Higher copper, molybdenum prices boost Butte metals mine

BUTTE (AP) — Montana Resources is midway through an epic year. Copper hit an all-time high of $4.86 per pound on May 10 and was at $4.21 Wednesday.

Meanwhile, molybdenum, the mine's other principal ore, has skyrocketed to $19.80 per pound after averaging $8.67 in 2020.

Which begs the question: What the heck is molybdenum?

Called moly for short, the metal is capable of withstanding extremely high temperatures and is a powerful anti-corrosive used to reinforce steel. When steel production is on the rise for buildings and bridges, moly prices rise accordingly, said Mike McGivern, vice president of human resources at MR.

"Steel production is the biggest driver," McGivern told the Montana Standard.

Moly is also used in lubricant, and in specialty items like gun barrels where strong steel must stand the high heat of bullets on the fly, McGivern said.

Other uses include rocket engine components, flat panel TV and computer screens, and "virtually every step of oil and gas exploration," from drill pipe to power plants, according to a fact sheet by Canadian mineral exploration company BCM Resources

Moly is even used in products for human consumption. It's an essential nutrient the body uses to process protein and genetic material like DNA, and even breaks down toxic substances in the body, according to the National Institutes of Health.

"It's in your morning protein shakes," McGivern said.

MR's operation is known for its copper, but moly has always been essential to the bottom line.

"Without moly, we don't have a mine," McGivern said. "We have to have moly to make this a viable operation."

MR counts on an $8 moly price to stay viable, McGivern said. Last year's average price was $8.67.

Averaging $31.87 in 2005 and $30.09 in 2007, moly actually made the mine more money than copper did those years.

"It has a tremendous impact for us," McGivern said.

This year, the price is closing in on $20. Combined with strong production, a $20 average moly price would about cover the cost of all operations for the year, McGivern said. That means copper would be all profit.

The company sets its budget in October. This past fall MR budgeted for an $8.50 moly and $3 copper price. So far moly's averaged $12.46 for the year, and copper stayed above $3.50 for the first two months of the year and averaged well above $4 since March.

Last week, copper bumped up a few cents following a slow decline since the May 10 peak.

"When you see $4.86, you want to stay at $4.86," McGivern said of the peak.

THE CURRENT trends are reminiscent of 2011, the last time both commodities boomed at once. That year saw an average price of $3.98 for copper and $15.46 for moly.

The mine's in good shape to take advantage of this year's boom. MR has a company high number of employees at 380, and this year switched to 13 haul trucks per shift from 11.

Every employee of the mine receives profit sharing.

"We post the price on the front gate every morning, and I'm sure all eyes look at that board every day. We're all very interested in these kind of prices," McGivern said.

The price of copper is projected to stay high the next few years.

Demand is on the rise due to the prioritization of electric cars, which use a lot of copper, as well as continued need from the largest consumers of raw materials — the United States and China — and is likewise boosted by infrastructure development and modernization of growing economies like India and Brazil, McGivern said.

Supply may decrease as foreign competitors face challenges.

"The South American copper market is having some shaky economics as Chile is looking at nationalizing their copper mines. This stifles exploration and capital investment in the copper industry in Chile," McGivern said.

There are some rumblings of potential strikes in Peru, he added.

Chile and Peru are the top producers of copper in the world, and the United States is ranked fifth.

Moly is a little harder to predict as it's a smaller market.

"China is a big factor," McGivern said. "They have a lot of moly, and the ability to control prices, how much they want to let out, how much they want to stockpile. They're a major player in the moly market in the world."

POST-PANDEMIC, Europe is buying a lot of moly for infrastructure which is a good sign for the price, McGivern said.

MR can't control the prices, only how they extract the ore — and ship it.

With the help of traders, MR has cut back this year on copper shipping expenses by sticking to railway instead of going overseas to China or Brazil as it has sometimes done in the past. The move is especially impactful because sea freight prices are up, McGivern said.

MR's copper is today shipped to smelters in Quebec, Canada and Utah, and the moly to Idaho.

The rise in diesel prices and delays in the parts supply chain due to the pandemic are the main two negatives for MR in an otherwise banner situation.

McGivern said MR is looking at ways beyond tax contributions and buying locally — the company accounts for $24 million in local purchases a year — to support the Butte community.

THIS IS nothing new. MR and the Dennis and Phyllis Washington Foundation's last major contribution was a $10 million donation to Stodden Park. The new golf course clubhouse is finished, and the final landscaping touches should be finished by October, McGivern said.

Now MR is on the lookout for the next big project.

A mining company can celebrate the good times, but success is also measured by years the prices don't cooperate.

"One of the things we've been able to do is weather the bad times," McGivern said.

Take 2009, when copper slumped to $1.28. And 2016, when it slumped to $1.97. And the most recent struggle, when, due to the pandemic, copper reached a low daily price of $2.10 in spring of last year.

During all of these times, mines shut down and laid off employees. But not MR.

"We were able to keep the lights on. Really not making a lot of money, but able to pay the bills, pay the employees and keep the place running," McGivern said.

Keeping its employees working has remained a top priority, and now the mine employs more people — almost of all of them local — than ever before.

"So that's been our strategic business model, to be able to weather the cycles of the metal commodities that we mine — and they do cycle," McGivern said. "And we're in a good one right now."

Production is on about the same course as last year, when the company mined 66.7 million pounds of copper and 8.7 million pounds of moly.