Thompson Creek shares sag as costs jump at Mt Milligan
TORONTO (Reuters) - Shares of Thompson Creek Metals TCM.TO tumbled more than 15 percent on Tuesday, a day after the company said the cost to build its Mt Milligan mine in British Columbia would rise by 10 to 20 percent.
The company said it will now cost C$1.4 billion to C$1.5 billion to bring the copper-gold project into production. Thompson Creek also raised the development costs at its Endako mill expansion, which is nearly complete, by about 3 percent.
"It is becoming very expensive to build these projects; labor is very scarce and turnover is very high," Chief Executive Kevin Loughrey told Reuters.
"Productivity is not what we hoped and so it just costs more to get these things done."
Shares of the Toronto-listed, Denver-based molybdenum miner closed down 15.7 percent at C$7.30 on Tuesday on the Toronto Stock Exchange.
Rising fuel costs, higher material costs and a tight labor market have led to overruns on mining projects around the world.
Thompson Creek, which had budgeted C$1.265 billion for the project, has so far spent about C$576 million on Mt Milligan and, with costs rising, it expects it may need additional funds to bring the mine online.
Loughrey said the company is eyeing a range of options to bridge the gap, including debt, selling gold forward or another gold stream deal. Thompson Creek already has two stream deals with Royal Gold (RGLD.O: Quote), which cover 40 percent of future gold output at the mine.
He added that Thompson Creek has no need to issue equity at this time and that the company is doing everything possible to keep costs under control. Continued...