Mercator Minerals is nearing completion of a two-phase construction to grow its milling operation at its Mineral Park Mine near Kingman, Ariz. Mercator acquired the copper and molybdenum-laden property in 2003. At that time, the solvent extraction electro-winning (SX/EW) operation was recovering copper from heap leaching. In 2007, the company started phase 1, to bring the facility’s production to 25,000 tons per day. Two years later, Mercator began commercial production, and in 2010 initiated construction of phase 2 to add an additional 25,000 tons per day capacity to bring the mill to its targeted 50,000-tons-per-day run-rate.
By Aug. 15, the company announced it had made significant progress on the phase 2 expansion. It completed construction and testing of a 37-megawatt turbine generator on August 12 and commenced commercial operation of the generator on Aug. 15. It had also completed construction for the phase 2 ball mills and rougher flotation cells. The waterline and well construction were also complete by Aug. 15. Three of the wells were scheduled to be energized mid-August and the final well by mid-September. According to Gary Simmerman, general manager of Mineral Park, the remaining equipment installation and construction will be finalized this September, bringing Mineral Park to its destined capacity of 50,000 tons per day.
For a small company in an uncertain market, such an investment may seem a risky undertaking. However, the company’s 2006 feasibility study returned a proven resource of more than 1 billion pounds of copper, 278 million pounds of molybdenum and 27 million ounces of silver. Milled at 50,000 tons per day, the mine has an expected 23 years of life.
A Quarter’s Worth
Though the phase 2 expansion is still underway, the company has already managed to increase its total commercial production quarter by quarter for 2011. In first-quarter 2011, copper production stood at 9.5 million pounds and molybdenum production stood at 1 million pounds. In second-quarter 2011, Mercator reported production of 11.18 million pounds of copper, 1.76 million pounds of molybdenum and more than 180,000 ounces of silver.
During the second quarter, the average throughput clocked in at 32,260 tons per day with a record throughput of 41,738 tons in one day. The company’s forecast for third-quarter production estimates an increase in copper production to 12 million pounds of copper and a slight decrease in molybdenum production to 1.7 million pounds. The company’s projections for the fourth quarter, during which phase 2 should be fully operational, show an all-around increase. The company says it expects to produce nearly 12.5 million pounds of copper and significantly increase its molybdenum production to 2.3 million pounds.
One of the most crucial components that will help the company achieve that fourth quarter forecast is its newly constructed General Electric LM6000PF natural gas turbine generator. In August, Mercator announced the new turbine generator had “comfortably passed performance testing and has been generating power at a rate of 40 megawatts.”
At that rate and at current natural gas prices, the company’s projected operating cost of the turbine is “approximately 33 percent less than [its] current power costs on a per kilowatt hour basis,” according to the company.
“With the new generator now online, which was the largest constraint to achieving targeted production levels of 50,000 tons per day run-rate, we can now focus our attention on finalizing the phase 2 expansion at Mineral Park,” states Bruce McLeod, president and CEO.
Less than a month after announcing the commissioning of its new natural gas turbine generator, Mercator released a new throughput count. The average throughput of the concentrator was recorded at 40,000 tons per day. During the last week of August, the throughput nearly averaged 45,000 tons per day, and on Aug. 31 the company achieved a single day record of 49,195 tons, just 805 tons away from its targeted rate.
“Despite the down time taken in August to tie in the new turbine and [phase 2] grinding and flotation circuits, our team did a tremendous job ramping up throughput to the highest levels ever,” McLeod explained.
“Even though nearly 50,000 [tons per day] throughput has been achieved, completion of the second crusher later in September will remove the final bottleneck to sustain throughput at these levels.”
The Right Investment
With the mine on track to reach 50,000 tons per day, the company expects to produce more than 45 million pounds of copper and nearly 7 million pounds of molybdenum for 2011. However, just as important as the amount of resources themselves is what those resources are worth, which is why the property warranted investment in the first place, according to Simmerman. “Copper and [molybdenum] prices have been very favorable,” he says. “Copper is over $4 [per pound] and [molybdenum] is over $14 [per pound]. Given the high demand for our products, we’re in the right business.”
