JOHANNESBURG (miningweekly.com) – Denver-based molybdenum producer Thompson Creek Metals CEO Kevin Loughrey on Thursday reaffirmed that the group had enough cash in the bank to complete construction of its Mount Milligan copper/gold project, in British Columbia.
The $1.5-billion Mount Milligan project is on schedule to be completed by the third quarter of 2013, with production scheduled to start in the last quarter of that year.
The copper/gold project’s costs spiralled about 50% from the initial cost estimate of about C$915-million.
Shares in Thompson Creek slid nearly 10% early in May after the miner announced plans to raise cash for the development of the Mount Milligan mine. The company said it would sell $200-million in secured debt, and raise up to $230-million in an equity unit offering.
“We sized our current debt facility to assume that completing the Mount Milligan mine would be at the high end of the construction cost estimate,” Loughrey told Mining Weekly Online in an interview.
However, he revealed that Thompson Creek was now expecting cost overruns to be much less than first expected. Costs increases would potentially be limited to 10%, rather than 20%, which was thought to be a possible scenario.
He added that the current debt sizing also assumed that the company would receive no molybdenum production income from now to when the mine is completed.
Loughrey conceded that should conditions warrant it, the company would consider slowing the Mount Milligan project, but it was, at the moment prioritising the project to complete it as quickly as possible.
“If the need arises for additional cash we would also consider selling more gold stream from the project,” he said.
The Mount Milligan mill is expected to be complete by the third quarter of 2013, and commercial production would start the following quarter. The project is said to host the second-largest gold reserve in Canada at six-million ounces, while also hosting 2.1-billion pounds of copper.
Mine life is expected to be about 22 years.
Loughrey believes that the commodity markets for molybdenum, copper and gold remain set to grow significantly in the medium to long term, despite the current uncertainty over China’s rate of growth, the economic woes of Western Europe and the sustainability of US economic recovery.
“Our most significant customers’ businesses are doing well. They are not at their lowest levels ever. It is a neutral market at present, but we are unsure what the catalyst would be to encourage economic recovery and growth,” he said.
Loughrey believes the key was wait out market dips until the bull returned. “We think our projects would be very profitable in the long term.”
First-quarter earnings were significantly down owing to a halving of sales to 4.9-million pounds, lower prices and soaring cash costs, all conspiring to whittle down earnings for the three months to March 31 to $1.1-million, compared with the $128.9-million the company made in the year-ago period.
Thomson Creek stocks closed down 2.73% on the TSX on Thursday at C$3.56 apiece, and at $3.43 apiece on the NYSE. The company traded at $10.57 a share a year ago.