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TUCOWS INC 6-K 2009

Documents found in this filing:

  1. 6-K
  2. 6-K

FORM 6-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16

of the Securities Exchange Act of 1934

For the month of  May 2009

 

Commission File Number   001-33783


THOMPSON CREEK METALS COMPANY INC.

401 Bay Street, Suite 2010
Toronto, Ontario
M5H 2Y4
(416) 860-1438

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F   o      Form 40-F   x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): __

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): __

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 


 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

 

Date:   May 7, 2009

THOMPSON CREEK METALS COMPANY INC.

 

 

/s/ Lorna D. MacGillivray                                 

Lorna D. MacGillivray

Assistant Secretary

 





 

Exhibit Index

 

Exhibit No.               Description                                     

 

1                Consolidated Financial Statements for the Three-Month Period Ending March 31, 2009

2                Management's Discussion & Analysis for the Three-Month Period Ending March 31, 2009

3                Certification of Chief Executive Officer

4                Certification of Chief Financial Officer

 


EXHIBIT 1

 


THOMPSON CREEK METALS COMPANY INC.

 

Consolidated Balance Sheets

(US dollars in millions – Unaudited)

 

Note

March 31,

2009

 

December 31,

2008

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

160.3

 

$

258.0

Short-term investments

4

 

100.3

 

 

Accounts receivable

 

 

31.6

 

 

55.0

Product inventory

5

 

45.4

 

 

57.1

Material and supplies inventory

 

 

35.0

 

 

36.2

Prepaid expense and other current assets

8

 

6.4

 

 

6.3

Income and mining taxes recoverable

 

 

1.3

 

 

1.4

 

 

380.3

 

 

414.0

Other assets

8

 

3.1

 

 

3.0

Restricted cash

9

 

15.0

 

 

14.2

Reclamation deposits

 

 

29.2

 

 

26.9

Property, plant and equipment

6

 

600.4

 

 

594.1

Goodwill

 

 

47.0

 

 

47.0

 

 

$

1,075.0

 

$

1,099.2

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

8

$

24.9

 

$

36.5

Income and mining taxes payable

 

 

0.1

 

 

7.5

Current portion of long-term debt

7

 

5.4

 

 

5.6

Future income and mining taxes

 

 

7.5

 

 

8.1

 

 

37.9

 

 

57.7

Long-term debt

7

 

11.5

 

 

11.7

Other liabilities

9

 

21.2

 

 

21.8

Asset retirement obligations

10

 

23.5

 

 

23.3

Future income and mining taxes

 

 

159.9

 

 

167.2

 

 

254.0

 

 

281.7

Shareholders' Equity

 

 

 

 

 

 

Common shares

11

 

484.1

 

 

484.1

Common share warrants

11

 

35.0

 

 

35.0

Contributed surplus

 

 

41.8

 

 

40.4

Retained earnings

 

 

315.5

 

 

304.3

Accumulated other comprehensive loss

 

 

(55.4)

 

 

(46.3)

 

 

821.0

 

 

817.5

 

 

$

1,075.0

 

$

1,099.2

Commitments and contingencies

13

 

 

 

 

 

Measurement uncertainty

2

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

- 1 -

 


THOMPSON CREEK METALS COMPANY INC.

 

Consolidated Statements of Income

(US dollars in millions, except per share amounts – Unaudited)

 

 

Three months ended

 

Note

March 31,

2009

 

March 31,

2008

Revenues

 

 

 

 

 

 

Molybdenum sales

8, 9

$

75.5

 

$

250.2

Tolling and calcining

 

 

3.4

 

 

4.6

 

 

78.9

 

 

254.8

Cost of sales

 

 

 

 

 

 

Operating expenses

8

 

53.3

 

 

166.6

Selling and marketing

 

 

1.4

 

 

2.5

Depreciation, depletion and amortization

 

 

11.9

 

 

7.7

Accretion

10

 

0.3

 

 

0.7

 

 

66.9

 

 

177.5

Income from mining and processing

 

 

12.0

 

 

77.3

Other (income) expenses

 

 

 

 

 

 

General and administrative

 

 

3.7

 

 

3.4

Stock-based compensation

12

 

1.4

 

 

1.7

Exploration and development

14

 

1.7

 

 

1.0

Gain on foreign exchange

 

 

(3.2)

 

 

(1.5)

Interest and finance fees

7

 

0.3

 

 

6.7

Interest income

 

 

(0.4)

 

 

(0.8)

Other

 

 

(0.4)

 

 

0.8

 

 

3.1

 

 

11.3

Income before income and mining taxes

 

 

8.9

 

 

66.0

Income and mining taxes (recoverable)

 

 

 

 

 

 

Current

15

 

3.3

 

 

25.5

Future

15

 

(5.6)

 

 

(6.3)

 

 

 

(2.3)

 

 

19.2

Net income

 

$

11.2

 

$

46.8

Net income per share

16

 

 

 

 

 

Basic

 

$

0.09

 

$

0.41

Diluted

 

$

0.09

 

$

0.37

 

Consolidated Statements of Comprehensive Income

(US dollars in millions - Unaudited)

 

 

 

Three months ended

 

 

March 31,

2009

 

March 31,

2008

Net income

 

$

11.2

 

$

46.8

Foreign currency translation adjustments

 

 

(9.1)

 

 

(11.2)

Comprehensive income

 

$

2.1

 

$

35.6

 

The accompanying notes are an integral part of these consolidated financial statements.

- 2 -

 


THOMPSON CREEK METALS COMPANY INC.

 

 

Consolidated Statements of Cash Flows

(US dollars in millions – Unaudited)

 

 

Three months ended

 

Note

March 31,

2009

 

March 31,

2008

Operating Activities

 

 

 

 

 

 

Net income

 

$

11.2

 

$

46.8

Items not affecting cash:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

11.9

 

 

7.7

Accretion expense

 

 

0.3

 

 

0.7

Accretion of finance fees

 

 

 

 

0.6

Stock-based compensation

 

 

1.4

 

 

1.7

Future income taxes recoverable

 

 

(5.6)

 

 

(6.3)

Unrealized loss on derivative instruments

 

 

0.1

 

 

1.0

Change in non-cash working capital

18

 

25.4

 

 

11.2

Cash generated by operating activities

 

 

44.7

 

 

63.4

Investing Activities

 

 

 

 

 

 

Short-term investments

 

 

(100.3)

 

 

Property, plant and equipment

 

 

(27.6)

 

 

(8.1)

Deferred stripping costs

 

 

(7.3)

 

 

(2.8)

Restricted cash

 

 

(0.8)

 

 

(2.4)

Reclamation deposit

 

 

(2.4)

 

 

(0.2)

Acquisition cost

 

 

 

 

(100.0)

Cash used in investing activities

 

 

(138.4)

 

 

(113.5)

Financing Activities

 

 

 

 

 

 

Proceeds from issuance of common shares

 

 

 

 

0.4

Repayment of long-term debt

 

 

(1.3)

 

 

(17.4)

Proceeds from revolving facility

 

 

 

 

22.5

Repayment of revolving facility

 

 

 

 

(22.5)

Cash used in financing activities

 

 

(1.3)

 

 

(17.0)

Effect of exchange rate changes on cash

 

 

(2.7)

 

 

0.9

Decrease in cash and cash equivalents

 

 

(97.7)

 

 

(66.2)

Cash and cash equivalents, beginning of period

 

 

258.0

 

 

113.7

Cash and cash equivalents, end of period

 

$

160.3

 

$

47.5

 

 

 

 

 

 

 

Supplementary cash flow information

18

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

- 3 -

 


THOMPSON CREEK METALS COMPANY INC.

