Thompson Creek announces positive Endako mine expansion feasibility study
Friday, November 9th, 2007
Thompson Creek Metals Company Inc., one of the world’s largest publicly traded, pure molybdenum producers, announce the results of the feasibility study conducted by Hatch Ltd. on the proposed mill expansion at the Endako Mine in Northern British Columbia. The Endako Mine is operated as a joint venture with Thompson Creek holding a 75% interest and Sojitz Corporation, a Japanese company, holding the remaining 25% interest.
“The Endako expansion feasibility study indicates a potential significant return on investment for Thompson Creek and its shareholders,” said Kevin Loughrey, President and Chief Executive Officer. “However, we have not yet decided to proceed with the expansion. We first must review the details of the Hatch study and evaluate it with Sojitz Corporation, our joint venture partner at Endako. We anticipate making a decision on the expansion in the next few months.”
The Hatch report evaluates the potential for increasing the processing rate at the Endako mill to 50,000 tonnes of ore per day from the current 28,000 tonnes per day — an increase of 78%.
Hatch has estimated that incremental capital expenditures of C$373 million would be required for the expansion. This estimate is considered to be accurate within plus-or-minus 20%. The capital cost estimates include the acquisition of new equipment for the mine and mill and to increase roasting capacity to 21 million pounds a year, and a C$44 million contingency, but it does not include costs related to new mine equipment for sustained operation at current production rates. All calculations including capital costs assumed a July 2007 Canadian dollar exchange rate of C$1.00 equals US$0.94.
The expanded facility could be fully operational by the second quarter of 2010 and would involve an increase in annual molybdenum production at Endako to approximately 16 million pounds beginning in 2010 from the current 11.2 million pounds a year. Of this production, 75% would be to Thompson Creek’s account.
Based on molybdenum price assumptions made by management and used in the study, the internal rate of return (IRR) for the expanded operation would be 21.3% over a 16-year mine life (reduced from 27 years based on the current production rate).
Sensitivity analysis performed by Hatch showed an increase in the IRR to 31% if molybdenum prices are 20% higher than the assumed level, and a decline in the IRR to 16.9% if molybdenum prices are 20% lower.
Projected cash flow through payback of the investment is calculated as occurring in 2013, or approximately three years after commissioning of the expanded mill facilities in 2010.
Management has assumed molybdenum prices will be US$31.50 per pound in 2008, US$27 per pound in 2009, US$23 per pound in 2010, US$17.50 per pound in 2011 and US$14 per pound thereafter. These were converted in the report in Canadian dollars at the assumed exchange rate for the Canadian dollar of C$1.00 equals US$0.94 cents.
Fixed and variable operating costs for the expanded operation over the entire 16-year period are estimated at C$6.85 per tonne of ore milled, compared with the current cost of C$8.52 per tonne. The estimated cost reduction of C$1.67 per tonne is largely attributable to the dilution of fixed costs at higher capacity.
This is equivalent to a reduction in long-term average costs to C$7.93 per pound of molybdenum from C$10.39 per pound under the current production rate.
The proposed expansion would include a new crushing, grinding and flotation process, including one SAG mill and two ball mills, seven stages of rougher/scavengers and three stages of cleaners for the flotation process.
The new process would result in a projected recovery improvement of four percentage points. Of this, 1.5 percentage points would be due to the increased retention time in the new rougher scavenger flotation cells and a further 2.5 percentage points due to the finer grind size afforded by the new milling circuit.