Rising metal prices trigger little investor interest so far in stalled N.B. mine
International price for molybdenum, a key element in proposed Sisson mine, is up more than 100% this year
A sudden surge in the worldwide price for the metal molybdenum might be good news for backers of a proposed tungsten mine development in central New Brunswick but so far investors have been reacting to the change mostly with indifference.
Vancouver based Northcliff Resources Ltd. is behind what has become a stalled plan to construct a $500 million open-pit metal mine near Stanley known as the Sisson project.
In addition to an estimated 222 million kilograms of tungsten deposits, the 189-square-kilometre development includes a suspected 154.8 million pounds of molybdenum. This spring, molybdenum suddenly raced to a 13-year price high of $50.50 US per kilogram ($22.95 per pound) according to the financial and economics forecasting website TradingEconomics.com.
That made it the fastest rising metal price tracked by the website this year. It has appreciated 114 per cent since January and soared to its highest valuation since prior to the worldwide financial crisis of 2008.
In addition, the website claimed its own "global macro models and analysts expectations" suggest prices for the element will keep rising.
"Looking forward, we estimate it to trade at $67.49 (per kilogram) in 12 months time," read the forecast.
A call to Northcliff's head office Tuesday to ask about how that pricing scenario might affect a decision to proceed with the mine was not immediately returned.
But the company has been clear in the past that prices and price forecasts for both tungsten and molybdenum are central to whether the project will proceed.
"The ability of Northcliff to raise interim and construction financing to fund its share of the Sisson Project's cost, will be significantly affected by changes in the market price of the metals for which it explores," the company said in its annual information form filed earlier this year.
"Future significant price declines could cause investors to be unprepared to finance exploration and development of tungsten and molybdenum deposits, with the result that Northcliff may not have sufficient financing with which to fund its share of the costs of development activities for the Sisson Project."
Tungsten and molybdenum are both notable for having high melting points and are used in a number of applications, including as an additive to make steel harder, stronger and more resistant to corrosion and in the internal construction of a variety of consumer electronics.
Northcliff has virtually all of the critical provincial and federal environmental approvals it needs to pursue a mine, but predictions of starting dates have proven unreliable in the past.
Former Northcliff president Christopher Zahovskis gave an interview in 2013 suggesting the mine would be under construction by 2014.
That date came and went. In 2017, after the project received a major federal environmental approval, senior federal Liberal cabinet minister Dominic Leblanc predicted shovels would be in the ground by early 2018.
"The federal cabinet approval of the environmental assessment was the last remaining critical piece in order to ensure this project sees the light of day," LeBlanc told reporters in Fredericton in June 2017.
"We are very confident that the company will be able to get the financing in place over the next number of months. We're confident that construction will begin next spring."
Four years later the development remains at a standstill.
Lower-than-expected metal prices than the project's 2013 feasibility study anticipated have been a central problem, although those have been slowly narrowing.
Current prices for tungsten have risen significantly since last year but remain about 20 per cent below those used in the feasibility study with molybdenum prices now 30 per cent or more above.
"The prices of tungsten and molybdenum are volatile, and are affected by numerous factors beyond Northcliff's control," the company noted in its information form.
Higher metal prices are critical for the Sisson project to proceed, but they need to stay elevated for the nearly 30-year expected life of the mine, which has made moving forward a difficult decision to make.
So far investors do not appear to see an improvement in the mine's prospects even with recent price increases. On Tuesday, Northcliff's stock price closed at 5.5 cents per share on the Toronto Stock Exchange, up just one cent on the year to date.
Northcliff has 17 months left to make a decision on whether to construct the mine before its provincial environmental approval to proceed expires.