 

Consolidated Statements of Shareholders’ Equity

(US dollars in millions – Unaudited)

 

 

Three months ended

 

 

March 31,

2009

 

March 31,

2008

Common Shares

 

 

 

 

 

 

Balance, beginning of period

 

$

484.1

 

$

268.1

Proceeds from exercise of stock options

 

 

 

 

0.4

Transferred from contributed surplus on exercise of options

 

 

 

 

0.2

Balance, end of period

 

$

484.1

 

$

268.7

Common Share Warrants

 

 

 

 

 

 

Balance, beginning and end of period

 

$

35.0

 

$

35.0

Contributed Surplus

 

 

 

 

 

 

Balance, beginning of period

 

$

40.4

 

$

26.5

Amortization of fair value of employee stock options

 

 

1.4

 

 

2.0

Transferred to common shares on exercise of options

 

 

 

 

(0.2)

Stock-based compensation tax adjustment

 

 

 

 

0.1

Balance, end of period

 

$

41.8

 

$

28.4

Retained Earnings

 

 

 

 

 

 

Balance, beginning of period

 

$

304.3

 

$

129.7

Net income

 

 

11.2

 

 

46.8

Balance, end of period

 

$

315.5

 

$

176.5

Accumulated Other Comprehensive (Loss) Income

 

 

 

 

 

 

Balance, beginning of period

 

$

(46.3)

 

$

28.2

Foreign currency translation adjustments

 

 

(9.1)

 

 

(11.2)

Balance, end of period

 

$

(55.4)

 

$

17.0

Shareholders’ Equity, end of period

 

$

821.0

 

$

525.6

 

The accompanying notes are an integral part of these consolidated financial statements.

- 4 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

1.

Description of Business

Thompson Creek Metals Company Inc. is a Canadian molybdenum mining corporation with vertically integrated mining, milling, processing and marketing operations in Canada and the United States (“US”). The US operations include the Thompson Creek Mine (mine and mill) in Idaho, the Langeloth Metallurgical Roasting Facility in Pennsylvania, as well as all roasting and sales of third party purchased material. The Canadian operations consist of a 75% joint venture interest in the Endako Molybdenum Mine Joint Venture (“Endako Mine”) (mine, mill and roaster) in British Columbia. In addition, the Corporation has two high-grade underground molybdenum development projects comprised of an option to acquire up to 75% of the Mount Emmons molybdenum property, located in Colorado, and the 100% owned Davidson molybdenum property (“Davidson Project”), located in British Columbia.

2.

Basis of Presentation and Measurement Uncertainty

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) for interim financial information and are expressed in US dollars unless otherwise stated. Accordingly, the interim consolidated financial statements of the Corporation do not include all information and note disclosures as required under Canadian GAAP for annual financial statements, and should be read in conjunction with the Corporation’s 2008 audited consolidated financial statements and the corresponding notes thereto.

The accompanying unaudited interim consolidated financial statements include all adjustments that are, in the opinion of management, necessary for a fair presentation.

The preparation of financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as of the date of the financial statements, and the reported amounts of revenues and expenditures during the reporting period.

The consolidated financial statements include the accounts of the Corporation and its subsidiaries. The principal subsidiaries of the Corporation are:

 

Thompson Creek Metals Company USA

 

Thompson Creek Mining Co.

 

Langeloth Metallurgical Company LLC

 

Cyprus Thompson Creek Mining Company

 

Thompson Creek Mining Ltd.

 

Blue Pearl Mining Inc.

 

Mt. Emmons Moly Company

The consolidated financial statements also include the Corporation’s pro rata share of its 75% joint venture interest in the Endako Mine, and its 50% share in Highlands Ranch LLC.

All intercompany accounts and transactions have been eliminated on consolidation.

Certain comparative figures for 2008 have been reclassified to conform to the 2009 financial statement presentation.

 

- 5 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

Measurement Uncertainty

The Corporation’s financial statements are based on a number of significant estimates, including the fair value of goodwill, impairments of long-lived assets, the timing and costs associated with its asset retirement obligations, estimates of molybdenum mineral reserves used for depreciation, depletion and amortization, and the fair value of financial and derivative instruments. As the estimation process is inherently uncertain, actual future outcomes could differ from current estimates and assumptions, potentially having material effects on future financial statements.

3.

Accounting Changes and Accounting Policy Developments

Accounting Changes

Goodwill and Intangible Assets

Effective January 1, 2009 the Corporation adopted Canadian Institute of Chartered Accountants (“CICA”) Section 3064, “Goodwill and Intangible Assets”, replacing Section 3062, “Goodwill and Other Intangible Assets” and Section 3450, “Research and Development Costs”. Section 3064 establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit-oriented enterprises. Standards concerning goodwill are unchanged from the standards included in Section 3062. The adoption of Section 3064 did not have any impact on the Corporation’s consolidated financial statements.

 

Credit Risk and Fair Value of Financial Assets and Liabilities

 

In January 2009, the CICA issued Emerging Issues Committee (“EIC”) Abstract 173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities.” The EIC provides guidance on evaluating credit risk of an entity and counterparty when determining the fair value of financial assets and financial liabilities, including derivative instruments. This standard is effective for the fiscal year beginning January 1, 2009. The adoption of EIC-173 did not have a significant impact on the Corporation’s consolidated financial statements.

 

Mining Exploration Costs

 

In March 2009, the CICA issued EIC-174, “Mining Exploration Costs.” The EIC provides guidance on the accounting and the impairment review of exploration costs. This standard is effective for the fiscal year beginning January 1, 2009. The adoption of this EIC did not have any impact on the Corporation’s consolidated financial statements.

Accounting Policy Developments

Convergence with International Financial Reporting Standards (“IFRS”)

In February 2008, the Canadian Accounting Standards Board confirmed that publicly accountable enterprises will be required to adopt International Financial Reporting Standards (“IFRS”) for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted. Accordingly, the conversion to IFRS will be applicable to the Corporation’s reporting no later than in the first quarter of 2011, with restatement of comparative information presented. The conversion to IFRS will impact the Corporation’s accounting policies, information technology and data systems, internal control over financial reporting, and disclosure controls and procedures. The transition may also impact business activities, such as foreign currency, certain

 

- 6 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

contractual arrangements, debt covenants and compensation arrangements. Accordingly, the Corporation has undertaken an in-depth review of companywide accounting policies and procedures, comparing current financial reporting with IFRS.

 

4.

Short-term Investments

As of March 31, 2009, the Corporation had $100.3 million of short-term investments ($nil as of December 31, 2008).  These investments consist of US and Canadian government treasury securities and US government-backed commercial paper with a maturity of greater than 90 days and less than 180 days.  These short-term investments are categorized as held-to-maturity financial instruments and are recorded at amortized cost.  When there is objective evidence that held-to-maturity financial assets are impaired and there is a decline in the fair value below amortized cost that is considered other than temporary, an impairment loss is recorded for the excess of amortized cost over fair value.

5.

Inventory

(US$ in millions)

 

 

March 31,

2009

 

December 31,

2008

Finished product

 

$

34.2

 

$

42.9

Work-in-process

 

 

8.9

 

 

10.5

Stockpiled ore

 

 

2.3

 

 

3.7

 

 

$

45.4

 

$

57.1

 

 

As of March 31, 2009, of the $34.2 million classified as finished product, $1.4 million was valued at net realizable value, which resulted in a charge to cost of sales of $0.3 million. This charge was caused by a decline in the market price of molybdenum during the first quarter of 2009 to approximately $8.00 per pound. At December 31, 2008, of the $42.9 million classified as finished product, $19.4 million was valued at net realizable value.

The Corporation values stockpiled ore at the lower of cost or net realizable value. The Corporation’s 75% owned Endako Mine has incurred costs for stockpiled ore that are recorded at $nil in inventory as the ore grade of this material is below the cut-off grade for further processing, and at estimated future market prices, the material has no net realizable value. The costs for this ore have been included in cost of sales (three months ended March 31, 2009 - $nil; three months ended March 31, 2008 - $0.9 million).

 

- 7 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

6.

