Thompson Creek to boost moly production at Endako

Thompson Creek Metals (TCM-T, TC-N) is expanding its Endako molybdenum operation, in northern B.C. to handle 50,000 tonnes of ore per day starting in 2010, up from its current capacity of 28,000 tonnes.

The company, formerly called Blue Pearl Mining, will spend $280 million on the expansion, down 25% from a feasibility study estimate that pegged capital costs at $373.6 million.

The expansion will include a modernization of the mill, which has been in operation since 1965, with the installation of a new grinding circuit consisting of semi-autogenous grinding and ball mills, new floating circuit and an upgraded roaster circuit.

Production at the open-pit mine, mill and roasting facility will increase to about 17 million lbs. initially, declining to about 16 million lbs. per year within a couple of years. Without the expansion, production would drop to about 8 million lbs. per year by 2012.

Assuming molybdenum prices of US$27 per lb. in 2009, US$23 per lb. in 2010, US$17.50 in 2011 and US$14 per lb. thereafter, the investment will yield an internal rate of return of more than 20% over a 16-year mine life.

The expansion will also lower production costs, from $10.39 to $7.93.

“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, the company’s chairman and CEO.

Thompson Creek holds a 75% interest in Endako, while Sojitz Corp. holds the remainder. The expansion plan is subject to Sojitz’s approval.

Last year, a rockslide at Endako, and lower-grade stockpile ore processed at the Thompson Creek mine, in Idaho, set back production by more than 2 million lbs.

But Loughrey said the company’s problems at Endako and Thompson Creek are in the past.

Thompson Creek has also released year-end figures for 2007 that show revenue of US$914.4 million, up from US$150.8 million in 2006. Fourth-quarter revenues were US$197 million. Net income came to US$157.3 million or US$1.24 per share last year, compared with a net loss of US$20.6 million or US36 per share in 2006.

The company sold 31 million lbs. moly at an averaged realized price of US$28.77 per lb. last year, including about 10 million lbs. from third-party material. Thompson Creek expects to produce 23-24.5 million lbs. moly this year, climbing to more than 34 million lbs. in 2009.

Increased production and revenue reflect the company’s October 2006 acquisition of Thompson Creek Metals (whose name the company adopted with the takeover), as it had no producing assets until then.

The company is also developing the Davidson molybdenum deposit, near Smithers, B.C., where a draft feasibility has been completed; a final feasibility will be released shortly.