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Thompson Creek Metals Company Inc. Message Board

  • carlrich carlrich Mar 2, 2013 8:16 PM Flag

    Ultraific - let me pick your brain

    It seems TC's financial results were not well received. I suspect the issues with Endako (even though they may have been known previously), the additional $40 mil in capex at MM to build a housing unit and the soft moly prices were the major contributors to the poor reception.

    Though it's usually, often impossible to explain price action, what I'm wrestling with is why the price went from 2.75 to 4.50 in a relatively short period of time and then back to 4.00 just before the earnings drop to 3.30. Was it simply 2.75 was just too cheap but 4.50 was too much too soon?

    Also, I believe the shorts have held their positions because of the hurdles TC must jump over in the next 6-8 mos. - make a decision on further stripping or not, getting Endako running properly again, moly prices and getting MM going without any hiccups. A problem in any of these areas, such as we just saw at the last CC, and they will put further pressure on the price. I suspect the conference calls in May and Aug will not be good unless moly pricing goes up or Endako kicks in.

    Is this dead money until Nov-Dec.when MM gets going?

    Thanks for any thoughts you may have...

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    • Thx your insights

    • Dead money? Don't know. Depends on equity markets, and commodity prices for moly, copper, and to a lessor extent, gold, in general.

      All things being equal, they are done with 95-99% of the mechanials by May (which they seem to be on schedule to do), and at that point, MIlligan goes into various forms of commissioning & start-up testing for about 6-7 mths. Most of the construction cash outflow will be over by June/July, when they pay the last of the major stuff. Getting Milligan into commissioning and out of construction will help the shares, as this alleviates some of the financial risk. So I think the shares start to really move progressively higher, this summer. When Milligan hits commerical production, it will not be running at full capacity (rather at 60%, for a predetermined period of time - usually 30 full days prior to the declaration of commercial production), but it should ramp up quickly,and be operating near full capacity by Q2-2014. If moly and copper aren't in the krapper by the end of 2013, that will lift prices further going into 2014. At current prices for copper and gold, and without factoring in any benefit from moly, EPS from Milligan is approaching $1 share in 2014, and over that in 2015 (assuming low-end dilution from tMEDs). If they can fix some of their issues with The Pig Called Endako, moly might just add to that EPS number(s).

      But at the end of the day, TC has to start hitting some milestones but by this summer, they should be giving us some serious hints.

      The most thing that irritated me the most regarding the 2/25 results (and the call) was the fact that the CEO was down in Miami (probably playing golf or exploring retirement property), and not at their Denver HQ. Not appropriate.

      Sentiment: Strong Buy

    • Continued - -
      TC is their low-cost producer when it's running at capacity. They won't shut it down unless they're prevented from moving on to Phase 8 due to lack of permitting for their final mine plan (which comes up because they need some final permitting from BLM for that - that remains open to date). I don't see that has a fatal impediment to ultimately moving on to Phase 8 mining, but it might not occur until late 2015 (again, not a huge worry as their building a high-grade stockpile at TC mine).
      Getting Endako running properly again won't occur until the freaking ice melts over the mill feed ponds (this snaffu kind of makes me angry....for it was "unforeseen"...?!?!), and when they start pulling higher-grade material from their pits (and stop running junk stockpile). The thought that they aren't doing anything now to address this ice issue, reveals the idiocy of Endako mgmt, as suction dredging is a viable option to limp along with, and they've opted not to do it. Honestly, the mgmt at the Endako mine needs a swift kick in the butt, or just the boot. One problem after another, after another, proves incompetence. Doesn't just reveal it..... proves it. Heads should roll there, since this will wipe out the Q1 favorable impact of improved TC performance, which really drives their moly operating profits in a normal year.
      I think Milligan will be fine, and will start commercial production in late Q4-2013, but it won't add much to Q4-2013 earnings. By Q2-2014, it should be running flat out, in all respects. The completion of the mine in later 2013 will take a lot of pressure off this stock. I see both happening. The real wildcard is moly pricing: since TC has the most earnings leverage from changes in prices of moly. Hopefully moly prices aren't in the basement in later 2013 or 2014, because at this rate, TC should just give Endako to the #$%$ in exchange for $1. That pig needs a diet, and fast. If it cannot perform, it should be shut down.

      Sentiment: Strong Buy

    • In my opinion, the biggest problem with TC's full-year 2012 results were the optics on Endako, as follows: 1) writing down of about 80% of the remaining book value of the mill expansion, 2) the little water issue, and 3) continued inability to acheive spec recoveries, 4) further deterioration in moly prices.
      Item No. 1 really isn't a problem for the company, whereas 2) to 4) will effect operations rolling forward.
      On 2): Endako results for Q1-2013 will probably be ugly if their not producing much of anything up there (in Q1) due to lack of water (caused by too shallow of a mill feed pond being iced over), and it will negate the positive impact of improved TC production and costing, for at least one quarter.
      On 3): Recoveries will improve over time, but it's sure taking a lot of it to fix. Am sure their ringing up lots of fees with mining consultants trying to address this issue when I suspect the lead culprit is running heavily oxidized, low-grade stock pile. Markets are probably letting out a collective #$%$" over this lingering problem.
      On 4): At some point, the price of moly will stop falling. Current pricing for much of the primary moly production worldwide, is at or below cost to produce. So production will be slowed, eventually. The worry is secondary (by-product) moly production from copper mines, as well as slow volumes in the US steel industry (capacity is only 76% utilized in the US). I we could claw back to $12, and hold it, I would be pleased.
      Also, I suspect in the days leading up to 2/25, whispers were leaking out regarding the big loss over the write-down, and this was getting picked up by the market participants who were intently listening for any early peep on TC results.

      Regarding hurdles:
      a) TC stripping of Phase 8 isn't an immediate worry. If you study their quarterly numbers, they're starting to build stockpile there, so any future gap in production, really only will represent a gap in mining, but not necessarily milling.

      Sentiment: Strong Buy

      • 1 Reply to ultraific2
      • How much profit does their roasting facility bring in? Is it meaningful, or mainly just used for their in house benefit. How many other moly producers have their own roasting facilities, and does it really do anything meaningful to juice overall ore profitability, or is it more of a wash after the expenses of operating the facility and transportation costs?
        I might assume it would help them to sell product more readily to a wider range of customers, but as to the profitability it actually adds I am not sure.

        Also, I know there are a lot of copper mining projects out there in various stages, and I assume all have been experiencing the kind of capex inflation that MtM has. Do you know if any significant projects are on target to come online in 2013 or 2014, and are they enough to impact the market price of copper?

        And wouldn't any projects that were started in 2012 have significantly higher costs/lb to get up and running than MtM experienced?

 
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1.76+0.07(+4.14%)Dec 19 4:02 PMEST

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