Property, Plant and Equipment

(US$ in millions)

 

 

March 31,

2009

 

December 31,

2008

 

Mining properties

 

$

275.5

 

$

274.0

 

Mining equipment

 

 

169.6

 

 

163.9

 

Processing facilities

 

 

110.2

 

 

110.2

 

Deferred stripping costs

 

 

70.1

 

 

62.8

 

Endako mill expansion

 

 

47.1

 

 

43.4

 

Construction in progress

 

 

23.4

 

 

30.8

 

Other

 

 

1.6

 

 

1.1

 

 

 

 

697.5

 

 

686.2

 

Less: Accumulated depreciation, depletion and amortization

 

(97.1)

 

 

(92.1)

 

 

 

$

600.4

 

$

594.1

 

 

The following table summarizes activity related to stripping costs that have been deferred:

(US$ in millions)

 

 

Deferred

costs

 

Accumulated

amortization

 

Net deferred

Costs

As of December 31, 2008

 

 

$

62.8

 

$

(7.2)

 

$

55.6

Costs deferred in period

 

 

 

7.3

 

 

 

 

7.3

Amortization of previously deferred costs

 

 

 

(1.8)

 

 

(1.8)

As of March 31, 2009

 

 

$

70.1

 

$

(9.0)

 

$

61.1

 

- 8 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

7.

Long-term Debt

Long-term debt consists of:

(US$ in millions)

 

 

March 31,

2009

 

December 31,

2008

Promissory note

 

$

1.0

 

$

Equipment loan – fixed rate

 

 

13.0

 

 

13.6

Equipment loans – variable rate

 

 

2.9

 

 

3.7

 

 

 

16.9

 

 

17.3

Less: Current portion

 

 

(5.4)

 

 

(5.6)

 

 

$

11.5

 

$

11.7

 

The Corporation has a $35 million first lien revolving collateralized line of credit secured by a significant amount of the Corporation’s US based assets. This credit facility, which has a final maturity date of October 26, 2011, bears interest at LIBOR plus 2.5% and includes both standard financial and non-financial covenants, including ratio tests for leverage, interest coverage and working capital. The Corporation was in compliance with these covenants as of March 31, 2009. As of March 31, 2009, drawings on this facility were $nil (December 31, 2008 – $nil).

As of March 31, 2009, the Corporation also held equipment loans with each loan secured by the underlying assets. The variable rate loans bear interest at LIBOR plus 2% with the fixed rate loan bearing interest at 5.9%. These loans are scheduled to mature no later than October 31, 2013.

In January 2009, the Corporation purchased a property interest in Colorado ($2.0 million), of which $1.0 million was paid in cash, and the remaining $1.0 million was paid with a promissory note. The promissory note bears interest at a fixed rate of 6%, and is due in equal payments over a five year period, with the first payment due in January 2010.

The following table summarizes activity related to interest and finance fees:

(US$ in millions)

 

 

Three Months Ended

 

 

March 31,

2009

 

March 31,

2008

Interest expense

 

$

0.3

 

$

6.1

Finance fees

 

 

 

 

0.6

 

 

$

0.3

 

$

6.7

 

- 9 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

8.

Derivative Financial Instruments

 

a)

Forward Currency Contracts

The Corporation uses foreign currency forward contracts to fix the rate of exchange for Canadian dollars at future dates in order to reduce the Corporation’s exposure to foreign currency fluctuations on cash flows related to its share of the Endako Mine’s operations. The terms of these contracts are less than one year. At March 31, 2009, the Corporation had open forward currency contracts with a total commitment to purchase Cdn$14.5 million at an average rate of US$0.78 (December 31, 2008 – Cdn$6.0 million at an average rate of US$0.81).

The Corporation does not consider these contracts to be hedges for accounting purposes and has determined these contracts to be derivative instruments, the fair value of which was an asset of $0.2 million at March 31, 2009 (December 31, 2008 –$0.1 million). The asset has been included in other assets on the Corporation’s consolidated balance sheets.

 

b)

Provisionally-priced contracts

The Corporation enters into agreements to sell and purchase molybdenum at prices to be determined in the future. The future pricing mechanism of these agreements constitutes an embedded derivative which must be bifurcated and separately recorded.

Changes to the fair value of embedded derivatives related to molybdenum sales agreements are included in molybdenum sales revenue in the determination of net income. As of March 31, 2009, the fair value of these embedded derivatives was a liability of $0.9 million (December 31, 2008 – asset of $0.1 million) and has been included in accounts payable on the Corporation’s balance sheet. For the three months ended March 31, 2009, an unrealized loss of $1.0 million has been included in molybdenum sales on the Corporation’s consolidated statements of income (three months ended March 31, 2008 - no sales agreements in prior year).

Changes to the fair value of embedded derivatives related to molybdenum purchases are included in operating expenses in the determination of net income. As of March 31, 2009, the fair value of these embedded derivatives was an asset of $0.1 million (December 31, 2008 – liability of $0.7 million). For the three months ended March 31, 2009, an unrealized gain of $0.1 million has been included in operating expenses on the Corporation’s consolidated statements of income (three months ended March 31, 2008 - $0.5 million loss).

 

c)

Forward Sales Contracts

The Corporation has forward sales contracts with fixed-price agreements under which it is required to sell certain future molybdenum production at prices that may be different than the prevailing market price. Forward sales contracts in place at March 31, 2009 cover the period 2009 to 2011. As of March 31, 2009, the Corporation had committed to sell approximately 1.3 million pounds at an average market price of approximately $17.11 per pound. These contracts had a mark-to-market value totaling $5.2 million (as of December 31, 2008 - $4.5 million). The current portion of $2.0 million has been included in other assets on the Corporation’s consolidated balance sheet. For the three months ended March 31, 2009, an unrealized gain of $0.6 million related to these forward sales contracts has been included as molybdenum sales on the Corporation’s consolidated statements of income (three months ended March 31, 2008 - $0.2 million loss).

 

- 10 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

9.

Other Liabilities

Other liabilities consist of:

(US$ in millions)

 

 

March 31,

2009

 

December 31,

2008

Severance and retention liability

 

$

14.5

 

$

14.5

Contractual sales obligations

 

 

6.7

 

 

7.3

 

 

$

21.2

 

$

21.8

 

The Corporation maintains an employee severance and retention program for certain individuals employed by Thompson Creek USA. As of March 31, 2009, the Corporation had recorded a liability of $15.2 million, of which $0.7 million was included in current liabilities (December 31, 2008 – $14.5 million and $nil classified in current liabilities). The Corporation has set aside funding for this liability by making periodic contributions to a trust fund based upon program participants’ salaries. The trust fund assets totaled $15.0 million at March 31, 2009 (December 31, 2008 – $14.2 million) and have been presented as restricted cash, a long-term asset, on the Corporation’s consolidated balance sheets. The Corporation recognized an expense of $1.0 million in the three months ended March 31, 2009 (three months ended March 31, 2008 - $1.6 million) for the retention and severance program.

On acquisition of Thompson Creek USA, the Corporation acquired a contractual agreement to sell 10% of certain production at the Thompson Creek Mine at an amount that was less than the prevailing market price at the date of the acquisition. Deliveries under this contract commenced in 2007 and, based on the current mine plan, will continue through 2011. As of March 31, 2009, the Corporation has a liability of $6.7 million related to future deliveries under this agreement (December 31, 2008 – $7.3 million). As this contractual agreement is satisfied by delivery of product, the liability is being drawn down with a corresponding adjustment to molybdenum sales in the determination of net income. For the three months ended March 31, 2009, $0.6 million related to this obligation had been realized and included in molybdenum sales (three months ended March 31, 2008 – $0.5 million).

 

10.

Asset Retirement Obligations

 

The following table details items affecting asset retirement obligations for future mine closure and reclamation costs in connection with the Corporation’s Thompson Creek Mine, Endako Mine and Davidson Project:

 

(US$ in millions)

 

Thompson

Creek Mine

 

Endako

Mine

 

Davidson
Project

 

Total

As of December 31, 2008

$

18.7

 

$

4.4

 

$

0.2

 

$

23.3

Revisions to expected cash flows

 

 

 

 

 

 

 

Accretion

 

0.2

 

 

0.1

 

 

 

 

0.3

Foreign exchange

 

 

 

(0.1)

 

 

 

 

(0.1)

As of March 31, 2009

$

18.9

 

$

4.4

 

$

0.2

 

$

23.5

 

 

- 11 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

11.

Common Share Capital and Common Share Warrants

As of March 31, 2009 and December 31, 2008, there were 122,253,000 common shares outstanding and 24,505,000 common share warrants outstanding.

12.