Another reason for investment is molybdenum’s ever-expanding applications in the global market. Molybdenum always has been a big player in the steel market. The mineral is often added to strengthen the steel and help it withstand higher temperatures. However, it also is being used more frequently in superalloys, nickel-based alloys, lubricants, chemicals, electronics and cast iron. The company also will benefit from the world’s growing demand for steel, which on average increases more than 5 percent each year, according to some industry sources.
Factoring In Steel
The growing Chinese steel industry is expected to be a key driving force for molybdenum production. China’s rapid urbanization has called for large infrastructure projects, of which steel is a key component. According to a 2007 ranking of Chinese steel manufacturers compiled by China Custeel, an industry resource, the Chinese government has made efforts to have four geographic bases for its steel production. The companies leading that production are Anshan Iron and Steel Group and Benxi Iron and Steel in northeast China. The companies merged in 2005 but still maintain separate operations.
The Shougang Group and Tanggan Group lead production in northern China, while Baoshan Iron and Steel and Maanshan Steel Group lead eastern China. In Central China, Whuhan Iron and Steel and the Panzhihua Iron and Steel Group top the list.
The steel production at these companies has positioned China as a global leader in steel manufacturing, which means the country will use a large amount of the resources, including molybdenum, that it takes to make steel and value-added steel products. According to the International Iron and Steel Institute, China led the steel industry in 2007 with a production of 489.2 million tons of steel that year, a 15.7 percent increase from the previous year. Japan and the United States followed as the second and third largest steel-producing countries, respectively. Other countries such as India and Brazil ranked lower on the list as far as overall production, but showed significant year-to-year increases. Brazil’s 2007 steel production increased by 9.3 percent from 2006, while India’s production increased by 7.3 percent.
To properly capitalize on the existing global conditions, Michael Surratt, one of the company’s founders and technical adviser to Bruce McLeod, Mercator’s president and CEO, pulled together a team of trusted names and past co-workers that he knew could accomplish the task.
“He was instrumental in purchasing the property, and he saw the potential to bring back a milling operation on the 5,800-acre property,” Simmerman explains. “He’s assembled a team of guys he worked with before, and brought a couple of guys out of retirement. It’s been a big team effort between all of us to get us to where we are today.”
Mineralizing in Mexico
Though Mineral Park Mine in Arizona is Mercator Minerals flagship property, the company is in the feasibility stages with two other projects, both located in Sonora, Mexico. In December 2009, Mercator Minerals acquired El Pilar, an advanced solvent extraction electro-winning copper development asset in Sonora, Mexico, and has recently completed two 300-ton run-of-mine leach tests. According to Mercator, it “anticipates El Pilar to be a conventional open pit, run of mine, heap leach copper project” and expects to issue an optimized feasibility study later in 2011. The property’s previous owner, Stingray Copper, estimated a 14-year mine life with total cathode copper production of 956 million pounds.
As of June 30, the company was continuing its engineering and cost estimation efforts, and had completed its mine plans in order to conduct its feasibility study. It had also completed an archaeological survey, which was done by Instituo Nacional de Antropologia e Historia. The company was continuing its metallurgical testing of resource samples, which represent the entire range of expected copper grades and acid soluble copper on the site. That testing is scheduled for completion during third quarter 2011. The company is also finalizing its environmental permit application to be ready for submittal in third quarter 2011.
Another promising Mercator project located in Sonora also came through way of acquisition. In June of 2011, Mercator purchased Creston Moly Corp., which owns a 100 percent interest in El Creston, an advanced development stage copper and molybdenum project. “Mercator believes that the addition of a world-class development asset like El Creston, which is anticipated to commence development in late 2013, is a strong step towards creating a strong intermediate base metals company with an attractive growth profile,” the company states.
Creston Moly’s preliminary economic assessment of the El Creston Project in Sonora Mexico (approximately 140 kilometers south of El Pilar) estimates a 13-year mine life at a milling rate of 50,000 tons per day with molybdenum in concentrate production of 310 million pounds and copper in concentrate production of 206 million pounds. The expected annual production rate for El Creston is 23.9 million pounds of molybdenum in concentrate and 16 million pounds of copper in concentrate.
In late June, the company announced three major updates at El Creston, including diamond drills on two zones. In order to further define its A-37 Zone, it completed two diamond drill holes totaling 457.7 meters in length. It also completed two diamond drill holes totaling 1045.60 meters in length to test the Red Hill Deep Zone. It also reported it was nearly complete with studies related to El Creston’s feasibility report.