Thompson Creek’s fine Q3

VANCOUVER — Higher molybdenum prices and increased output helped Thompson Creek Metals’ (TCM-T) increase third quarter revenue and profits while it continues to advance the recently acquired Mt. Milligan copper-gold project near Prince George, B.C.

Thompson Creek saw revenue increase 41.4% to US$161.8 million compared to US$114.4 million for the same quarter in 2009. Net income was US$31.1 million compared with a loss of US$1.4 million for the third quarter of 2009.

Net income included a non-cash unrealized loss on warrants of US$20.5 million, or 15¢ per share, which using non-GAAP adjusted net income works out to US$51.6 million or 37¢ per share.

Molybdenum production from the company’s operating Thompson Creek mine in Idaho and its 75%-owned Endako mine in British Columbia totaled 8 million lbs., a 28% increase compared to the 6.2 million lbs. produced for the third quarter of 2009, at an average cash cost of US$6.24 per lb.

The company’s average realized price for the metal was US$15.30 per lb. for the third quarter, a 20% increase compared to the $12.75 per lb. achieved in the same quarter of 2009.

To avoid being subject to molybdenum price swings in the future, Thompson Creek acquired Mt. Milligan in July as part of a takeover of Terrane Metals. On Oct. 20, the $650-million deal was completed and Thompson secured reserves of 6 million oz. gold and 2.1 billion lbs. copper at the project.

Not long after the deal closed, the Canadian government granted the final environmental permit for Mt. Milligan, an event largely overshadowed by the concurrent rejection of Taseko Mines’ (TKO-T, TGB-X) permit for its Prosperity copper-gold project.

Kevin Loughrey, chairman and CEO of Thompson Creek, said in a phone interview that before the company took on Terrane, it did extensive due diligence and he was not worried about getting environmental approval.

“We looked into that very carefully and frankly assessed the permitting risk as zero,” says Loughrey. “Our experience with British Columbia regulators is that if the project is well thought out and well-designed and engineered then you can get your permit.”

Along with Mt. Milligan, the company gained control of the Berg and Davidson projects in B.C. as part of its takeover of Terrane. While at much earlier stages than Mt. Milligan, Loughrey says he is not particularly concerned about permitting them either, despite the Prosperity ruling.

“Each situation in a permitting sense has to be looked at very differently and independently,” explains Loughrey. “Prosperity had a plan that was always going to be difficult to permit.”

That said, Loughrey did note that he expected the Mt. Milligan permit to come through a month or two ago, and that construction crews were quickly approaching the spot at which, without a permit, they would have had to stop working. “I can’t deny that we started to get a little anxious,” says Loughrey.

In the third quarter results, Thompson Creek estimated it would spend roughly US$350 million next year on Mt. Milligan as construction accelerates towards the 2013 estimated production start date.

On Nov. 4, the day the quarterly results came out, Thompson Creek’s share price rose 68¢ to $13.13 with 4.1 million shares traded.

A week before, however, the company’s share price jumped $1.32 or 12% to $12.28 on 7.2 million shares traded after reports surfaced that China was going to restrict molybdenum exports and declare it a strategic metal.

Loughrey says the move was another step in a progression that has been going on for some time, as the China works to both secure stable domestic supplies and higher prices for its exports.

“They believe the price of all natural resources is too low,” says Loughrey, adding that, despite the often cryptic messages from China, “it’s only reasonable to assume its going to mean less supply coming out of China, which, for the moly producers of the world, is a good thing.”