Stock-based Compensation

 

The Corporation uses the fair value method of accounting for stock-based compensation and recognized a stock-based compensation expense of $1.4 million for the three months ended March 31, 2009 (three months ended March 31, 2008 – $1.7 million). The stock-based compensation expense recorded in each period includes costs related to option awards made during the period as well as the amortization of costs of prior period awards that did not vest at the grant date.

The Corporation did not grant any stock options during the three months ended March 31, 2009 (three months ended March 31, 2008 – 25,000).

As of March 31, 2009 and December 31, 2008, there were 8,788,000 options outstanding at a weighted average exercise price per option of Cdn $12.51.

13.

Commitments and Contingencies

 

The Corporation has entered into commitments to buy Canadian dollars at future dates at established exchange rates (see Note 8(a)).

The Corporation has committed to sell a certain amount of production at a defined price that may be greater or less than market (see Note 8(c) and Note 9).

In the normal course of operations, the Corporation enters into agreements for the purchase of molybdenum. As of March 31, 2009, the Corporation had commitments to purchase approximately 3.1 million pounds of molybdenum sulfide concentrates for the remainder of 2009 to be priced at a discount to the market price for molybdenum oxide at the time of purchase.

As of March 31, 2009, the Corporation had commitments related to the purchase of major mill equipment for its share of the Endako mill expansion of approximately $18.2 million in 2009 and approximately $18.0 million in 2010. In January 2008, a payment of $100.0 million was made to the former shareholders of Thompson Creek Metals Company USA to settle an acquisition price adjustment recorded in 2007 related to the market price of molybdenum in 2007. The Corporation may be responsible for a further contingent payment in early 2010 of $25.0 million if the average price of molybdenum exceeds $15.00 per pound in 2009.

 

- 12 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

14.

Exploration and Development

 

(US$ in millions)

 

 

Three Months Ended

 

 

March 31,

2009

 

March 31,

2008

Davidson project

 

$

0.2

 

$

0.9

Mt. Emmons project

 

 

1.5

 

 

Endako Mine

 

 

 

 

0.1

 

 

$

1.7

 

$

1.0

 

 

15.

Income and Mining Taxes

 

(US$ in millions)

 

 

Three Months Ended

 

 

March 31,

2009

 

March 31,

2008

Current income and mining taxes

 

$

3.3

 

$

25.5

Future income and mining taxes recoverable

 

 

(5.6)

 

 

(6.3)

 

 

$

(2.3)

 

$

19.2

Income and mining taxes differ from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes. The differences result from the following items:

(US$ in millions)

 

Three Months Ended

 

March 31,

2009

 

March 31,

2008

Income before income and mining taxes

$

8.9

 

$

66.0

Combined Canadian federal and provincial income tax rates

 

30%        

 

 

31%

Income taxes based on above rates

 

2.7

 

 

20.5

Increase (decrease) to income taxes due to:

 

 

 

 

 

Difference in foreign statutory tax rates

operations

 

0.5

 

 

2.5

Provincial and state mining taxes

 

0.2

 

 

3.6

Withholding taxes

 

0.3

 

 

0.1

Non-deductible expenses

 

0.5

 

 

1.7

Non-taxable income

 

(0.5)

 

 

(0.4)

Depletion allowance

 

(2.1)

 

 

(6.9)

Change in valuation allowance

 

(0.7)

 

 

Impact of reduction in tax rates on future income and

mining taxes

 

(1.5)

 

 

(2.6)

Other

 

(1.7)

 

 

0.7

Income and mining taxes (recoverable)

$

(2.3)

 

$

19.2

 

- 13 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

16.

Net Income per Share

 

(US$ in millions except share and per share amounts)

 

Three Months Ended

 

March 31,

2009

 

March 31,

2008

Net income

$

11.2

 

$

46.8

 

 

 

 

 

 

Basic weighted-average number of shares outstanding (000’s)

 

122,253

 

 

113,457

Effect of dilutive securities

 

 

 

 

 

Common share warrants

 

 

 

11,720

Stock options

 

77

 

 

2,497

Diluted weighted-average number of shares outstanding (000’s)

 

122,330

 

 

127,674

 

 

 

 

 

 

Net income per share

 

 

 

 

 

Basic

$

0.09

 

$

0.41

Diluted

$

0.09

 

$

0.37

For the three months ended March 31, 2009, 8,711,000 stock options and 24,505,000 warrants (March 31, 2008 – 2,025,500 stock options and nil warrants) have been excluded from the computation of diluted securities as these would be considered to be anti-dilutive.

17.

Related Party Transactions

Consolidated sales to members of a group of companies affiliated with the other participant in the Endako Mine joint venture were $12.1 million for the three months ended March 31, 2009, representing 15.4% of the Corporation’s total revenues for the period (three months ended March 31, 2008 – $54.2 million and 21.3%, respectively). For the three months ended March 31, 2009, the Corporation recorded management fee income of $0.1 million (three months ended March 31, 2008 – $0.2 million) and selling and marketing costs of $0.1 million (three months ended March 31, 2008 – $0.4 million) from this group of companies. At March 31, 2009, the Corporation’s accounts receivable included $3.6 million owing from this group of companies (December 31, 2008 – $8.9 million).

 

- 14 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

18.

Supplementary Cash Flow Information

 

(US$ in millions)

 

Three Months Ended

 

March 31,

2009

 

March 31,

2008

Change in non-cash working capital:

 

 

 

 

 

Accounts receivable

$

23.5

 

$

(39.8)

Product inventory

 

10.8

 

 

21.0

Material and supplies inventory

 

1.0

 

 

(4.9)

Prepaid expense and other current assets

 

0.1

 

 

0.1

Income and mining taxes recoverable

 

 

 

13.4

Accounts payable and accrued liabilities

 

(2.5)

 

 

19.7

Income and mining taxes payable

 

(7.5)

 

 

1.7

 

$

25.4

 

$

11.2

 

 

 

 

 

 

 

Cash interest paid

 

$

0.2

 

$

5.0

Cash income taxes paid

 

$

10.4

 

$

10.2

Cash and cash equivalents is comprised of:

 

 

 

 

 

 

Cash

 

$

63.1

 

$

47.5

Cash equivalents

 

$

97.2

 

 

 

 

$

160.3

 

$

47.5

Cash equivalents consist of treasury securities and money market instruments issued or guaranteed by US and Canadian financial institutions and the US and Canadian governments that have an original maturity date of less than 90 days.

19.

Financial Risk Management

The Corporation’s activities expose it to a variety of financial risks which include foreign exchange risk, interest rate risk, commodity price risk, counterparty and credit risk and liquidity risk.

The Corporation enters into foreign currency exchange forward contracts, molybdenum forward sales contracts, and provisionally-priced contracts for the purchase and sale of molybdenum to manage its exposure to fluctuations in foreign exchange rates and molybdenum prices.

The carrying amounts of accounts receivable, accounts payable and accrued liabilities and fixed and variable rate debt approximate fair value as of March 31, 2009 and December 31, 2008, respectively.

The Corporation does not acquire, hold, or issue financial instruments for trading or speculative purposes. Derivative instruments are used to manage certain market risks resulting from fluctuations in foreign currency exchange rates. On a limited basis, the Corporation enters into forward contracts for the purchase of Canadian dollars.

The Corporation monitors its positions with, and the credit quality of, the financial institutions in which it invests. The Corporation’s current investment policy limits investments to US and Canadian government-backed financial instruments.

The Corporation controls credit risk related to accounts receivable through credit approvals, credit limits, and monitoring procedures. Management considers the credit of each individual customer, including payment history and other commercial business factors.

 

- 15 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

Foreign Exchange Risk

The US dollar is the measurement currency of the majority of the Corporation’s activities. However, the Canadian dollar is the measurement currency of the Corporation’s self sustaining Canadian operations. The Corporation has potential currency exposures in respect of items denominated in currencies other than the operations’ measurement currency. The Corporation’s foreign exchange exposures include:

 

Transactional exposure in its Canadian dollar self sustaining operation as molybdenum sales are denominated in US dollars and the majority of operating expenses are in Canadian dollars;

 

Transactional exposure to its self sustaining Canadian operations; whereby, those operations hold financial instruments in a currency other than the Canadian dollar.

