Thompson Creek posts solid Q2

Higher-than-expected sales and improved realized prices for molybdenum drove up Thompson Creek Metals’ (TSX: TCM; NYSE: TC) second-quarter results, and the company expects to start up its mill at Mt. Milligan any moment.

The Mt. Milligan copper-gold project in B.C. is forecast to begin commercial production in this year’s fourth quarter, followed by a 12-month ramp-up period to full design production, the company reported, noting that it has boosted its capital budget for the project by another $50 million. 

Average annual production at the conventional open-pit mine during the first six years will be 89 million lb. copper and 262,000 oz. gold, both in concentrate. Annual life-of-mine production will be closer to an average of 81 million lb. copper and 194,500 oz. gold.

Tom Meyer of CIBC World Markets estimates that molybdenum — as a percentage of the company’s revenues — will fall from 100% to 50% by 2014. Thompson Creek is one of the largest molybdenum miners in the world, producing the metal from its wholly owned Thompson Creek mine in Idaho, its Langeloth molybdenum-roasting facility in Pennsylvania and its 75%-owned Endako mine in northern B.C. (Sojitz owns the remaining 25% stake in Endako.)

The company’s molybdenum production in the second quarter jumped 58% year-on-year to 6.5 million lb., while average cash costs fell 49% to US$7.96 per lb. Total sales rose by 29% to 9.7 million lb., at an average realized sales price of US$11.60 per lb., compared to sales of 7.5 million lb. last year at an average realized sales price of US$14.55 per lb.

Adjusted net income for the quarter (excluding the non-cash impact of foreign exchange losses, net of tax benefits) was US$13.8 million, or US8¢ per share, compared with Meyers’ estimate of US1¢ per share.

The first ore feed at Mt. Milligan is expected in mid-August, with concentrate production starting shortly after that. The concentrator grinding and flotation circuits should operate by September.

CIBC’s Meyer has a 12- to 18-month target price on the stock of $3.50 per share. At press time the company was trading at $3.36 per share within a 52-week trading range of $2.23 to $4.49. The company has 171 million shares outstanding.

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