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Thompson Creek Metals Company Inc. Message Board

  • mikeszotak mikeszotak Sep 26, 2012 11:52 AM Flag

    Question regarding balance sheet

    My opinion is that downside on TC here is rather limited based on the low valuation and the fairly large amount of net equity the firm has (almost $2 billion as of last quarter's balance sheet). My question is really regarding the future potential upside in the right economic environment given expected company production.

    Can someone tell me when the company lists "property, plant and equipment" in the asset ledger of the balance sheet (roughly $3 billion as of last quarter end), how is valuation of property taken into account? Does it include the after-cost/tax NPV of the reserve metals in the ground, if so at what price, or does it not take into account the value of the metals at all?

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    • The companies Property, Pland and Equipment is just the historical cost to purchase or construct the asset, less book depreciation. It doesn't include value of the resources in the ground.
      Example: Let say 5 years ago they bought a mine for 1M and spent another 1M for construction. So on books they will record Property = 2M. Every year they will reduce that 2M by a fraction called depreciation. So 5yr later the mine on books will be let say 1.5M. That amount has nothing to do with the actual market value of the mine. But this a good starting point for estimating how much it might cost.

      Sentiment: Strong Buy

      • 1 Reply to vittoshulman
      • Which is what I thought. Think about it, and I know it is simplistic, but if someone (let's say FCX or a Chinese outfit) were just going to buy the company's assets and payoff the liabilities, the net shareholder equity right now, fully diluted, is still somewhere around $7-8/share. That means once Mt. Milligan is completed, some company could come in and fairly pay $7/share for TC, take other cash to then payoff the $700 million in debt of the company and basically have a debt-free company, minines and equipment fully in place and ready to go, with a huge resource of physical assets in the ground. Even if they had to sit on it for a while depending on economic conditions and metals prices, etc., they still would be getting a bargain for those resources.

        The only reason this company trades at $3 right now is because they are small and strapped, Milligan isn't done and running yet, and most importantly Moly prices are hurting their cashflow. Just within the last few years Moly was their only business and when economic conditions were favorable they were making a huge amount of money. It's just a matter of race between completion of Milligan, moly prices holding up enough to avoid cashflow disaster and them getting all of these mines humming the way they think they will once everything is completed. I think they will, but who knows, maybe they won't, even still at $3 I don't see much more pain to be inflicted based on just the value of the company's assets and their reserves. It's not like it is South Africa and although they have a large reserve they may politically and strategically may never be able to mine them. These is Canadian/US easy to mine reserves, eventually someone is going to make a boatload of mining mining them when the stars align.

 
TC
1.64-0.010(-0.61%)Dec 24 1:03 PMEST

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