Freeport-McMoRan restarts Climax mine

With molybdenum prices trading recently at US$32.65 per lb. — up sharply from a 20-year high in 2004 of US$16 — it’s hardly surprising that Freeport-McMoRan Copper & Gold (FCX-N) plans to reopen its Climax molybdenum mine after a 12-year closure.

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

Reserves at the mine site — nestled high in the Colorado Rocky Mountains — are estimated at 180 million tons averaging 0.165% molybdenum, or 500 million lbs. of recoverable molybdenum.

There is also an additional 466 million tons of mineralized material grading 0.17% molybdenum.

Calling the project “financially attractive,” Freeport 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 says Climax is the largest, highest-grade and lowest-cost undeveloped molybdenum deposit in the world.

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 September 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.