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Thompson Creek Metals is a pureplay molybdenum producer. It owns the Thompson Creek open-pit molybdenum mine and mill in Idaho, 75% of the Endako open-pit mine, mill and roasting facility in northern British Columbia and a metallurgical roasting facility in Langeloth, Pennsylvania. The Company is also developing a high grade molybdenum project known as Davidson. The Langeloth complex, located 40 kilometers west of Pittsburgh has a roasting capacity of over 35 million pounds a year. The Endako Mine which is comprised of three open pits, a mill and a roasting facility is operated by Thompson Creek (75% interest) and Sojitz Corporation (25% interest). It processed approximately 28,000 tons of ore per day in 2008.

Though the company is based and headquartered in Canada (Parent company Thompson Creek Metals Company Inc. is headquartered in Toronto (run through Canadian subsidiary Blue Pearl Mining and based in British Colombia, all divisions and subsidiaries are based in the United States and manage operations at all projects in Canada and the USA except for the Davidson Project.[1] The main division through which all subsidiaries are run is Thompson Creek Metals Company USA which has a 100% interest in the Langeloth Metallurgical Copmany LLC (Pennsylvania facility run from Colorado), Thompson Creek Mining Co. (oversees the operators of the Thompson Creek Mine (Cyprus Thompson Creek Mining Company of Nevada) and Endako Mine (75% interest through Thompson Creek Mining Ltd. of Yukon), Mt Emmons Moly Company (oversees the Mount Emmons project) and 50% of Highlands Ranch, LLC (land holdings in Colorado).[1]

In 2009 about 40% to 50% of molybdenum production came as a by-product of copper mining.[2] In 2006 then known as Blue Pearl Mining Inc. was the 5th largest molybdenum producer in the world, producing between 21 and 27 million pounds (12.8 from Thompson Creek Mine and 8.5 from Endako Mine) of molydenum annually (when 2P reserves were 246 million pounds and total resources amounted to 742 million pounds)[3] When the 2 large mines were assessed previously molybdenum prices were assumed to be 3 to 5 dollars per pound but that was changed to $10 for the long term based on rising demand and changing trends.

Company Overview

As of the beginning of 2010 the company had 556 million pounds of proven and probable molybdenum reserves (2P reserves, all of the 2P reserves were at the Thompson Creek and Endako mines). Reserves prices in early 2010 were calculated at a price of $10 per pound for molybdenum (actual prices were between 15 and 18 dollars a pound).[2] Production increased for 16.4 million pounds in 2007 to 26.0 million pounds in 2008.[4]

2010 mil pounds Thompson Creek
Mine
Endako Mine
2P reserves266.4289.5
proven164.1122.9
probable102.3166.7

There are two operating mines (November 2010), both produce only molybdenum but since the acquisition of Terrane Metals Corp (TRX) it is also a major player in the copper and gold mining industry (the deal gave it control of the $915 million Mt Milligan property which isn't producing but has significant reserves of copper and gold). There are four other properties that the company has a controlling interest in, all are in Canada.[5] Business partners include Sojitz Corporation (Endako Mine), US Energy Corporation (Mount Emmons), Selwyn Resources and US Steel (Howards Pass), Royal Gold (has a 25% life of mine royalty claim on gold production at Mount Milligan), Laurentian Goldfields (43% owner of Maze Lake).

production
mil pounds
Thompson
Creek
Endako total Langeloth Processed
total roasted
20062.4731.3733.8465.682
20079.2697.09716.36627.698
200816.7659.28026.04523.170
200917.8137.44725.26010.030
9Mo'1013.5135.47923.261