 

Transactional exposure to Canadian dollar transactions and balances in US dollar functional currency operations.

 

The Corporation enters into foreign exchange forward contracts to manage these exposures. As of March 31, 2009, the Corporation had open forward exchange contracts for Cdn$14.5 million to sell US dollars and buy Canadian dollars at a weighted average exchange rate of US$0.78. All foreign exchange forward contracts are due within the year. As of March 31, 2009, the fair value of these contracts was an asset of $0.2 million.

With other variables unchanged, each $0.10 strengthening (weakening) of the US dollar against the Canadian dollar would result in an increase (decrease) of approximately $6.2 million in net earnings for the three months period ended March 31, 2009.

Interest Rate Risk

The Corporation has invested and borrowed at variable rates. Cash and cash equivalents receive interest based on market interest rates. Some of the Corporation’s debt facilities are variable rate facilities based on LIBOR and prime rates.

Commodity Price Risk

The Corporation enters into certain molybdenum sales contracts where it sells future molybdenum production at fixed prices. These fixed prices may be different than the quoted market prices at the date of sale. The Corporation physically delivers molybdenum under these contracts; however, has chosen not to use the normal usage exemption and therefore treats these contracts as non-financial derivatives. The fair value is recorded on the balance sheet with changes in fair value recorded in revenue. The fair value is calculated using a discounted cash flow based on estimated forward prices. The Corporation uses an average of long-term prices as forecast by independent analysts.

 

As of March 31, 2009, the fair value of the Corporation’s fixed forward sales contracts is as follows:

 

(US$ in millions except per pound amounts)

 

2009

 

2010

 

2011

Molybdenum committed (000’s lb)

 

 

405

 

 

490

 

 

417

Fair value – asset

 

$

2.1

 

$

1.5

 

$

1.6

Average price ($/lb)

 

$

13.26

 

$

17.00

 

$

21.00

 

 

- 16 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

The Corporation also enters into molybdenum sale and purchase agreements with provisional pricing mechanisms where the final prices are determined by quoted market prices subsequent to the date of the sale or purchase. As a result, the value of the respective trade receivable and trade payable changes as the underlying market price changes. This component of these contracts is an embedded derivative, which is initially recorded at fair value with subsequent changes in fair value recorded in revenue and operating expenses, respectively. The Corporation uses the latest Platts Metals Week published average molybdenum oxide price as the estimated forward price.

As of March 31, 2009, the fair value of embedded derivatives in the provisionally priced sale and purchase agreements is as follows:

(US$ in millions except per pound amounts)

Pounds Sold/Purchased

(000’s lb)

 

Fair Value

Asset (Liability)

Provisionally priced sales

639

 

$

(0.9)

Provisionally priced purchases

187

 

$

0.1

These agreements will mature within the year.

Counterparty and Credit Risk

The Corporation is exposed to counterparty risk from its current cash and cash equivalent balances, its short-term cash investments, and its insurance policy to provide financial assurance of future mine reclamation costs at its mines. Counterparties to current cash balances, money market instruments, government treasury securities and its insurance policy are US and Canadian institutions and the US and Canadian governments. The Corporation manages these counterparty risks by establishing approved counterparties and assigning investment limits for counterparties.

The Corporation manages its credit risk from its accounts receivable through established credit monitoring activities. As of March 31, 2009 the Corporation had one customer which owed the Corporation more than $5.0 million and accounted for approximately 27% of all receivables outstanding. There were another six customers having balances greater than $1.0 million but less than $5.0 million that accounted for 32% of total receivables. All of these balances were compliant with credit terms and scheduled payment dates. The Corporation’s maximum credit risk exposure is the carrying value of its accounts receivable.

 

- 17 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

Liquidity Risk

The Corporation manages its liquidity risk by maintaining cash and cash equivalent balances and by utilizing its line of credit, if necessary. Surplus cash is invested in a range of 30 to 180-day US and Canadian government-backed financial instruments under the Corporation’s investment policy. As of March 31, 2009, the Corporation had an unutilized line of credit of $35.0 million.

As of March 31, 2009, contractual undiscounted cash flow requirements for financial assets and liabilities, including interest payments are as follows:

(US$ in millions)

 

 

2009 to 2011

 

2012 Onward

 

Total

Accounts payable

 

$

24.0

 

$

 

$

24.0

Long-term debt

 

$

11.5

 

$

5.4

 

$

16.9

Commodity contracts

 

$

0.8

 

$

 

$

0.8

Capital commitments

 

$

36.2

 

$

 

$

36.2

Pledged Financial Assets

The Corporation has financial assets that are pledged for employee compensation and reclamation obligations. The Corporation maintains a separate trust fund to satisfy its obligation to employees under a severance and retention compensation arrangement. Reclamation deposits are maintained to satisfy the Corporation’s obligation for future reclamation expenditures at its mine sites.

 

- 18 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

20.

Capital Risk Management

 

The Corporation defines its capital as follows:

 

Shareholders’ equity;

 

Long-term debt; and

 

Short-term debt.

Capital as defined above as of March 31, 2009 and December 31, 2008 are as follows:

(US$ in millions)

 

 

March 31,

2009

 

December 31,

2008

Shareholders’ equity

 

$

821.0

 

$

817.5

Debt

 

 

16.9

 

 

17.3

 

 

$

837.9

 

$

834.8

 

The Corporation’s objectives with regard to its capital are:

 

Maintain adequate working capital to operate its business;

 

Comply with financial covenants on the line of credit;

 

Utilize equipment financings to supplement working capital needs; and

 

Opportunistic investments

 

The Corporation’s capital structure is managed and adjusted as necessary by monitoring economic conditions, debt and equity markets, and changes to the Corporation’s operating plans. Covenants relating to existing debt are monitored regularly to ensure compliance. Outstanding debt is evaluated to determine if it contains the most favorable terms available to the Corporation or if the Corporation should reduce the amount outstanding from cash available or pursue new equity issuances.

 

- 19 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

21.

Segment Information

The Corporation has two reportable segments: US Operations and Canadian Operations. The US Operations segment includes all mining, milling, roasting and sale of molybdenum products from the Thompson Creek Mine and the Langeloth Metallurgical Facility, as well as all roasting and sales of third party purchased material. The Canadian Operations segment includes all mining, milling, roasting and sale of molybdenum products from the 75% owned Endako Mine. The Corporation evaluates segment performance based on income from mining and processing. The Corporation attributes other income and expenses to the reporting segments if the income or expense is directly related to segment operations, as described above. The Corporation does not allocate corporate expenditures such as general and administrative, exploration and development, and interest income and expense items. The Corporation does not report income and mining taxes by reporting segment as the Corporation’s tax attributes are determined by legal entity.

Segment information for the three months ended and as of March 31, 2009 and 2008 is as follows:  

(US$ in millions)

 

 

 

 

 

Three months ended March 31, 2009

US

Operations

 

Canadian

Operations

 

Total

Revenues

 

 

 

 

 

 

 

 

Molybdenum sales

$

53.1

 

$

22.4

 

$

75.5

Tolling and calcining

 

3.4

 

 

 

 

3.4

 

 

56.5

 

 

22.4

 

 

78.9

Cost of sales

 

 

 

 

 

 

 

 

Operating expenses

 

39.4

 

 

13.9

 

 

53.3

Selling and marketing

 

0.9

 

 

0.5

 

 

1.4

Depreciation, depletion and amortization

 

7.9

 

 

4.0

 

 

11.9

Accretion

 

0.2

 

 

0.1

 

 

0.3

 

 

48.4

 

 

18.5

 

 

66.9

Segment income from mining and

processing

 

8.1

 

 

3.9

 

 

12.0

 

 

 

 

 

 

 

 

 

Other segment (income) expenses:

 

 

 

 

 

 

 

 

Gain on foreign exchange

 

 

 

(3.2)

 

 

(3.2)

 

 

 

 

(3.2)

 

 

(3.2)

Segment income before income and mining taxes

 

$

8.1

 

 

$

7.1

 

 

$

15.2

 

 

- 20 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

(US$ in millions)

 

 

 

 

 

Three months ended March 31, 2008

US

Operations

 

