Supply & demands
With too much molybdenum on the market, the site plans to close, leaving the county fearful of the costs of losing a big chunk of its tax base.
clear creek county» For roughly 40 years, a massive mine near Empire has paid for everything in this mountain community, from its sheriff’s office and schools to road repairs and the fire authority.
But a few weeks ago, Freeport-McMoRan told government officials that because of declining demand for molybdenum, it plans to close the Henderson Mine in three to five years, much more quickly than the 10 years they had expected.
“We knew this day was going to come,” Tom Hayden, chairman of the Clear Creek County commission, said during an interview in an administration building renovated with tax money from the mine. “We just didn’t know it was going to come so soon.”
While the county’s commissioners say they are confident they’ve planned well for looming budget shortfalls, residents say they are less certain about the future.
In 2015, the mine’s $14 million bill accounted for 70 percent of all property taxes collected in Clear Creek County (population 10,000) and about 36 percent of the county budget.
In January, more than 200 of the 560 people who work at the mine will be laid off. Molybdenum is used to harden steel, and demand for it has dropped as construction, especially in the oil and gas industry, has slowed.
The Clear Creek County towns along Interstate 70 have been complaining for years about how highway construction and congestion have discouraged tourists and hurt the bottom line. With the prospect of the mine shutting, some see a nasty economic storm brewing.
“We are looking for a little more money to deal with these issues and we’ve been told to just button it up,” tiny Silver Plume’s town clerk Tammy Sanford said.
Worries are circulating about crumbling infrastructure, increasing taxes and cutbacks in police and fire services. One teacher in Idaho Springs said Henderson’s closure has become a frequent topic during staff meetings.
Officials say while they will never be able to completely replace the tax revenue generated from the mine, they can recover some of what’s lost by trying to attract new businesses and promoting outdoorrecreation opportunities.
The mine will continue to pay taxes for 10 years after it closes, thanks to an averaging agreement. But beyond then, there are mounting unknowns and officials say the county’s services and programs will likely shrink.
While the lost funds are not expected to directly impact Clear Creek’s towns — Georgetown, Idaho Springs, Empire and Silver Plume — effects of the waning tax base are expected to trickle down. Only about half of Henderson’s workers live in the county, but those who do are paid solid money and have benefits.
“If you’re talking about a wage that can get you in the door to buy a house, you’re talking about the mine or a county job,” Sanford said.
Additionally, grants that Phoenix-based FreeportMcMoRan has provided to pay for recreational buildings and helped charities could be in jeopardy.
“We’re a countywide community,” said Idaho Springs Mayor Mike Hillman, who is fretting about the closure. “Anything that happens within the county will affect us.”
But with millions of motorists passing through the county each year on I-70, the hope is to dig for a different kind of revenue.
“We just have to mine the interstate, essentially,” Commissioner Tim Mauck said. “Lake County didn’t fall off the map (when their molybdenum mine closed), so there’s no reason to run around like the sky is falling.”
Leadville’s lessons
Lake County and Leadville were devastated in the early 1980s when the Climax Mine shut its doors and put more than 3,000 out of work. The closure sparked a mass exodus, leaving the county without funds to operate and with no choice but to slash services and staff.
“We lost so much of our small business community,” said Carl Miller, who was a Lake County commissioner at the time. “At one time we had three car dealerships here, two major grocery stores and a few drug stores. We still haven’t completely recovered.”
Miller said Climax represented 75 percent of the county’s property tax income when it went under.
“It was a struggle,” he said.
The mine reopened briefly in 1996 before it resumed full operations in 2012 and has been steadily producing since. It, too, is owned by Freeport-McMoRan, and a company spokesman told The Denver Post there are no plans to change production rates or employment at the site.
The reopening allowed the county to catch up on deferred infrastructure, pay more competitive wages for employees, expand programs and match grants. Lake County Commissioner Mike Bordogna says the county has created a rainy day fund and begun investing in long-term initiatives to prevent another meltdown.
“We’ve had crumbling streets,” Bordogna said. “We had buildings that fell down from not being able to repair them for 30 years.”
Climax now represents about half of the county’s property tax income, but it isn’t the employer it once was, he said. Only 370 people work there today.
Commissioners in Clear Creek County say they used the example of the Leadville mine closure as a warning sign of things to come for their own community.
“We’ve used a lot of the revenue for long-term investments of infrastructure, improvements and those kind of things,” Commissioner Phil Buckland said.
The tax-averaging agreement with Freeport-McMoRan is another example of addressing the problem, he said. The commissioners were told in August the mine had about 10 years of life left before the recent news broke of a shortened timeline and accelerated layoffs.
“We’d like to have them last another 40 years,” Buckland said. “(But) when you mine everything out of the hole, that’s the end of it.”
Clear Creek, however, is already facing a housing crisis that could complicate any efforts to bring in new businesses. Some worry that potential tax increases after Henderson closes could push the community’s impoverished to the brink.
“We do have economic problems already,” said Rob Morris, a shop owner in Empire who served on the town’s board for 32 years.
Henderson’s shuttering is also expected to hurt Grand County.
The mine’s mill is 15 miles to the west near Kremmling and the two are connected by the world’s largest conveyor of its kind that passes underneath the Continental Divide. Officials in Grand County say they are still evaluating the impact, but expect it to be big.
County assessor Tom Weydert says the mine operation provides roughly $4.4 million in yearly tax income.
“Truly at this point, nobody knows,” he said of the impact. “It’s strictly a guess. The county commissioners have scheduled a meeting to meet with (the mining company) to go over this whole thing.”
Falling prices
Molybdenum prices have dropped from $18 a pound in 2011 to a projected $7 in 2016, according to KC Chang, a senior economist with IHS Global Insight.
“In terms of the moly market, you still have a global supply that’s running ahead of demand,” said Chang, who is based in Toronto and specializes in analyzing rare-earth markets. “These mine closures are just part of the overall market correcting itself.”
The low price of oil and slowing construction markets in China and Europe are driving the decrease, he said. Molybdenum prices are also “very, very volatile,” according to Chang, and can change dramatically.
Freeport-McMoRan spokesman Eric Kinneberg said Henderson is cutting molybdenum production by 63 percent to a rate of 10 million pounds per year. It will also suspend development of new mining areas in early 2016.
“The mine life at Henderson can be extended beyond the remaining five years with further mine development, which would be dependent on a recovery in the molybdenum market,” Kinneberg said.
Meantime, the company says it plans to continue investing in community projects in Clear Creek and Grand counties.
“While we are evaluating the total amount available, there is no consideration being given to eliminating contributions,” Kinneberg said.
Freeport-McMoRan denied a Denver Post request for a tour of the site and did not respond to messages seeking to talk to those who work at the mine. But the roar of Henderson’s massive campus echoed in the mountains near Berthoud Pass last week like Clear Creek County’s combined worries.
Debbie Dhyne’s husband worked on and off at Henderson for more than 40 years before taking an early retirement on Nov. 20, ahead of the layoffs. She said he couldn’t speak to reporters because of the terms of his retirement.
“They have been a great place for my husband to work,” Dhyne said. “We raised our four kids with him working up in the mine. They provided for us.”
Andi Anderson’s husband has worked as an electrician at Henderson for five years, and while they are hoping he will make it through the January layoffs, she called it “a longshot.”
“I can’t believe it’s closing,” the Idaho Springs resident said as she left her job at a diner in town. “We just bought a house.”