Alloycorp is all but mothballing its Avanti Kitsault molybdenum mine plans this year, citing market and financing difficulties.
The company had optimistically expected to begin construction this year but to date has not been able to secure all of the $1 billion it would need for an open pit operation lasting approximately 14 years at Kitsault on the north coast.
It has committed itself to finishing an engineering design study next month which the company says will help define its construction costs.
It says it will work at completing its financing and construction start up plans next year.
Company official Bernee Bolton cited “current languishing metals prices and tepid investment sentiment towards mineral resources” as reasons for halting further work this year.
In the interim, “activity at site will be reduced to maintain the minimum environmental and safety requirements under our permits and all other agreements. In the meantime there will be no additional development work and workforce recruitment,” she said in a statement.
“Upon completion of financing in 2016, we plan to ramp up to full construction at site. However, at this time, we must take difficult but necessary steps to reduce expenditures in areas that are related to project advancement and workforce recruiting,” the statement continues.
Bolton adds that in the short term, “certain activities will not be continued and some employees will be transitioning from the organization beginning at the end of August.”
Molybdenum is used as a strengthening alloy in the production of steel and Alloy said its Avanti Kitsault property would be a low-cost producer.
Kitsault has been the location of two previous molybdenum mine projects in the past decades with one resulting in the construction of a town and a brief operating life in the early 1980s before markets turned downward.
Alloycorp, which was at first called Avanti Mining, purchased the property in 2008 and began exploration and cost assessment.
It received provincial environmental approval from the provincial government in 2013, environmental approval from the federal government in 2014 and it negotiated an economics benefits agreement with the Nisga'a Lisims Government in 2014.
The company had committed itself to training and employing Nisga'a residents of the Nass Valley which is connected by a road to the Kitsault location.
In an Aug. 13 project update Alloycorp president Gordon Bogden expressed optimism about its prospects.
“Our lenders and financial partners remain very supportive and are awaiting positive economic results from the [front end engineering design] study. In the meantime, we continue to advance discussions with potential equity investors, partners and streamers. We strongly believe that progressing Avanti Kitsault now will position us well for a recovery in commodity prices," he said.
Part of the Alloycorp business plan included purchase agreements for its ore with a German firm and a South Koren steel manufacturer.