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Climax re-opens the rumor mill

Article by Steve Voynick

Mining – March 1995 – Colorado Central Magazine

“I hear Climax is startin’ up next week.”

“Joe told me it will open next year.”
“That place will never open again.”

IF, DURING THE PAST FEW MONTHS, you’ve heard those recurring comments, or variations thereof, you probably live in the upper Arkansas River Valley, where just the casual mention of the word “Climax” can seed to saturation the dark clouds of rumor. And Climax rumors, for more than seven decades, have gone unchallenged in imagination, creativity, and often inaccuracy and absurdity.

A trickle of rumors again started flowing down the Arkansas from Leadville this past fall. Recently, those rumors turned into a flood: The Climax Mine will reopen.

Even the mainstream media can’t resist printing Climax rumors. In late January, a Denver Post headline stated factually, “Climax Mine to Reopen as Molybdenum Surges” and “Leadville Cheers Reopening of Mine.” The Rocky Mountain News announced “Climax Mine to Reopen.” Those who grabbed their hard hats and mine boots and rushed up the hill got there a bit early.

Both the Post and the Rocky were premature, for just a week later, Leadville’s Herald-Democrat, which has printed Climax news and rumors for seventy-eight years, told the real story: “Climax Decision Has Not Been Made Yet.”

But this time the wave of rumors was right on target. By the time these words get into print, the formal announcement will have been made: The Climax Mine will resume production as soon as possible.

Interestingly, Climax rumors are self-perpetuating. The end of one rumor merely generates a whole new flood of rumors. Leading the latest flood are rumors about why Climax is reopening.

“They gotta reopen. I hear moly’s at ninety bucks a pound.”

“They only want to run it a few months to get the rust off the mill equipment.”

“I hear they got a buyer and they gotta show ’em the mill still runs.”

“Cletis tells me they found gold in the tailings. Maybe that’s got something to do with it.”

THE DECISION TO REOPEN the Climax mine was based on a complex scenario of developments and projections, the most important of which, this time, was the price of molybdenum.

From the 1930s until the early 1970s, thanks to the prodigious production of the Climax Mine, molybdenum prices were among the flattest of all metals, rising from $1 per pound to only about $3 per pound. But by 1981, a combination of booming demand, speculation, and supply uncertainties pushed the long-term contract price to nearly $18 per pound.

Then, as you well know, especially if you were among the 3,000 Climax miners at the time, the market crashed in the face of an untimely economic recession coupled with market oversupply. The price wallowed lethargically between $2.75 and $4 per pound until spring 1994, then began to inch upward. By fall, the price nudged $6 per pound; today, just four months later, the price is $17 per pound and still rising.

“Sparky says the price of moly might go to a hundred bucks.”

“I hear it’s gonna fall flat, just like it did in ‘eighty-one.”

MARKET ANALYSTS IDENTIFY no one factor, but point to generally strong worldwide economy and increased demand for steel for everything from construction to automobiles. Since much of that steel is toughened with molybdenum, demand and prices of moly have increased.

In response to the rising prices, Cyprus Climax Metals Company brought the Henderson Mine, near Empire, Colorado, to capacity production six months ago. At Climax, the cost to mine and mill one pound of molybdenum is probably about $4.

Whatever the exact Climax production costs turn out to be, the current $17-per-pound market price of moly obviously provides a hefty profit margin. But how stable is the price?

Most metal market analysts project a strong market at least through 1995. But some, eying the rapidity of the recent price rise, question long-term market stability.

Aside from price and profit, Climax will enjoy a side benefit by resuming production. In 1992, Climax spent $4 million to modernize and upgrade the mill. But large flotation mills aren’t designed to sit idle for years. Physical deterioration occurs quickly and replacement and repair costs make high start-up costs even higher. Operation, even if temporary, would be the best thing possible for the new, idle mill facilities.

“I hear they’re only gonna hire a hundred men.”

“They can’t run that place without a thousand men.”

AFTER A DECADE of downsizing, demolition, and upgrading operating efficiencies, Climax is hardly the same mine it was in 1980. In April, 1995, Climax will produce at the rate of 15,000 tons per day — with only 155 workers.

The comparison is striking. In 1980, Climax produced 50,000 tons per day with 3,000 employees, the equivalent of seventeen tons per employee. It will now produce ninety-seven tons per employee.

“They won’t get that place running for a year or two.”

“I heard they’re starting up next week.”

CLIMAX GENERAL SUPERINTENDENT John Clapper expects to begin production in early April — just two months from the announcement. That’s no easy feat, considering that Climax has had only twenty-five employees for the past year.

“Somebody said they’re going underground.”

“Charlie says they’re only going to work the open pit.”

THE LATTER RUMOR is correct. All production will come from the open pits as existing production and developmental underground levels have been written off and abandoned. Someday, Climax may again go underground for selected ores, but not in the foreseeable future.

“I heard there’s not much ore left up there.”

“They got enough ore for a hundred years.”

CLIMAX HAS ALREADY MINED a total of 470 million tons of ore since 1917. Nevertheless, even with underground ore reserves written off, open pit reserves stand at 137 million tons. At a continuous production level of 20,000 tons per day, the mine life could exceed twenty-five years. Although the average grade is only 0.317 percent, open pit reserves contain a whopping 400 million pounds of molybdenum metal.

What’s it worth? Just multiply that poundage by the market prices. It’s big, big bucks. And that’s why mining engineers and economic geologists still consider Climax a world-class deposit.

“Cyprus-AMAX doesn’t care. If the price of moly crashes, they close it down. No sweat off their backs.”

NOT AT ALL TRUE. The decision to reopen the mine is a big-league corporate gamble. Start-up costs are sky high. Should the mine have to suspend production in, say, six months, it will cost plenty. Whoever ultimately made the decision to reopen may end up looking very, very good, or, if things go poorly, very, very bad.

During the fourteen years that have passed since the Climax glory years ended abruptly, rumors have written off the mine as dead countless times. But no one really believed those rumors, for Climax, once a regional institution, remains a more enduring economic and cultural tradition in the upper Arkansas Valley than we might realize. Climax is an indelible part of life in Central Colorado, and whether it’s producing ore or not, it’s always producing rumors. When the next wave of good rumors spread down the upper Arkansas Valley, it’s a safe bet they’ll be about Climax, too.

“I hear they’re going to close Climax pretty soon.”

“Me, I hear Shirley MacLaine wants to buy it and turn it into a monastery.”

Years ago, Steve Voynick heard that Climax was hiring, which partly explains how he became a free-lance writer in Leadville. His history of the Climax Mine will be published this year by Mountain Press.