After a long slump, copper and molybdenum prices are kicking off 2018 strong, with Butte-Silver Bow set to see the tax revenue benefit in 2019.
Copper is currently priced at $3.22 a pound. Molybdenum, a second metal Montana Resources mines from the Continental Pit, has reached $11.10 a pound.
That means good news not just for Montana Resources, but also for Butte-Silver Bow County. Because of legislation passed in 2015, the counties are beginning to see 35 percent of tax revenue from the Metals Mine Tax, instead of the previously established 25 percent.
The state gets the rest of the Metals Mine Tax.
Butte-Silver Bow County Budget Director Danette Gleason said that MR’s uptick in copper and molybdenum revenue won’t make it to the county’s coffers until about mid-2019. It takes about 18 months for the tax revenue, based on previous fiscal years, to reach the county.
Butte-Silver Bow County has received more than $1 million for its 2017 Metal Mines Tax, according to the Department of Revenue. That includes the 10 percent jump in Metal Mines Tax revenue, which went into effect in mid-year 2016.
However, the way the money is broken down, the county gets only a portion of that going into its general fund, which got $207,936. The school district received $415,872 and the Hard Rock Trust account got $393,192. The Hard Rock Trust account is a “rainy day” fund that can’t be accessed unless the mine shuts down or faces a significant reduction in work force.
Currently, MR provides about 18 or 19 percent of the county’s overall tax base, Gleason said. That’s down from its tax contribution of about 21 to 25 percent in recent years. MR is the number two tax base provider for the county, second to NorthWestern Energy.
Besides the Metal Mines Tax, MR also pays property taxes, which includes gross proceeds tax and real and personal property taxes on its larger equipment, such as the big haul trucks, Gleason said.
The slump copper and molybdenum were in from 2015 through 2017 is just now hitting the county’s tax revenue.
“Right now, the county's breaking even in the low copper price,” Gleason said.
MR Vice President of Human Resources Mike McGivern said the mining company hasn’t seen the current price levels for either copper or molybdenum since 2014.
B-SB Chief Executive Dave Palmer called the upswing in copper prices “good news.”
The state will benefit from the improvement, too.
Copper makes up about one-third of the total metal mine collections for the state, according to the state’s Office of Budget and Program Planning.
“We are estimating a 20 percent increase in copper prices from fiscal year 2017 to fiscal year 2018,” the state’s Budget office said via email.
“Overall, the state’s economy continues to show strength, including copper production and price. This is particularly good news for Butte,” Budget Director Dan Villa said via email.
McGivern attributes the rise in price to a general improvement in the world’s economy, China and “the greatest run in the stock market in the history of the world,” in 2017.
Copper is used in everything from electrical wiring to cars, computers, cell phones and pipes. China is a major customer, consuming about 40 percent of the world’s copper supply.
Molybdenum, or “moly,” hardens steel. It is used in road construction and building skyscrapers.
In 2018, MR forecasts producing about 64 million pounds of copper, 9.3 million pounds of “moly” and approximately 630,000 ounces of silver. A mainstay in the jewelry business and used in electronics, silver is hovering at $16.96 an ounce.
Gold has also seen an improvement in price in the last six weeks, which is also good news for Barrick Corp.-owned Golden Sunlight in Jefferson County.
Gold has risen in value by about $60 since mid-December, Golden Sunlight General Manager Dan Banghart said earlier this week.
It’s now trading at $1,320 an ounce.
Andy Lloyd, communications director for Toronto, Canada-based Barrick Corp., said via email earlier this week that most gold analysts “point to a weakening U.S. dollar and geopolitical tensions as key factors,” for the improvement in gold pricing.
“Gold typically has an inverse relationship to the U.S. dollar," Lloyd said in writing.
Right now, the dollar has fallen to a 3-month low, Lloyd said. Some analysts predict gold will rise slightly over the next two years, according to financial magazine Barron's.
Jefferson County Commissioner Leonard Wortman said that because of the lag time involved in a county collecting taxes, Jefferson County is only just now seeing the decrease in tax revenue caused by Golden Sunlight shutting down its open pit operation in 2015 and laying off around 140 workers.
Within a few months of the shutdown, Golden Sunlight brought in Canadian-based contractor Redpath to mine an underground tunnel called "2Bug" that snakes around behind the former open pit mine.
"They don’t have nearly the production they did," Wortman said of the current operation. "That affects our proceeds."
According to the Department of Revenue, Jefferson County got, overall, $279,121 for its 2017 Metal Mines Tax, which also included the 10 percent hike. A portion of that went to the schools and a portion to the “rainy day” fund. By contrast, Jefferson County received over $700,000 in Metal Mines Tax for fiscal year 2013, according to the Department of Revenue.
But, while the lowered tax base is hard on Jefferson County, Wortman points out that Golden Sunlight opened in 1983 and, originally, was never expected to still be extracting gold 35 years later.
Banghart said early reports expected the gold mine to have a 13-year mine life.
"We've milked it for a long time," Wortman said.
Copper and “moly” are also expected to continue to improve in 2019 and in 2020, McGivern said.
“It’s a very positive place for us,” McGivern said.