Freeport-McMoRan restarts Colorado molybdenum mine

With molybdenum prices trading last month at US$32.65 per pound up sharply from a 20-year high in 2004 of $16 per pound it’s hardly surprising that Freeport-McMoRan Copper & Gold (FCX-N) plans to reopen its Climax molybdenum mine after a twelve-year closure.

Restarting the open pit near Leadville, Colorado, and building state-of-the art milling facilities, will cost the company about $500 million, it says. When the project moves into production in 2010, the mine is expected to produce about 30 million pounds of the metal annually at cash costs of around $3.50 per pound.

Reserves at the mine site nestled high in the Colorado Rocky Mountains — are estimated to be 180 million tons at 0.165% molybdenum, or 0.5 billion pounds of recoverable molybdenum.

There is also an estimated 466 million tons grading 0.17% molybdenum of mineralized metal at a long-term molybdenum price of $10 per pound, the company says.

Calling the project “financially attractive,” Freeport-McMoRan’s chief executive, Richard Adkerson, said in a prepared statement that the project would provide long-term, low-cost production and sustain the company’s “leadership position” as the world’s largest molybdenum producer.

Ore was first produced from the mine in 1918. Freeport-McMoRan claims the Climax mine is the largest, highest grade and lowest-cost undeveloped molybdenum deposit in the world.

Molybdenum is principally used as an alloying agent in steel, cast iron, and super-alloys, to enhance strength, toughness and corrosion resistance.

Strong demand for molybdenum from the oil sector and from China’s steel industry could keep prices for the specialty metal strong in the year ahead. But more supply is also expected to come on stream starting from next year, according to the Sept.-Oct. 2006 Strategic Report from the prestigious Metals Economics Group.

The study noted that 11 new molybdenum mines and expansions could begin production by 2009. If all of them reached capacity, world molybdenum mine production would rise by 32,275 million tons per year.