit and small loadout facility, with the idea that ore would be trucked 200 km to the Endako mine for processing.
However, Loughrey said on Wednesday that the company is using the delay to conduct engineering work into a potentially larger, longer-term operation that could include a full-scale mine, which would be more expensive and take longer “but could be a bigger, longer-life project”.
“But the plan right now is still the existing plan, that's the one that we have the application for,” he added.
Loughrey declined to predict where the molybdenum price could be headed, but commented that the market has been “moving slowly in the right direction”.
One significant change in the industry over the last six months or so has been demand from China, which has historically been a net exporter of molybdenum, but has now entered the market as a buyer, as the plethora of small molybdenum mines in the country found themselves unprofitable after the sharp decline in prices.
However, the short-term outlook for moly, which is used to strengthen high-end stainless steel, in steel pipes and drills, and other extreme high- or low-temperature applications, as well as to prevent corrosion, remains “difficult”, Loughrey said.
“The steel market needs to rebound some - we haven't seen much increase of late in the steel utilisation rates.
“And, we also need to see, in my mind, some loosening up of the finance market,” so that large industrial projects in the pipeline can start moving ahead, he said.
Loughrey repeated comments made earlier this year that the company is on the lookout for potential acquisitions, although it is under no pressure to complete a transaction.
He said on Wednesday the company would look first at pure molybdenum assets, but may also consider buy copper deposits, which would be a “natural extension”.
About one-half of the world's molybdenum is produced as a byproduct from other mines, mostly copper operations, and the mining methods for the two metals are similar.
Beyond that, the company may look “opportunistically” at other materials that are sold into the steel industry.
“It would not be a disadvantage to diversify in terms of more mines, more sources of revenue, and perhaps more metals in which we are involved,” he commented.
The firm would look first in North America, but would also consider investing in regions like South America and Australia, Loughrey told Mining Weekly Online.
Thompson Creek said on Monday it expects to produce and sell between 22-million and 26-million pounds of molybdenum this year from its mines in Idaho and British Columbia, up from previous guidance of 20-million to 24-million pounds.
Besides Endako, the company also produces molybdenum from the Thompson Creek mine, in Idaho, and owns a metallurgical facility in Pennsylvania.