U.S. Energy loses major investor in moly mine

What’s Mandarin for molybdenum?

The head of Thompson Creek Metals Company knew the impact his company’s decision would have in Crested Butte. “We know we have made a lot of people there happy but we are sorry we can’t continue the good fight to build the mine,” company chairman Kevin Loughrey wrote in an email to the Crested Butte News.

He wasn’t wrong.
The announcement that Thompson Creek was pulling out of the Mt. Emmons molybdenum mine project came early Monday morning. The news hit the national financial Internet sites by 6 a.m. and within an hour, local Facebook posters were giddy with the news.
Twelve hours later, an impromptu parade started at the High Country Citizens’ Alliance office at the east side of Elk Avenue and ended seven blocks later at the west end of Elk Avenue in front of the Mt. Emmons Project offices. About 50 red-clad bikers and a few dogs sporting red bandanas were greeted with pumped fists and high-fives as they rode the town’s main thoroughfare in snow flurries.
The reason for all the excitement was the decision by Thompson Creek to “terminate its option agreement with U.S. Energy Corp. to acquire an interest in the Mount Emmons molybdenum project…”
Thompson Creek Chairman and chief executive officer Kevin Loughrey emphasized that the decision was one of “prioritization.”
“We made the strategic decision to step back from the Mount Emmons project and focus our efforts and resources on our Berg exploration property located in British Columbia. Berg represents an attractive development project that potentially expands our molybdenum production, but also can further our diversification efforts,” Loughrey stated in a company press release. “The measured and indicated resources for the Berg property include 3.3 billion pounds of copper, 412 million pounds of molybdenum, and 61 million ounces of silver. We have redirected the pre-feasibility funding previously budgeted for Mount Emmons to Berg for an advanced scoping study to be initiated in 2011.”
Loughrey also mentioned the company was focusing on two other mining projects that would “significantly increase revenue, net income and shareholder value. Consequently, we believe it is best to focus our efforts on these three projects and allow U.S. Energy Corp. to develop Mount Emmons as they see fit.
“We continue to believe that the Mount Emmons molybdenum project is a very good project that presents significant opportunities for the local and state economies,” Loughrey continued.
The decision did not make the principals at U.S. Energy happy. Mark, Keith and Reggie Larsen did not return calls to the News. Mark is president of the company, Keith is CEO and chairman, and Reggie is director of investment relations.
In a company press release, CEO Keith Larsen said, “While we are disappointed with Thompson Creek’s departure from the project, we remain committed to moving the project forward on our own behalf as well as reaching out to other potential partners, including those outside of our borders. We were very pleased to have had the opportunity to work with Thompson Creek on this project. They were a first-class partner and we appreciate the work they have completed to advance the project over the course of the last two and one-half years. We plan to utilize the numerous technical engineering, siting and cost studies they have completed, which will help us advance the project further towards the development stage,” he added.
Larsen continued, “Looking forward, we will be reaching out to the Chinese, who have expressed an interest in the project in the past. They tend to have a longer-term view regarding resource inventory. In the meantime we plan to move the project forward and we have several permitting initiatives under way that we will build upon in the coming months and years.”
Thompson Creek had paid U.S. Energy the $1 million option payment last January 1. The two companies had entered into a partnership in August of 2008.
Representatives of the two major local organizations fighting the Mt. Emmons Project, the High Country Citizens’ Alliance and the Red Lady Coalition, both expressed some surprise, not at the ultimate decision but at when it was announced.
“I am not surprised at the decision but the timing is the part that is perplexing,” said HCCA executive director Dan Morse. “They could have waited and it probably wouldn’t have cost them much money. But overall, it is quite good for the community. Thompson Creek is well respected. They aren’t a giant in the mining universe but they are a substantial mid-market mining company. The junior mining companies may be eager to take on this project but when they see Thompson Creek didn’t take it, it will make them think twice. Phelps-Dodge, Amax and Kobex all passed on it as well. It thins the herd of potentially interested investors pretty quickly. Other companies will likely be influenced by this decision.”
“They had three years to pursue this so I am surprised they made a decision now,” said Red Lady Coalition president Bill Ronai. “Obviously they decided it took up a ton of management time—the Forest Service scrutiny, the water quality issues, the fact that the Climax mine is getting ready to re-open and add 30 to 40 million more pounds per year to the molybdenum market. They had to be asking if this project was really worth it. A number of serious mining companies have now backed away from this project.”
“It is a business decision,” said Morse. “The prospects of money over various time frames didn’t work for them. As far as U.S. Energy, they aren’t well resourced. I’m sure they’ll try to keep this thing sputtering along. Our job as a community is to stop it. We need to make the most of this situation.”
On the local political scene, community leaders were fairly tight-lipped. Crested Butte mayor Leah Williams stated, “This is an interesting development. The town has a long-standing vital interest in any activity that could impact the town or our watershed. Staff will continue to monitor all activities in our watershed district.”
County commissioner Hap Channell said, “Mining partners have come and gone from this project over the years. I’m sure that each has had their own reasons for doing so. Not being an expert on the mining industry, I tend to take their public announcements at face value rather than speculating on other motivations.”
“The bottom line is that the objective of the Red Lady Coalition was to get U.S. Energy to the table to find a permanent solution to this thing,” said Ronai. “We want to move on as an entire community, north and south, and pursue sustainable economic growth.”