TORONTO (miningweekly.com) – A “dramatic” increase in the price of molybdenum over the last few weeks, driven by broad and steady demand growth, bodes well for producers like Thompson Creek Metals, CEO Kevin Loughrey said on Friday.

The price of molybdenum, which is used to strengthen steel, was still trading at around $32/lb in the third quarter of last year, when it fell off sharply, thanks to the severe slowdown in global infrastructure development and general economic activity.

Things got so bad that Thompson Creek sold some metal for less than $8/lb in the second quarter, Loughrey said.

However, the price has since moved up “rather dramatically”, to around $17/lb, and the company is cautiously optimistic that the second quarter represented a low point for the market.

Further, the price is being supported by what Loughrey calls “gentle, sloping curves of increase” in demand for the metal.

“If you thought about the way that you would want a recovery to happen, it may be happening exactly that way right now.

The firm is seeing increased demand from almost all of the geographical areas, as well as all the industry sectors that it sells to.

“Our experience has been that spikes, skits and starts in the changes in demand are not ideal...but we are seeing a modest increase in demand across the board, and that is the way we like it,” Loughrey said.

“And we believe that there is a tremendous opportunity for that demand to continue to grow, which should augur very well for the moly price going forward.”

Like other producers, Thompson Creek scaled back operations at its two mines during the decline, but is now looking at mine planning and scheduling to see where and when production can be ramped back up.

Although the Endako mine, in British Columbia, is running pretty close to capacity, the mill at the Thompson Creek operation, in Idaho, is running on a 10-4 schedule, and could probably return to full-time operations within two to four months of a decision being made, Loughrey said.

CHINA

Thompson Creek continues to sell molybdenum to Chinese buyers, although the volumes have fallen off slightly, compared with the first quarter, when sales to China made up as much as 25% of the company's total.

Until late last year, the firm had not made a single sale to the resource-hungry nation, which has historically been a net exporter of molybdenum, but has now entered the market as a buyer.

“We are selling less to China [compared with the first quarter]...but it has been more than picked up by increased demand from other geographical regions,” Loughrey said on a conference call.

ENDAKO EXPANSION

On Thursday, Thompson Creek announced its board had approved the resumption of a mill expansion at the Endako mine, in response to the improved market outlook.

The project was initially approved in the first quarter of 2008, but was put on hold in December last year.

If all goes to plan, the project should be completed and commissioned in 2011, Loughrey said.

The milling capacity at Endako will be increased from 28 000 t/d to 50 000 t/d, boosting annual production from between 10-million and 12-million pounds a year to around 15-million pounds a year.

The resumption of the project still needs the greenlight from Thompson Creek's partner, Japan's Sojitz Corporation, which owns 25% of Endako.

However, Loughrey indicated that the Sojitz board will approve the project.

Thompson Creek also plans to relook at the capital expenditure estimates for the expansion, given that much of the project was priced at the top of the market, when equipment, labour and materials where at a premium.

The firm expect to complete a revised capital estimate later in the year.

It has actually already purchased some key equipment that had been ordered before the project was suspended, as it opted to complete the purchases instead of paying cancellation fees.