TORONTO (miningweekly.com) – Thompson Creek Metals, the Denver, Colorado-based molybdenum miner, said its Mt. Milligan project in British Columbia may cost as much as 20% more to complete at up to C$1.5-billion, as the company struggles with cost inflation rampant in the mining industry.

“As Amerigo Vespucci might have put it, we’re in terra incognita here in terms of the mining world and the kinds of inflation that we’re seeing. This has been an extraordinary period and we’re not immune from it,” CEO Kevin Loughrey said on a Tuesday conference call.

TSX- and NYSE-quoted Tompson Creek had originally pegged capital costs at Mt. Milligan, set to start producing copper and gold in the third quarter of 2013 and reach full output rates in the first quarter of 2014, at C$1-billion in late 2010.

That estimate had climbed to $1.26-billion by November last year, and increasing labour and material costs had forced the company to raise the projected cost by 10% to 20% again, meaning Mt. Milligan capital projection now stood at between C$1.4-billion and C$1.5-billion.

The market punished Thompson Creek over the capital inflation, sending its share price 12.7% lower on the TSX on Tuesday morning to trade at C$7.56.

In a call to discuss the company’s fourth-quarter financial results, where it posted a
.8-million profit, Loughrey faced some tough questioning from analysts regarding the surging cost of building Mt. Milligan, which the company bought through its some-C$650-million acquisition of Terrance Metals in 2010.

Loughrey said it was simply a challenge facing the broader industry, in a world where there were too many projects and not enough skilled people to execute them.

“We’ve seen one mining company after another give these same kinds of numbers...that’s what’s happening in the project building business,” he commented.

Around two-thirds of the latest capital estimate hike was attributable to labour – both the cost of it and lower productivity levels, while higher material prices received the blame for the remaining 33% of the increases.

Labour turnover at the Mt. Milligan project was reaching rates of 35% to 45%, said Loughrey, adding this level was “close to extraordinary”.

This is just the tip of the iceberg, lack of skilled trademan, and competition from other projects.

Dry camp, very isolated..Skibum2