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Thompson Creek swings to Q3 profit on improved molybdenum demand

13th November 2013

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – North American base metals producer Thompson Creek Metals, which mainly produces molybdenum from mines in Canada and the US, had swung to profit in the three months ended September 30, as demand for molybdenum rose slightly.

Net income for the period totalled $13.8-million, or $0.06 a share, compared with a net loss of $48.2-million, or $0.29 a share, in the comparable period a year earlier. Excluding one-time items, the adjusted net loss was $7.6-million, or $0.04 a share, compared with an adjusted net loss of $18.4-million, or $0.12 a share.

Wall Street analysts did, however, expect the Denver, Colorado-based firm’s adjusted net loss to total only $0.02 a share.

The company late on Tuesday reported that revenues rose 21% year-on-year to $90.8-million, up from $74.9-million, boosted by sharply higher molybdenum sales.

The total molybdenum sales spiked 47% to 8.3-million pounds, at an average realised sales price of $10.30/lb, compared with 5.6-million pounds, at an average realised sales price of $12.85/lb.

Thompson Creek's cash flow from operations improved to $19.5-million in the quarter, compared with $3.3-million a year earlier.

Molybdenum output from Thompson Creek’s eponymous mine in Idaho, and its 75% interest in the Endako mine, in British Columbia, had increased 39% year-on-year to 8.5-million pounds in the third quarter, compared with 6.1-million pounds a year earlier.

The average cash costs of molybdenum produced fell 37% to $5.93/lb, compared with $9.46/lb.

"With the continued price fluctuations of the commodities we produce, we remain focused on reducing costs throughout the company, optimising all of our operations, and strengthening our balance sheet," CEO Jacques Perron said.

Having been in office for only a few weeks as the new CEO, Perron told Mining Weekly Online on Wednesday morning he had spent the past three weeks familiarising himself with the company’s operations, having spent a week at the corporate office, before undertaking a three-week tour of the company’s assets, including the $1.57-billion Mt Milligan mine, also in British Columbia, which in September started the ramp-up phase, and reported initial production of 1 801 t of copper/gold/silver concentrate – a critical diversification to the company’s molybdenum-heavy portfolio.

Perron said he was engaging the company’s top management to finalise its strategy and budget for 2014, but stressed that much of that would rely on continuing the established discipline at its operations and using the company’s skills to focus operations on efficiency.

He noted that while the Thompson Creek mine did not offer much room for cost improvement in the fourth quarter and in 2014, the Endako mine, however did have potential for “some” improvements to the cost structure and unit costs, which he hoped would manifest in 2014.

Thompson Creek’s executive VP and chief commercial officer, Mark Wilson, noted that he believed the molybdenum price was off the mid-summer lows of $9.25/lb. However, while he did not see significant catalysts for growth on the medium-term horizon, he pointed to growth – albeit anaemic – in the eurozone and in the Americas, which was steadily raising demand for molybdenum.

The metal, which is most commonly used to make steel alloys, including high-strength alloys and superalloys, had like many other commodities in recent times suffered from weak demand and low prices.

Meanwhile, Perron said that since the second quarter, the company had been negotiating a labour agreement with members of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union at the Endako mine.

During the third quarter, the union obtained permission from the unionised employees to call a strike on 72 hours' notice to the company. Perron said the company and the union continued to engage in negotiations regarding the terms of a new agreement, adding that the union had “high expectations” that were not necessarily aligned with the market reality.

Perron said the most critical challenge for Thompson Creek in 2014 was to get the Mt Milligan mine operating at maximum capacity as soon as possible.

The Mt Milligan copper/gold project is a conventional truck-shovel openpit mine, located 155 km north-west of Prince George, in British Columbia.

The plan is to build a 60 000 t/d copper flotation concentrator at the mine, where an average metal production of 81-million pounds a year of copper and 194 000 oz/y of gold is targeted. The mine plan has also been designed to enable the extraction of higher-grade and gold-rich reserves in the early years. In the first six years, gold production will average 262 100 oz/y and account for 55% of the revenue.

The project has an estimated 22-year mine life and commercial production was expected to start during the first quarter of 2014.

The project has been subject to delays as a result of worker shortages, winter weather and a 50% budget blowout. The copper/gold project’s costs increased about 50% from the initial estimate of $915-million.

Edited by Creamer Media Reporter

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