Source 2006-2009, 2010 first nine months

At the end of 2009 its properties had a net present value of $605.7 million. Endako represented 57% of that, Thompson Creek Mine 27.59%, Langeloth 14.66%, Davidson 0.05% and corporoate and other 0.69%. Other important projects like Mount Emmons, Berg, Maze Lake weren't completely assessed. 3QFY10 molybdenum production was up 28% compared to 3QFY09 (6.2 to 8.0 million pounds) resulting in a rise in revenue of 41.4% for the quarter.. Capital costs and capital expenditures totaled $169.7 million and $147.3 million respectively during that period.[6] Cash costs per pound produced for the first nine months of 2010 were $5.41 for Thompson Creek (down 1.6% yoy) and $8.38 for Endako (up 43.99% yoy). Total cash costs per pound of molybdenum produced for the whole company was $6.17 (up 10.38%).[6]

Business and Financials revenue, assets, net income

The price of molybdenum according to Platt's Metals Week ranged from $7.70 to $33.75 between 2006 and 2009 (end of year, prices fell sharply during the last 3 months of 2008) influenced by such factors as economic growth in countries that are highly dependent on infrastructure development (like Colombia), the amount produced and whether it exceeds demand as well as production costs (averaged $6 to $7 in 2009 for Thompson Creek Metals. Production costs are lowest at the biggest mine Thompson Creek Mine ($5.5 to $6.5, production is about 3 times that of Endako) and slightly above average at Endako Mine ($7 to $8 per pound).[2] Molybdenum prices were as low as $4 per pound in the mid 1990's but rose to highs of $40 within the next ten years. Molybdenum prices showed the sharpest decline in the fourth quarter of 2008 when they went from over $33.00 to less than $9.00 per pound.

USD million 2006[3] 2007[7] 2008[4] 2009[2] 9M09 9M10 Change (9M) using fx rates
USD million
2006[3] 2007[7] 2008[4] 2009[2] 9M09 9M10 Change (9M)
revenue 150.8 914.4 1,011.4 373.4 258.6 426.6 64.97% operating expense 147.3 588.8 557.4 241.3 173.2 239.9 38.51%
ammortization, depr 4.7 48.2 40.0 43.4 32.0 35.6 11.25% total cost of sales 153.3 647.7 609.2 292.3 233.3 311.0 33.30%
operating income (2.5) 266.7 402.2 81.1 33.9 127.0 274.63% net income (21.1) 139.6 173.1 (56.0) (82.0) 158.7 increase
income per share (b) (0.37) 1.27 1.45 (0.44) (0.66) 1.14 increase cash equivalents 98.1 113.7 258.0 158.5 303.5 457.9 50.87%
total debt 397.8 237.4 17.3 12.9 12.9 9.9 (23.26)% total assets 899.9 1,083.0 1,046.4 1,344.6 1,380.8 1,504.8 8.98%
shareholders equity 224.2 471.0 790.6 985.4 1,101.7 1,155.2 4.86% cash costs per pound' 10.03 (13.54)[4] 7.54 6.25-7.25 5.59 6.17 10.38%
molybdenum price avg 25.00 16.98 33.22 (16.04 4Qtr) 11.75-18.60

Trends and Forces

Molybdenum is a key industrial use commodity

Its high boiling point, ability to strengthen steel and prevent corrosion makes it an essential ingredient in high strength steels (improves performance in extreme environmental conditions). It also serves as an important addition to catalysts used in refining to reduce the sulfur content of petroleum output like gasoline. Recently uses have been more widespread crossing different industry sectors from food processing and aerospace to fertilizer.

References

  1. 1.0 1.1 Thompson Creek Metals Co Inc 10-K Form (2010).
  2. 2.0 2.1 2.2 2.3 2.4 Thompson Creek Metals 2009 Annual Report page 55 (2010).
  3. 3.0 3.1 3.2 Thompson Creek Metals 2006 Annual Report (2007).
  4. 4.0 4.1 4.2 4.3 Thompson Creek Metals 2008 Annual Report (2009).
  5. Mount Milligan forges ahead, Prosperity proposal looks for lifeline (2010-11-06).
  6. 6.0 6.1 Thompson Creek 2010 Third Quarter operating and financial results (2010-11-04).
  7. 7.0 7.1 Thompson Creek Metals 2007 Annual Report (2008).
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