Operations at the Henderson molybdenum mine and mill in Colorado will continue until 2026 instead of 2020 as originally planned.
Mine operator Climax Molybdenum, a subsidiary of Freeport-McMoRan (NYSE:FCX), announced the news on Wednesday (August 30). The company has attributed the extension to increased employee productivity, mine plan improvements and a stronger molybdenum market.
The company has faced challenges in recent years due to lower molybdenum prices. It cut production rates by more than half in late 2015 and early 2016, reducing Henderson’s output from 27 million pounds per year to 10 million. In 2016 it also suspended development of new areas at the mine after molybdenum prices fell below $5 per pound.
According to Climax, molybdenum oxide prices are now trading at about $8.30, and the market for associated products such as lubricant-grade molybdenum has also strengthened. About 80 percent of molybdenum is used as an alloying agent for steel, and 14 percent is used in the chemical industry for catalysts and lubricants.
The mine will continue to operate at its reduced production rate, processing about 22,000 tonnes of ore per day to produce 10 million pounds of molybdenum annually.
Climax has not yet decided whether to resume development of new areas at the mine, and has said the decision will depend on future market conditions. Production at Henderson could be extended until 2040 at the current production rate if additional mine development is pursued.
The company said it is grateful for the support and understanding Henderson has received from the local community and county governments during the molybdenum price downturn. Climax acknowledged that “operating with the cyclicality of the molybdenum market is challenging, and can impact our stakeholders in Colorado [but] we are excited about this development.”
Freeport’s share price was up over 2 percent during mid-morning trading on Thursday. In addition to Henderson, Climax also operates the Climax molybdenum mine in Colorado.
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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.