Canadian

Operations

 

Total

Revenues

 

 

 

 

 

 

 

 

Molybdenum sales

$

195.7

 

$

54.5

 

$

250.2

Tolling and calcining

 

4.6

 

 

 

 

4.6

 

 

200.3

 

 

54.5

 

 

254.8

Cost of sales

 

 

 

 

 

 

 

 

Operating expenses

 

150.8

 

 

15.8

 

 

166.6

Selling and marketing

 

1.8

 

 

0.7

 

 

2.5

Depreciation, depletion and amortization

 

4.4

 

 

3.3

 

 

7.7

Accretion

 

0.6

 

 

0.1

 

 

0.7

 

 

157.6

 

 

19.9

 

 

177.5

Segment income from mining and

processing

 

42.7

 

 

34.6

 

 

77.3

 

 

 

 

 

 

 

 

 

Other segment (income) expenses:

 

 

 

 

 

 

 

 

Stock-based compensation

 

0.3

 

 

0.1

 

 

0.4

Gain on foreign exchange

 

 

 

(1.7)

 

 

(1.7)

 

 

0.3

 

 

(1.6)

 

 

(1.3)

Segment income before income and mining taxes

 

$

42.4

 

 

$

36.2

 

 

$

78.6

 

 

 

 

 

 

 

 

 

 

 

- 21 -

 


THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements

Three Months Ended March 31, 2009

(Unaudited)

 

 

Reconciliation of segment income to net income

(US$ in millions)

March 31,

2009

 

March 31,

2008

 

 

 

 

 

 

Segment income

$

15.2

 

$

78.6

Other (income) expenses:

 

 

 

 

 

General and administrative

 

3.7

 

 

3.4

Stock-based compensation

 

1.4

 

 

1.3

Exploration and development

 

1.7

 

 

1.0

Interest and finance fees

 

0.3

 

 

6.7

Interest income

 

(0.4)

 

 

(0.8)

Other

 

(0.4)

 

 

1.0

Income before income and mining taxes

 

8.9

 

 

66.0

Income and mining taxes (recoverable)

 

(2.3)

 

 

19.2

Net income

$

11.2

 

$

46.8

 

Other segment information regarding capital expenditures, assets and liabilities, including the assets and liabilities attributed to corporate operations, is as follows (US$ in millions):

 

As of March 31, 2009

 

US Operations

 

 

Canadian Operations

 

 

Corporate

 

 

Total

Capital expenditures

$

11.5

 

$

13.4

 

$

2.7

 

$

27.6

Capital assets

$

323.4

 

$

276.5

 

$

0.5

 

$

600.4

Goodwill

$

47.0

 

$

 

$

 

$

47.0

Assets

$

671.7

 

$

392.2

 

$

11.1

 

$

1,075.0

Liabilities

$

162.6

 

$

88.8

 

$

2.6

 

$

254.0

 

As of March 31, 2008

 

US Operations

 

 

Canadian Operations

 

 

Corporate

 

 

Total

Capital expenditures

$

3.7

 

$

4.4

 

$

 

$

8.1

Capital assets

$

274.6

 

$

277.1

 

$

2.4

 

$

554.1

Goodwill

$

80.0

 

$

41.9

 

$

 

$

121.9

Assets

$

643.9

 

$

394.9

 

$

4.9

 

$

1,043.7

Liabilities

$

179.9

 

$

117.6

 

$

220.6

 

$

518.1

 

 

 


EXHIBIT 2

 

THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

This Management’s Discussion and Analysis (“MD&A”) of financial condition and results of operation of Thompson Creek Metals Corporation Inc. (“Thompson Creek” or the “Corporation”) was prepared as of May 6, 2009, and should be read in conjunction with the unaudited consolidated financial statements of the Corporation and the notes thereto for the three months ended March 31, 2009 and with both the audited consolidated financial statements of the Corporation and the notes thereto and Management’s Discussion and Analysis for the year ended December 31, 2008. All dollar amounts are expressed in United States (“US”) dollars unless otherwise indicated. Additional information on the Corporation is available on SEDAR at www.sedar.com, or on EDGAR at www.sec.gov.

 

Business Overview

 

Thompson Creek is a Canadian molybdenum mining company with vertically integrated mining, milling, processing and marketing operations in Canada and the US. The Corporation’s operations include the Thompson Creek Mine (mine and mill) in Idaho, the Langeloth Metallurgical Roasting Facility in Pennsylvania and a 75% joint venture interest in the Endako Molybdenum Mine Joint Venture (“Endako Mine”) (mine, mill and roaster) in British Columbia. In addition, the Corporation has two underground molybdenum development projects comprised of an option to acquire up to 75% of the Mount Emmons molybdenum property, located in Colorado, and the Davidson molybdenum property (“Davidson Project”), located in British Columbia.

 

Highlights First Quarter 2009

 

 

Net income for the first quarter of 2009 was $11.2 million, or $0.09 per basic and diluted common share.

 

 

Consolidated revenues for the first quarter of 2009 were $78.9 million, down 69% from the first quarter of 2008, as a result of significantly lower molybdenum sales prices.

 

 

Consolidated molybdenum sales for the first quarter of 2009 totalled $75.5 million, representing 7.4 million pounds sold at an average realized price of $10.14 per pound, compared to molybdenum sales of $250.2 million for the first quarter of 2008, representing 7.7 million pounds sold at an average realized price of $32.69 per pound.

 

 

Operating cash flows were $44.7 million for the first quarter of 2009, compared to $63.4 million for the first quarter of 2008.

 

 

Capital expenditures totalled $18.7 million in the first quarter of 2009, comprised of $14.9 million of sustaining capital expenditures together with $3.8 million of capital expenditures for the Endako mill expansion (75% share).

 

 

Total cash, cash equivalents and short-term investments at March 31, 2009 were $260.6 million, compared to $258.0 million as of December 31, 2008. Total debt as of March 31, 2009 was $16.9 million compared to $17.3 million as of December 31, 2008.

 

 

Molybdenum mined production in the first quarter of 2009 increased 8% to 6.1 million pounds from 5.6 million pounds in the first quarter of 2008.

 

 

Average cash cost per pound produced in the first quarter of 2009 was $5.93 per pound compared to $8.29 per pound in the first quarter of 2008.

 

 

 


THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

 

Outlook

 

Molybdenum prices declined gradually during the first quarter of 2009, falling in 11 of the first 13 weeks of the year. The monthly Platts Metals Week published molybdenum oxide price averaged $8.94 per pound during the quarter. For the month of April 2009, this published price declined further to an average $7.90 per pound. The published Platts Metals Week price on April 30, 2009 was a range of $8.30 to $8.80 per pound. The Corporation’s realized sales price averaged $10.14 per pound for the first quarter of 2009, which reflects upgraded product sales as well as sales of molybdenum oxide (which typically lags the market price).  

 

Based on market trends experienced in the January to April period, the Corporation expects its average realized price to be lower in the second quarter than in the first quarter of 2009. Additionally, the Corporation’s sales volumes are expected to be less during the 2009 second quarter as the Company continues its efforts to match production with the anticipated level of sales.

 

For fiscal 2009, previous guidance remains unchanged with molybdenum production levels of 20 to 24 million pounds. For 2009, expected production from the Thompson Creek Mine is 15 to 17 million pounds (unchanged from previous guidance), and the Corporation’s 75% share of Endako Mine expected production is 5 to 7 million pounds (unchanged from previous guidance).

 

For fiscal 2009, given the lower cash cost per pound produced for the 2009 first quarter, the anticipated average cash cost per pound produced has been revised to an estimated $6.25 to $7.25 per pound (compared to previous guidance of $7.25 to $8.25 per pound), with the Thompson Creek Mine expected to be approximately $6.00 to $7.00 per pound (compared to previous guidance of $7.00 to $8.00 per pound) and the Endako Mine at an estimated cash cost of $7.00 to $8.00 per pound (compared to previous guidance of $8.00 to $9.00 per pound). This assumes a US$/Cdn$ exchange rate of 1.20 for the last nine months of fiscal 2009. The revised fiscal 2009 Thompson Creek Mine cash cost per pound produced includes approximately $30 million of stripping costs, totalling $1.75 to $2.00 per pound produced (compared to previous guidance of $40 million of stripping costs, totalling $2.30 to $2.60 per pound produced) related to future planned production phases. The 2009 Endako Mine operating plan has minimal stripping costs. The decline in the expected cash cost per pound produced was primarily due to the result of favorable foreign exchange rates in the first quarter of 2009 (converting Cdn$ costs to US$ costs) and lower mining and milling costs, including lower grinding media, consumable and electrical power costs together with lower equipment maintenance costs.

