High Molybdenum Prices Could Spark Reopening of Mine

After lying dormant for a decade, the storied Climax molybdenum mine near Leadville could reopen - a sign of resurgence in Colorado's mining industry and its economy.

Growing demand for steel, especially from developing economies in China and India, and the skyrocketing price of molybdenum have prompted Climax owner Phelps Dodge Corp. to look into activating the historic mine.

The mine, whose portal sits at an altitude of 11,300 feet, has been operating on a skeleton crew since it ceased production in 1987, aside from a three-month reopening in 1995.

Phelps Dodge also is pumping in $20 million to $24 million to ramp up production by 25 percent at its Henderson mine, the state's only operating molybdenum mine.

Henderson, near Empire, produced 27.5 million pounds of the metal in 2004 and employed roughly 500 workers.

"It is great news for Leadville and for Colorado," said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. "Leadville has been struggling and struggling in the past years to create new jobs. They tried several strategies in arts and culture, they put a mining museum in the downtown to make it a tourist stop.

"But those jobs do not pay as much as good mining jobs. I am sure they are hoping (the mine, if reopened) will stay open for a long time now."

Lake County Assessor Howard Tritz said people in Leadville have heard rumors about Phelps looking to reopen the mine.

"It's not surprising," said Tritz, who worked at the mine for 30 years. "They've got about 40 years' worth of moly left up there."

Tritz worked a variety of jobs at the mine, including mill foreman and acting mill superintendent. At its peak, the mine employed 3,000 workers, most of whom lived in Leadville, 13 miles away.

An average miner makes about $70,000 per year including salary and benefits. Clark speculates that Climax, if restarted, would create 400 to 500 mine jobs and an additional 500 in indirect jobs.

Phelps Dodge has hired a consulting firm to look into restarting the mine, including how much it would cost and how many workers it would employ, said company spokesman Ken Vaughn. The study will be completed later this year.

If started, the Climax mine would produce up to 20 million pounds of molybdenum a year. The metal is used to make harder steel alloys and in petrochemical products.

The dramatic rise in molybdenum prices have prompted producers to ramp up their production at active mines or reopen dormant mines, said Xavier Cronin, managing editor of New York-based Platts Metals.

"It is pretty simple. Why you would be sitting on an asset that has a metal in it that the world needs and presumably you could make a lot of money (off) of," Cronin said.

"There is a great demand for molybdenum and prices are at historic highs," he said.

The global demand for molybdenum is roughly 375 million pounds. About 80 percent of the demand comes from the steel industry, while the remaining 20 percent comes from the chemical industry.

The fortunes of molybdenum mines fluctuated wildly in the 1980s and 1990s before falling to an all-time low in 2001, when prices hit a dismal $2.36 per pound. Since then, prices have climbed and currently hover between $36 and $37 a pound.

Henderson plans to increase production to 40 million pounds per year by mid-2006. Molybdenum production at at the mine has increased from 18.6 million pounds in 2001 to 27.5 million pounds in 2004. The mine plans to produce about 32 million pounds in 2005.

The production curve at Climax has been cyclical.

Since molybdenum was discovered in the Climax area around Fremont Pass north of Leadville in 1879, the mine has been has been shut down several times. After the increased production during the wars, it was shut down in the early 1970s, then in 1986 and the last time in 1995. Since then, it has been on standby.

"The opening or reopening of a mine is a major cost undertaking," said Stuart Sanderson of the Colorado Mining Association. "And the recent volatility of molybdenum prices is something (the company) has to examine. I am sure they will examine whether the current favorable market conditions can be sustained."

Tritz said the mine would take some retrofitting before it can start pulling molybdenum out of the ground again.

But in his role as a county official, he said the costs are worth it to the community. He said the mine recently was assessed at $39 million. At its peak, its assessment was $247 million.

"If it opens up, it'll be a big boost to Leadville and the county," Tritz said.


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