Thompson Creek Metals feels squeeze of molybdenum cutbacks

Mount Emmons project still being studied … for now

Thompson Creek Metals is making huge cutbacks within the company, reductions that will result in some major company layoffs and less molybdenum mining. But according to local personnel, the moves aren’t expected to slow down the Mount Emmons project in Crested Butte—at least not at the moment.

The mining company, which currently controls the Mount Emmons molybdenum project, has announced that because of the worldwide recession and reduced demand for molybdenum, the company intends to not mine as much of the mineral as expected. In fact, Thompson Creek anticipates total moly production of 20 million to 24 million pounds in 2009, down from previous estimates of 31 million to 34 million pounds.
“We are currently planning a temporary shutdown for about a month this summer in mining activity at both the Thompson Creek and Endako mines and there will be other production changes about which we will provide details at a later date after they are decided,” announced Thompson Creek chairman and chief executive officer Kevin Loughrey last week. “The company intends to remain flexible and adjust production as needed in response to changing market conditions.”
Director of community relations for the Mount Emmons Project, Perry Anderson, said the company cutbacks wouldn’t immediately impact the local project. “We are in the engineering and study stage,” he said. “This announcement doesn’t affect the Mount Emmons Project.”
When asked if he had to take a mandatory month off, Perry laughed. “That doesn’t sound bad, but no, I have to work,” he said.
According to information on the Thompson Creek Metals website, the world’s fifth largest producer of molybdenum announced in December that they would cut their capital expenditures budget in 2009 in response to the weak economy and the falling price of molybdenum. On January 27 the company announced it would be scaling back molybdenum production as well.
The company said it would reduce capital expenditures to $69 million in 2009. Prior to the change the company was planning on expenditures of $300 million in 2009.
On the local front, Anderson did say Thompson Creek will look at the Mount Emmons engineering studies and “reassess the project and look at where to go after the second quarter. It’s not necessarily due to the slowdown in the worldwide economy but part of the process.”
Given the circumstances of what appears to be a boom and bust mining cycle, Anderson argued that in the long run, mining can contribute to a sustainable community. “Molybdenum is still being used,” he pointed out. “In the long-term, molybdenum mining is a fairly recession-resistant business. I would argue that we need tourism and we need mining to be a sustainable community. I have a tourism-related business and tourism is fickle.”
Anderson made the case that both tourism and mining have merits for a sustainable community. “A mine that is done right will be a good economic contributor,” he said. “The key is that it will add diversity. I like the prospect of having an education engine, a tourism engine and an industrial engine in the form of the mine. The combination can help build a middle class that is very important for a long-term community. Now, I agree that any business is at risk of layoffs and furloughs. But we’re not quitting this project. We are still selling moly.”
But clearly Thompson Creek is expecting to sell a lot less this year. “The company decided in December 2008 to reduce planned capital expenditures as part of an initiative to conserve cash and we are now taking the added step of reducing production levels,” said Loughrey in a company press release.
Molybdenum at one point was selling for nearly $35 a pound last fall. It currently is trading at under $10 a pound. Shares of Thompson Creek, which have lost more than 60 percent of their value in the past six months, closed Monday at C$5.59 on the Toronto Stock Exchange.