 

For fiscal 2009, the Corporation’s share of estimated sustaining capital expenditures at both mines and the Langeloth Metallurgical Facility are expected to be $38 million and 75% of the estimated Endako mill expansion capital expenditures are expected to be $22 million (unchanged from previous guidance).

 

For fiscal 2009, the Corporation’s sales of molybdenum produced from its own mines are expected to be 20 to 24 million pounds, with sales of molybdenum purchased, processed and resold for 2009 expected to be 3 to 4 million pounds (unchanged from previous guidance).

 

The Corporation believes the long-term outlook for its business is positive. The Corporation is positioned to react quickly to further changes in the molybdenum market in order to ensure that working capital levels are maintained. Operating cash flows will be impacted by approximately $20 to $24 million for every $1.00 per pound change in the molybdenum price.

 

 

 

2

 

 


THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

 

Selected Consolidated Operations and Financial Information

 

(US$ in millions except per pound and per share amounts - Unaudited)

 

Three months ended

March 31,

2009

 

2008

Operations

 

 

 

 

 

Molybdenum production from mines (000’s lb) 1

 

6,057

 

 

5,589

Cash cost ($/lb produced) 2

$

5.93

 

$

8.29

Molybdenum sold (000’s lb):

 

 

 

 

 

Thompson Creek Mine and Endako Mine production

 

6,549

 

 

4,082

Product purchased, processed and resold

 

898

 

 

3,572

 

 

7,447

 

 

7,654

Average realized price ($/lb)

$

10.14

 

$

32.69

Financial

 

 

 

 

 

Revenue

 

 

 

 

 

Molybdenum sales

$

75.5

 

$

250.2

Tolling and calcining

 

3.4

 

 

4.6

 

 

78.9

 

 

254.8

Cost of sales

 

 

 

 

 

Operating expenses

 

53.3

 

 

166.6

Selling and marketing

 

1.4

 

 

2.5

Depreciation, depletion and amortization

 

11.9

 

 

7.7

Accretion

 

0.3

 

 

0.7

 

 

66.9

 

 

177.5

Income from mining and processing

 

12.0

 

 

77.3

Net income (loss)

$

11.2

 

$

46.8

Net income (loss) per share

 

 

 

 

 

- basic

$

0.09

 

$

0.41

- diluted

$

0.09

 

$

0.37

Cash flow provided by operating activities

$

44.7

 

$

63.4

 

March 31, 2009

 

December 31, 2008

Cash and cash equivalents

$

160.3

 

$

258.0

Short-term investments

$

100.3

 

$

-

Total assets

$

1,075.0

 

$

1,099.2

Total debt

$

16.9

 

$

17.3

Total liabilities

$

254.0

 

$

281.7

Shareholders’ equity

$

821.0

 

$

817.5

Shares outstanding (000’s)

 

122,253

 

 

122,253

1

Mined production pounds are molybdenum oxide and high performance molybdenum disulfide (“HPM”) from the Corporation’s share of the production from the mines; excludes molybdenum processed from purchased product.

2

Weighted-average of Thompson Creek Mine and Endako Mine cash costs (mining, milling, roasting and packaging) for molybdenum oxide and HPM produced in the period, including all stripping costs. Cash cost excludes: the effect of purchase price adjustments, the effects of changes in inventory, and depreciation, depletion, amortization and accretion. The cash cost for Thompson Creek, which only produces sulfide on site, includes an estimated molybdenum loss and an allocation of roasting and packaging costs from the Langeloth facility. See Non-GAAP Financial Measures on page 12 for additional information.

 

3

 

 


THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

Summary of Quarterly Results

(US$ in millions except per pound and per share amounts – Unaudited)

 

 

Jun 30

Sep 30

Dec 31

Mar 31

Jun 30

Sep 30

Dec 31

Mar 31

 

2007

2007

2007

2008

2008

2008

2008

2009

Operations

 

 

 

 

 

 

 

 

Mined molybdenum

production (000’s lb)

4,466

3,024

3,443

5,589

6,184

6,499

7,773

6,057

 

Cash cost ($/lb produced) 1

$      9.07

$    13.22

$     13.58

$      8.29

$      8.85

$      7.33

$      6.01

$     5.93

Molybdenum sold (000’s lb):

 

 

 

 

 

 

 

 

Thompson Creek Mine and Endako Mine Production

5,079

3,391

3,151

4,082

4,830

6,879

6,558

6,549

Product purchased,

processed and resold

3,075

2,722

3,066

3,572

2,500

3,044

1,565

898

 

8,154

6,113

6,217

7,654

7,330

9,923

8,123

7,447

Average realized price ($/lb)

$    29.59

$     32.06

$     31.08

$    32.69

$    32.68

$    32.85

$    21.72

$   10.14

 

 

 

 

 

 

 

 

 

Financial

 

 

 

 

 

 

 

 

Revenue

$     247.8

$     200.9

$     197.8

$    254.8

$    243.9

$    331.1

$   181.6

$     78.9

Income from mining and

processing

$     104.1

$       60.9

$       47.9

$      77.3

$    105.4

$    159.0

$     88.5

$     12.0

Net income (loss)

$       56.8

$       24.0

$       28.8

$      46.8

$      60.4

$    100.6

$   (24.6)

$     11.2

Income (loss) per share

 

 

 

 

 

 

 

 

- basic

$       0.51

$       0.21

$       0.25

$      0.41

$      0.52

$      0.80

$   (0.20)

$     0.09

- diluted

$       0.45

$       0.18

$       0.22

$      0.37

$      0.45

$      0.74

$   (0.20)

$     0.09

Cash flow provided

by operating activities

$         0.4

$       31.4

$       45.7

$      63.4

$      62.9

$    110.3

$    181.0

$     44.7

1

See Non-GAAP Financial Measures on page 12 for additional information.

 

Financial Review

 

Three Months Ended March 31, 2009

 

Income Statement

 

Net income for the three months ended March 31, 2009 was $11.2 million or $0.09 per basic and diluted share, compared to $46.8 million, or $0.41 basic and $0.37 diluted share, for the same period in 2008.

 

Revenues for the three months ended March 31, 2009 were $78.9 million, down $175.9 million or 69% from $254.8 million for the same period in 2008. The average realized sales price for molybdenum for the first quarter of 2009 was $10.14 per pound, down 69% from $32.69 per pound for the first quarter of 2008. Molybdenum sold from the Corporation’s mines in the first quarter of 2009 was 6.5 million pounds, up 60% from 4.1 million pounds sold in the same period in 2008. This volume variance was primarily due to lower production at the Corporation’s mines during the fourth quarter of 2007, resulting in less product being available for sale during the first quarter of 2008. Sales volumes from third party product purchased, processed and resold was 0.9 million pounds for the 2009 quarter compared to 3.6 million pounds for the same period in 2008. This volume variance was primarily due to increased purchases during the fourth quarter of 2007 and the first quarter of 2008 in order to meet 2008 sales demand. The volume of material toll roasted and processed for third parties was down 26% in the first quarter of 2009 relative to the same period in 2008 due to lower demand for these services in the current period.

 

4

 

 


THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

Operating expenses for the three months ended March 31, 2009 were $53.3 million, down $113.3 million or 68% from $166.6 million for the same period in 2008. Sales volumes and related costs for the third party material that was purchased, processed and resold was down significantly during the first quarter of 2009 from the first quarter of 2008 which resulted in the significant decline in the operating expenses in the 2009 quarter. Additionally, operating expenses declined due to the lower cash cost per pound produced from the Corporation’s mines in the fourth quarter of 2008 and the first quarter of 2009 compared to the same periods in 2007 and 2008.

