Climax Molybdenum boosts production in Colorado (May 24, 2005)

Vancouver — Dramatically improved prices for molybdenum have prompted a unit of Phelps Dodge (PD-N) to expand production at the Henderson mine and possibly revive the dormant Climax mine in the Rocky Mountains of Colorado.

Climax Molybdenum, a wholly owned unit of Phelps Dodge, has already spent an estimated US$20 million each year since 2002 to expand output at the Henderson mine near Empire, a small town 50 miles west of Denver. The underground mine produced a mere 18.6 million lbs. in 2001, when moly prices fell to an all-time low of US$2.36 per lb.

Since then, prices have climbed steadily to a recent range of US$35 to US$38 per pound. Production at Henderson climbed to 27.5 million lbs. in 2004, and should reach about 32 million lbs. this year. It is now the largest primary molybdenum mine in the world.

Climax Molybdenum plans to further boost the capacity of the Henderson mine to 40 million lbs. by mid-2006. Capital costs for the expansion are estimated at between US$20-24 million.

The company is also evaluating the possibility of reviving the historic Climax mine near Leadville, which was placed on care and maintenance in 1995. Assuming a positive production decision, the restarted mine could produce in the range of 10-20 million lbs. per year.

The Climax mine was the first moly mine developed in the region, albeit long after the first discoveries were made in 1879. The unusual metal had no known uses until the First World War, when it was needed to make stronger alloys for steel armaments.

The Climax mine became an important producer during the Second World War and continued through to the 1970s. Operations thereafter were intermittent, depending on metal prices, until the last closure about a decade ago.

Henderson was opened in 1976 as a state-of-the-art mine, with capital costs estimated at almost US$500 million. It took almost ten years to build and was the largest privately developed project in the history of Colorado.

The main shaft was sunk to a depth of 3,000 ft. and a full-size railway tunnel was driven from the mine upward for nine miles.

The mine and mill facility are connected by the world’s largest conveyor belt of its kind; a 15-mile elevated belt that passes underneath the Continental Divide through an old train tunnel and then above ground to the mill.

The Henderson mine has produced more than 770 million lbs. of moly during the past 27 years.

Phelps Dodge also produces moly as a by-product from its copper mines, including the Sierrita and Bagdad mines in Arizona, which together produced nearly 30 million lbs. of moly in 2004.