TORONTO (miningweekly.com) – Denver-based molybdenum producer Thompson Creek Metals is determined to put its sizeable cash balance to work in acquiring a near-production asset “as soon as possible”, although it may have to wait a bit for asset prices to fall in line with what the company is willing to pay, CEO Kevin Loughrey said on Friday.

Thompson Creek has spent this year evaluating a number of potential targets, while refining its own shopping list for the type of asset that would be a good fit, he said in an interview.

“But all of that ultimately becomes dependent on price,” he added.

“And we have a sense that there are still people out there who haven't awoken to the new reality, which is that prices have moved off their highs.”

Loughrey said his ideal target would be a molybdenum property in North America, which has the potential to be generating revenue within the next couple of years.

Unfortunately, the list of companies or assets that fit the bill is not a long one, so the firm is also looking beyond that, to jurisdictions like South America or Australia, as well as to other metals – copper, which is frequently produced together with molybdenum, is an obvious candidate.

After stingily conserving cash this year, then raising almost $200-million in a bought-deal offering during the third quarter, Thompson Creek ended the period with $478,2-million in cash equivalents and short-term investments, and just $14,3-million in debt.

The company does have internal uses for some of the cash – it is expanding the mill at one of its two mines – and, predictably, receives a lot of hints from analysts and investors that the money could be used for a dividend or share buy-back programme.

But Loughrey is adamant that, together with investment in the company's own assets, the “war chest” will be best spent on an accretive acquisition.

“And I think there are opportunities out there that we will find in the relatively near term,” he said.

He declined to comment on when the company might be ready to unveil a deal.

BOTTOMED OUT?

The price of molybdenum, which is used to strengthen steel, was still trading at around $32/lb into the third quarter of last year, when it fell off sharply, thanks to the severe slowdown in global infrastructure development and general economic activity.

By April this year, prices had fallen as low as $8/lb, before the market started firming, to reach about $18/lb during the northern hemisphere summer.

It dipped again in the third quarter, to the $10/lb level, but has started rising again, nearing $11/lb, and there is “fair reason” to believe that the $10 point will be the bottom for the next little while, Loughrey said.

“I think it is a reasonable expectation that that is going to represent the bottom."

A key change in the molybdenum market this year is that China, which had historically been a net exporter of the metal, imported significant amounts of moly in the first half of the year.

Loughrey said the level of interest from China has fallen off as the year progressed, with sales to the resource-hungry nation representing about only 15% of Thompson Creek's business in the year to date, compared with as much as 25% in the first quarter.

“At $18/lb in the summer the Chinese buying seemed to fade away. So I think much of the activity in China is price related,” he commented.

However, as the price goes up, there are smaller producers in China that bring production on-line, which means the Chinese have the capability to satisfy more of their own market.

This “swing” production seems to come on and off at around the $13/lb or $14/lb price range, he said.

Thompson Creek mines molybdenum from its Thompson Creek mine, in Idaho, and the Endako mine, in British Columbia. It also has a metallurgical facility in Pennsylvania.

The company said on Thursday it expects to produce between 24-million pounds and 26-million pounds this year, while output in 2010 is forecast at between 29-million pound and 32-million pounds.

It also announced this week it will ramp up operations at its Thompson Creek mill, in Idaho, to full capacity from January 2010, in response to the improved outlook for molybdenum market fundamentals.

The mill is currently running at 78% of full capacity, after operations were curtailed earlier this year as a response to sharply lower molybdenum prices.

Thompson Creek shares rose 8,6% on Friday, to C$12,74 apiece by 15:12 in Toronto.