 

Cash cost per pound produced from the Corporation’s mines declined in the first quarter of 2009 to $5.93 per pound produced from $8.29 per pound produced for the comparable quarter in 2008. The decline in the cash cost per pound produced was primarily due to increased production as a result of higher ore grades and recoveries at the Thompson Creek Mine together with lower mining and milling costs from both of the Corporation’s mines in the 2009 quarter compared to the 2008 quarter.

 

Depreciation, depletion and amortization expense for the three months ended March 31, 2009 was $11.9 million or 55% more than $7.7 million for the first quarter of 2008. This increase was primarily due to a draw-down of product inventory from the Corporation’s mines during the 2009 first quarter and a build-up of product inventory from the Corporation’s mines during the 2008 first quarter, which resulted in higher depreciation and depletion costs in the 2009 quarter and lower depreciation and depletion costs in the 2008 quarter. Product inventory costs include depreciation, depletion and amortization.

 

General and administrative expense for the 2009 first quarter was $3.7 million, $0.3 million higher than the first quarter of 2008. This increase primarily related to increased public company costs related to Sarbanes-Oxley compliance work and higher consulting costs. Overall, the general and administrative expenses for all of fiscal 2009 are expected to be lower than fiscal 2008 as the transition of the finance function from Vancouver to Denver was substantially completed as of December 31, 2008.

 

Stock-based compensation for the first quarter of 2009 was $1.4 million, down $0.3 million from $1.7 million for the first quarter of 2008. No stock option awards were granted in the 2009 period while 25,000 stock option awards were granted in the 2008 period. The stock-based compensation expense recorded in each period includes costs related to option awards made during the period as well as the amortization of costs of prior period awards that did not vest at the grant date.

 

Exploration and development expenses for the first quarter of 2009 were $1.7 million compared to $1.0 million for the first quarter of 2008. These expenses vary from period to period according to the type of activity being undertaken. The 2009 expenses primarily relate to expenditures under an earn-in agreement on the Mount Emmons underground molybdenum project in Colorado. For the 2008 first quarter, exploration expenditures primarily related to the Davidson feasibility study and the permitting work for this project.

 

Foreign exchange gains for the first quarter of 2009 were $3.2 million compared to $1.5 million for the first quarter of 2008. The US$ strengthened against the Cdn$ in both quarters which resulted in a foreign exchange gain on US$ cash balances in entities that have the Cdn$ as their measurement currency. Additionally, the US$ cash balance in the entities with the Cdn$ measurement currency was higher as of March 31, 2009 compared to March 31, 2008. The US$/Cdn$ exchange rate as of March 31, 2009 was 1.26 compared to 1.22 as of December 31, 2008. The US$/Cdn$ exchange rate as of March 31, 2008 was 1.03 compared to 0.99 as of December 31, 2007.

 

Interest and finance fees of $0.3 million for the first quarter of 2009 primarily represented interest on the equipment loans together with finance fees on the unused $35 million credit facility. For the first quarter of 2008, interest and finance fees of $6.7 million represented interest and finance fees on the first lien loan which was fully repaid in the second quarter of 2008.

 

5

 

 


THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

 

Interest income for the first quarter of 2009 was $0.4 million, down from $0.8 million for the first quarter of 2008. This is primarily the result of significantly lower interest rates during the 2009 quarter compared to the 2008 quarter.

 

For the first quarter of 2009, the Corporation recognized $0.4 million in other income primarily as a result of gains on derivative instruments. For the first quarter of 2008, the Corporation recognized $0.8 million in other expense primarily as a result of losses on derivative instruments.

 

The income tax impact for the first quarter of 2009 was significantly lower than the first quarter of 2008 primarily due to the reduced level of income before taxes. For the first quarter of 2009, the Corporation recognized a net $2.3 million tax benefit (current tax expense of $3.3 million and a future tax benefit of $5.6 million) compared to a net $19.2 million tax expense for the first quarter of 2008 (current tax expense of $25.5 million and a future tax benefit of $6.3 million). The net tax benefit for the 2009 quarter was primarily due to a reduction of the future British Columbia corporate income tax rate, the deduction of cross-border interest and a proportionately larger US percentage depletion deduction in relation to the US income before income and mining taxes in the 2009 quarter as compared to the 2008 quarter. The effective tax rate for the first quarter of 2008 was 29% which reflected a higher relative portion of the income for the quarter that was earned in the Canadian operation which was subject to a higher rate of income and mining taxes than the US operations.

 

Cash Flows

 

Cash generated by operating activities for the three months ended March 31, 2009 was $44.7 million compared to $63.4 million for the same period in 2008. This decline in cash flow from operations was mainly due to lower revenues for the 2009 quarter, which was partially offset by increased cash flow from working capital primarily related to the collection of accounts receivable and the draw-down of product inventory.

 

Cash used in investing activities for the three months ended March 31, 2009 was $138.4 million compared to $113.5 million for the same period in 2008. During the 2009 quarter, the Corporation made short-term investments of $100.3 million that consisted of US and Canadian government treasury securities and US government-backed commercial paper with maturities of greater than 90 days but less than 180 days. During the 2008 quarter, there were no comparable short-term investments. Additionally, in the 2009 quarter, property, plant and equipment payments increased by $19.5 million to $27.6 million due largely to payments made for the Endako mill expansion costs. Deferred stripping costs at the Thompson Creek Mine increased to $7.3 million for the first quarter of 2009 compared to $2.8 million for the first quarter of 2008. Stripping activity for both periods relates to Phase 7. Also in the first quarter of 2009, a $2.4 million reclamation deposit was made with the State of Idaho for the Thompson Creek Mine. In January 2008, a $100.0 million payment was made to the former shareholders of Thompson Creek Metals Corporation USA. This payment was in settlement of contingent consideration for the acquisition of Thompson Creek Metals Corporation USA, which became payable based on the market price of molybdenum in 2007.

 

Cash used by financing activities for the three months ended March 31, 2009 was $1.3 million compared to $17.0 million for the same period in 2008. During the 2009 first quarter scheduled principal payments of $1.3 million were made on equipment loans. During the 2008 quarter, the Corporation made $17.4 million in scheduled principal payments on its long-term debt obligations, including $16.7 million on the first lien facility and $0.7 million on equipment loans. During the 2008 quarter the Corporation also borrowed and subsequently repaid $22.5 million on its revolving credit facility. In addition, during the 2008 quarter, $0.4 million was raised through the issuance of common shares on the exercise of stock options.

 

6

 

 


THOMPSON CREEK METALS COMPANY INC.

Management’s Discussion and Analysis

Three Months Ended March 31, 2009

 

Operations Review

 

Thompson Creek Mine

 

The Corporation’s Thompson Creek Mine and mill are located near Challis, in central Idaho. Mining is done by conventional open pit methods utilizing electric-powered shovels and 200-ton haul trucks. Thompson Creek currently controls a block of contiguous mineral claims that includes patented and unpatented mineral claims and mill site claims comprising approximately 24,000 acres. The current 2009 mill capacity is approximately 28,000 tons per day and operates with a crusher, SAG mill, ball mill and flotation circuit.

 

The table that follows presents a summary of Thompson Creek Mine’s operating and financial results for the three months ended March 31, 2009 and 2008:

 

(US$ in millions except per pound amounts – Unaudited)

Three months ended

March 31,

2009

 

2008

Operations

 

 

 

 

 

Mined (000’s ore tons)

 

1,508

 

 

3,772

Milled (000’s tons)

 

2,031

 

 

2,503

Grade (% molybdenum)

 

0.125

 

 

0.085

Recovery (%)

 

90.8

 

 

86.1

Molybdenum production (000’s lb) 1

 

4,373

 

 

3,631

Cash cost ($/lb produced) 2

$

5.83

 

$

8.76

Molybdenum sold (000’s lb)

 

4,172

 

 

2,397

Average realized price ($/lb)

$

10.51

 

$

31.63

Financial3

 

 

 

 

 

Molybdenum sales

$

43.9

 

$

75.8

Cost of sales

 

 

 

 

 

Operating expenses

 

23.2

 

 

27.2

Selling and marketing