B.C. moly mine gears up for expansion

Thompson Creek Metals Co. Inc., one of the world's largest publicly traded, pure molybdenum producers, plans to expand the processing capacity at its Endako Mine in British Columbia in hope of more than doubling the mine's output over the next five years.

Thompson Creek March 12 said the expansion will boost the amount of ore processed at Endako to 50,000 metric tons per day by 2010. Currently, the mine processes 28,000 metric tons of ore daily.

"Our estimates show that the Endako expansion will add to Thompson Creek's profitability and provide an attractive rate of return in the coming years even using price assumptions that are well below the current price of molybdenum," said Kevin Loughrey, Thompson Creek's chairman and CEO.

"The expansion project also involves a needed modernization of the mill, which has been in operation since 1965, and ensures we will have an efficient processing operation at Endako that will be beneficial for the long term. The Denver-based producer said it expects to spend C$280 million, or 75 percent of a feasibility study estimate of C$373.6 million, on the expansion project between 2008 and 2010, plus ongoing sustaining capital.

The Endako Mine is operated as a joint venture, with Thompson Creek holding a 75 percent interest and Sojitz Corp., a Japanese company, holding the remaining 25 percent interest.

Thompson Creek, formerly Blue Pearl Mining Ltd., said it expects to generate sufficient cash flow from existing operations to fund its share of expansion costs as well as meet capital requirements anticipated at its other properties.

Annual molybdenum production as a result of the expansion at Endako is expected initially to be about 17 million pounds and will decline within two years of startup to 16 million pounds.  Without the expansion, annual moly output at Endako would decrease to about 8 million pounds by 2012 and remain near that level for the remaining life of the mine.

In estimating return on investment from the expansion, Thompson Creek assumed future molybdenum prices of US$27 per pound in 2009, US$23 per pound in 2010, US$17.50 per pound in 2011, and US$14 per pound thereafter. Based on those prices, the company estimates that the expansion will generate an internal rate of return of more than 20 percent over a 16-year mine life.

Average production costs as a result of the expansion are projected to be C$7.93 per pound of molybdenum, down from C$10.39 per pound projected in the absence of an expansion.

All of the calculations assume an average exchange value of the Canadian dollar of 94 cents (US) throughout the production period. 

The mill expansion will include the installation of a new grinding circuit consisting of semi-autogenous grinding and ball mills, a modern flotation circuit and the upgrading of the roaster circuit.  The result will be a more cost-efficient mill with fewer mechanical items and with the ability to handle a variety of ore more easily and achieve greater recoveries than the existing mill, the company said.

Thompson Creek also plans to purchase new trucks and other equipment to supply the mill with a higher volume of ore.

The expansion plan still is subject to approval by Sojitz, and financing adjustments, the company said.

Thompson Creek owns the Thompson Creek open-pit molybdenum mine and mill in Idaho and a metallurgical roasting facility in Langeloth, Pa. The company is also developing the Davidson Deposit, a high-grade underground molybdenum project near Smithers, B.C.

The company reported a profit of US$28.9 million in the fourth quarter, compared with a loss of $12.5 million during the same period a year earlier. Results from mining and processing operations in both years were negatively affected by a non-cash acquisition expense related to the company's purchase of Thompson Creek USA.