The cost of becoming a diversified base metals company
Mark Mentiplay, 7th May 2012
Mt Milligan copper-gold project under construction in northern BC, Canada.
DENVER, May 7 – North American miner Thompson Creek Metals’ transition from a pure molybdenum producer into a diversified base metals company is coming at a substantial cost.
The cost of upgrading its flagship Endako molybdenum mine and getting its $C1.5B Mt Milligan copper-gold project, both in northern British Columbia, Canada, into production in the 2013 fourth quarter is weighing heavily on the company.
And it has also flagged a possible downgrade of its calendar 2012 production/cost guidance for Endako in its March (1st) 2012 quarter results, which reported an operating loss of $16.5M on a net profit of just $US1.1M, compared to first quarter 2011’s $128.9M profit.
The loss was due to significantly lower production, higher unit costs, higher unit depreciation, lower sales volumes and average realised prices as well as significant costs associated with the 75%-owned Endako project, the Mt Milligan development and producing Thompson Creek mine in Idaho.
Despite this, the company expects continued optimisation to make up for the lower production throughout the remainder of 2012 and to meet its 2012 production guidance from the Endako mine of about 14-15Mlb of molybdenum on a 100% basis. Further, CEO Kevin Loughrey says the company also expects to meet total 2012 production forecasts of about 26-28Mlb of molybdenum.
However, he says the company is also currently tracking to the higher range of current 2012 average cash cost guidance of about $US7.75lb-$9lb produced that “may cause actual costs to vary from current guidance.
“Additionally, the company's operating performance for the first half of 2012 is expected to be less than for the second half. This is due to the anticipated ramp-up of production from the newly completed Endako mill, together with the improved ore accessibility at the Thompson Creek mine.”
In the March 2012 quarter, the company completed the Endako mill expansion, with its share of aggregate capital expenditure totalling about $C500M. The expansion, which included the construction of a new mill, has lifted ore-processing capacity from 31,000tpd to 55,000tpd.
The Mt Milligan copper-gold mine is on schedule for completion in the third quarter of calendar 2013 and commercial production in the fourth quarter. Since inception through to the end of March 2012, Thompson Creek has spent about $C592.5M on the project, with another $799M-$929M to come for a projected total of $1.4B-$1.5B.
Overall, sales volume for the March 2012 quarter was 4.9Mlb molybdenum, compared to 10.1Mlb a year ago, with the average realised sales price also falling to $US14.74/lb from $17.39/lb. Molybdenum production in the latest quarter fell to 4.4Mlb from 10.3Mlb in the first quarter 2011, with cash flow from operations down to $3.1M, compared to $76.6M.
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