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Thompson Creek Metals Company Inc. Message Board

  • buylowsellhigh80 buylowsellhigh80 May 9, 2012 6:22 AM Flag

    NPV@12% discount rate is $8

    My financial model assumes 216 million fully diluted shares, assumes the highest capex. expenses (from the stated guidance), and I used $3.75 copper, $1,600 gold, and $15 moly.

    In the short term, institutions are livid (as am I) that this management team is so completely incompetent. When they bought Terrane for $693.4 million ($420 in cash and issued 24.4 million shares), they estimated capex would be $915 million. Now that it will cost $1.4 billion - $1.5 billion (including a working capital reserve of $30 million and a contingency reserve of $107 million), this was a giant wealth transfer from existing shareholders to employees and new shareholders. People with a high school degree willing to drive a truck (at Mt. Milligan) are probably making $80k and highly skilled employees are probably taking in much more. This management team is terrible and the CEO deserve zero pay, people he has cost shareholders dearly. I hope an activist investors buy up a controlling stake and cleans house with these incompetent fools!!! Expenses are one of the only element a CEO can control. All commodity company are price takers so a good team are great at building and running mines on time and on budget. When you guide the street ($1.265 Billion) after selling more "seed corn from the family farm" as Buffett would say - when they sold more gold to Royal Gold at an undiscount price in the high $600's ( the $270 million plus the $435 per ounce at delivery) and then two month later you guide capex up by another $200 million plus - any honorable CEO and their team would fall on their sword and resign. These guys are "muppets" in the words of Greg Smith formerly of Goldman Sachs.

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    • Understood - my model is based on the next 22 years not today's fluctuations.

      The all in cost to produce an ounce of gold including:

      Buying the equity, driling/site work and permitting, huge upfront capex (this is a scale game), and ongoing Opex equals an new ounce of gold costs probably close to $1,600 per ounce. In the short term, some of the world's greatest hedge fund have been getting crushed in gold like the Paulson's and Baupost's of the world. So this create forced selling and the migrating momentum herd has moved on to greener pastures. Last time I checked, Central banks around the world are still printing trillions of dollars. So if you compare the total amount of fiat (or paper currency) to existing gold, we are not anywhere close to the 1980 highs. I believe the physical gold compare to paper currency peak at 2.5% - we are at around 1%. Gold maintains purchasing power and the cost to finding new gold are increasing 10% - 20% per year given the lack of financing, acute labor shortages, and lack of mining equipment.

      A competent management team could make this a $10 stock......That's a big "if" at $4.20 - the risk/reward is in your favor -despite this clueless management team. If you are afraid then sell and buy treasuries.

      • 1 Reply to buylowsellhigh80
      • Models are only good if the numbers that you plug in are meaningful. I had a very good one that is pretty complete and estimate monthly cash flows, financing flows, tax rates, depreciation, mining costs, etc. The only big variables should have been commodity prices. It is not that hard to build a mine and to operate one and to know what your production is going to be barring major accidents.

        Problem is that the numbers that I plugged into the model that were published by the company and iterated as to their validity under direct questioning turned out to be false. Very false.

        They lied directly. They published numbers and estimates that bore zero relationship to reality.
        They have deleted the old presentations from their website, and the podcasts of earnings only go back 6 months, but I have copies of all the relevant stuff.

        In retrospect the risk in this company has purely been about the management and their false presentation of the factual state of the company, its projects and its finances. There are securities laws in place whose intent is to keep that from happening. Unfortunately here that did not deter them from making stuff up and presenting it as real.

        The risk going forward, in addition to commodity prices, is now legal, in addition to the ongoing false conveyances.

        I have no idea how you model that.

    • Moly is now $14/lb., copper $3.65/lb. and gold has just broken through to $1580/oz.. If the global downturn gathers momentum these metal prices will fall further.

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