[ferro-alloys.com] While many new moly projects are struggling to find financing (See General Moly story, p3) or have been put on indefinite hold (Moly Mines’ Spinifex mine in Australia, for example), Sierra Gorda, the copper/moly project in Chile is on schedule to produce 50-million ppy of moly, starting at the end of 2014, said Kevin Pritchett, Head of Moly Sales and Marketing at KGHM International, the 55% owner of Sierra Gorda. 

With Sierra Gorda, KGHM will be the second-largest moly producer after Freeport McMoRan Copper & Gold. In addition, Pritchett told delegates at the recent CRU/Ryan’s Notes European Ferroalloys Meeting in Amsterdam, Sierra Gorda’s production will be maintained at 50-million ppy for five years, not the originally planned, three-year period. Sierra Gorda has always been expected to make a big splash, but put in context against other miners-Freeport, 85-million ppy; Codelco, 44-million ppy;

 Southern Copper, 40-million ppy and Jinduicheng, 37-million ppy-it indeed is a formidable No. 2 producer. Pritchett made it clear that because Sierra Gorda is first-and-foremost a copper mine, the moly production will be sold regardless of market conditions. He acknowledged that with expected moly demand growth of 3-4% annually, the market is amply supplied with current and in-construction, fully-financed projects.

“High-cost primary production will be under pressure, though chemical demand growth will be a logical outlet for more efficient primary mine operations,” Pritchett said. While China’s large-scale imports of metallurgical moly helped support market prices in 2009, China is not likely to “save the West” this time around, Pritchett said. He noted that in the first four-months of 2013, China was a net exporter of all moly products with 8.5-million lb (Mo) of exports compared to 4.6-million lb of imports. In the first four months of 2009, China’s imports of FeMo, moly oxide and concentrates were 4.25-million lb compared to exports of 3.4-million lb.

 A large portion of China’s moly production defies economic, environmental and energy efficiency realities, and probably will be scaled back, Pritchett said. Other analysts, however, point out that China has not been quick to shut down inefficient production of other products (nickel pig iron, for example) and there are no guarantees that Chinese miners will act according to economic dictates. The consensus price forecast of moly analysts is $11.74 per lb for 2013; $13.29 for 2014 and $13.36 in 2015 and $12.50 longer term, Pritchett said. These numbers seem high in view of current moly oxide prices in the low $10s. Pritchett noted that first-quarter 2013 steel production (ex China) was “a lackluster blah.” He conceded that the market “shrugged off” news that Thompson Creek was likely to put its mine in Idaho on care and maintenance in 2015 because of poor market conditions (Ryan’s Notes, May 13, p1). 

 Still, Pritchett said, the molybdenum market has surprised experts before. Continued infrastructure investment, especially aging infrastructure in the West, could create “a pop,” he said. Also, the push for cleaner, environment and better efficiency could help moly use in oil refining catalysts and alloys for automotive steels and turbine engines.