BRITISH COLUMBIA - THOMPSON CREEK METALS which is, one of the world's largest publicly traded, pure molybdenum producers, has approved plans to expand capacity at the Endako mine from 28,000 to 50,000 tonnes of ore per day beginning in 2010. Endako lies between Smithers and Prince George. The Endako mine is operated as a joint venture, with Thompson Creek holding a 75% interest and SOJITZ CORP. holding the remaining 25% interest.
"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, chairman and CEO. The expansion project also involves a needed modernization of the mill, which has been in operation since 1965, and ensures we will have an efficient processing operation at Endako that will be beneficial for the long term."
The company expects its capital expenditures related to the expansion project during the period 2008 to 2010 will be $280 million (75% of the feasibility study estimate of $373.6 million) plus ongoing sustaining capital spending. Thompson Creek expects to have sufficient cash flow from existing operations to fund its share of the expansion as well as to meet the capital requirements anticipated at other properties.
Annual molybdenum production as a result of the expansion at the Endako mine (of which Thompson Creek will receive 75%) is expected initially to be about 17 million lb and will decline within two years of the start up to approximately 16 million lb. In the absence of an expansion, annual molybendum production would have been expected to fall to about 8 million lb by 2012 and remain at approximately that level.
In estimating the return on investment from the expansion, the company has assumed future molybdenum prices of US$27/lb in 2009, US$23/lbin 2010, US$17.50/lb in 2011, and US$14/lb thereafter. Based on these prices, the expected internal rate of return will be more than 20% over a 16-year mine life.
Average production costs as a result of the expansion are projected to be Cdn$7.93/lb of molybdenum, down from C$10.39 in the absence of an expansion. All calculations assume an average exchange value of the Canadian dollar of US$0.94 throughout the production period.
The mill expansion includes the installation of a new grinding circuit consisting of SAG and ball mills, a modern flotation circuit and the upgrading of the roaster circuit. The result will be a more cost-efficient mill with fewer mechanical items and with the ability to handle a variety of ore more easily, and will achieve greater recoveries than the existing mill. The capital expenditures will include the acquisition of new trucks and other equipment to supply the mill with a higher volume of ore.
The approval of the Endako expansion is subject to approval by Sojitz and obtaining new financing. More information is available at www.thompsoncreekmetals.com.
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