Thompson Creek Metals Co. Inc. is moving to cut costs as it struggles to finance construction of a new mine in British Columbia amid depressed prices for the metals it produces.
Toronto-listed Thompson Creek, with mines in the United States and Canada, said on Wednesday it will cut 100 workers at its namesake mine in Idaho, as it halts the removal of waste material for a next phase of production.
The cost savings of $100-million in operating costs for the molybdenum miner echo much bigger moves by global resource giants such BHP Billiton Ltd. and Rio Tinto PLC, which have halted billions of dollars worth of planned spending as costs escalate and No. 1 consumer China retreats from a decade of ravenous commodity consumption.
“As a result of continuing weakness and uncertainty in the world economy, we have decided to reduce our costs, strengthen our balance sheet, and conserve cash,” Kevin Loughrey, Thompson Creek’s chief executive officer and chairman, said in a statement.
The cash savings will give the company some breathing room to pay for development at Mount Milligan, a copper and gold project in British Columbia meant to help the company diversify its revenue base away from pure molybdenum.
“This will allow for greater certainty in accessing our existing financings in order to complete the development of Mount Milligan, while we preserve the assets at Thompson Creek until market conditions strengthen,” Mr. Loughrey said.
Thompson Creek is hoping that Mount Milligan, a $1.5-billion project, will help to offset swings in the commodities cycle by giving it exposure to base metals and gold at the same time.
Prices for molybdenum, a metal used to strengthen steel, have failed to recover since the economic crisis of 2008-2009, which toppled it from record levels.
Initially applauded by investors, the move to develop Mount Milligan has come under attack in recent months as costs mounted more than 60 per cent – from initial estimates of $915-million – and the company was forced to scramble for financing.
Between May and August, Thompson Creek announced some $600-million in financing, most recently in the form of a $200-million deal to sell future gold output from the mine to partner Royal Gold.
Earlier in the summer, it announced plans to raise about $412-million in two debt and equity financings.
Changes in the mine plan at Thompson Creek, the fourth-largest primary molybdenum mine in the world, will see the miner halt so-called stripping activity for the next phase of a production plan, also shaving as much as $9-million from capital expenditures.
As well as falling metals prices, miners see cost inflation as the biggest challenge to sustaining operations.
Thompson Creek, which has mines and development properties in Canada and the United States, said molybdenum production guidance should not be affected by the shift in strategy.