By Leia Michele Toovey- Exclusive to Moly Investing News
Molybdenum’s primary use is by the steel industry; as economic doom and gloom spread in 2008, stainless steel producers took a particularly large hit. It is estimated that the industry is currently operating at about 50 per cent capacity to cope with low demand. In 2008, molybdenum cost an average of $29/lb after peaking at $30 in 2007.
On a monthly basis, however, molybdenum has sold for less than $10/lb for two months now. Investment bank Dahlman Rose & Co. in New York expects molybdenum to average $12/lb this year and $15 in 2010 because of the slowdown in North American steel production. Moly’s precipitous drop is causing miners around the globe to report dire earnings. To cope with the crash in value, output curtailments and other cost cutting measures are being undertaken at an alarming rate.
Southern Copper Corporation’s (NYSE:PCU) earnings dropped 140 per cent in the fourth quarter of ’08, compared to the fourth quarter of 2007. The company reported a net income of $1.4 billion, down 36.5 per cent from the $2.21 billion reported for 2007. Moly production hit 16, 309 tonnes in 2008, compared with 16,207 tonnes a year ago. Copper production in 2008 was reported at 488,929 tonnes, down from 592,182 tonnes in 2007. Although SCC spent $118 million on its Tia Maria project, the company is “currently evaluating putting on hold or stopping the project in light of current market conditions.”
Freeport McMoRan Copper now expects its sales to slide 15 per cent to 60 million lbs in 2009 from the 71 million lbs shipped in 2008. The new forecast is 25 per cent lower than the 2009 estimate made last October, attributing the change to reduced-demand market conditions. Freeport-McMoRan had consolidated molybdenum sales from the Henderson primary mine in Colorado and byproduct mines totaled 12 million lbs, 7 million lbs lower than the fourth quarter of 2007, primarily resulting from lower demand.
Now, Freeport has revised annual production plans at Henderson for 2009 at a 25 per cent reduction. Freeport also has made adjustments to its molybdenum production plans at certain byproduct mines, temporarily curtailed the molybdenum circuit at the Cerro Verde copper mine in Peru, which produced 3 million lb of molybdenum in 2008. The firm also has suspended construction activities associated with the restart of the Climax molybdenum mine near Leadville, Colo., previously expected to start up in 2010.
Thompson Creek Metals Co. (NYSE:TC) said Tuesday it will reduce production of the metal from previously planned levels in 2009 “due to unfavorable market conditions” and reduced demand. Thompson Creek Metals operates a moly mine in Idaho and is evaluating the high-grade Mount Emmons Deposit near Crested Butte. In a statement Tuesday, the company said it anticipates total molybdenum production of 20 to 24 million pounds in 2009, down from previous guidance of 31.5 to 34 million pounds.
Adanac Molybdenum Corporation (TSX: AUA) recently announced that it has implemented measures to curtail its business operations and substantially reduce its operating costs. These steps are the initial phase in connection with the company’s overall restructuring under the Companies’ Creditors Arrangement Act. The restructuring includes, among other things, reducing employees by approximately 70 per cent, substantially reducing contractors, demobilizing the Ruby Creek site, eliminating or substantially reducing services provided to the company and repaying a portion of the Company’s indebtedness to its Senior Secured Creditors. Adanac expects to further reduce operating costs by consolidating its head and engineering offices to minimize lease payments. Going forward, Adanac intends to continue to seek investors for the development of the Ruby Creek project while concurrently seeking opportunities relating to the sale of the company or its assets.
