Thompson Creek to raise $412M for Mt. Milligan funding gap

VANCOUVER — Thompson Creek Metals (TCM-T, TC-N) has set out to raise about $412 million in two separate financings to plug a funding shortfall at its under-construction Mt. Milligan mine in British Columbia.

The financings include a $200-million senior note offering and a tangible equity unit offering that is expected to yield net proceeds $212 million.

The company says the financings should more than cover the projected shortfall for the mine. Thompson Creek originally estimated the mine would cost about $915 million but, as per a late February update, the company thinks the mine will cost between $1.4 and $1.5 billion.

The $200 million senior notes are fully guaranteed by subsidiaries of the company but are not convertible into Thompson Creek equity. The 12.5% notes are due in 2019 and the offering is expected to close May 11.

Thompson Creek has priced the 8.8-million tangible equity units at $25 each for an aggregate $220 million. The tangible equity offering, which combines a future equity issue and quarterly interest payments, is set to issue between roughly 4.6 and 5.4 shares of Thompson Creek stock per contract in May 2015 while the amortizing notes will pay about 40.6¢ per note every quarter for the equivalent of a 6.5% annual cash payment. Thompson Creek is accounting roughly $177.5-million of the offering as equity and $35.9-million as debt. Underwriters have 13 days to buy up to 1.2 million more units to cover over-allotments.

The company’s shares fell sharply on news of the financing, down $1.32 or 24% over two days to close at $4.19 with 3 million shares traded. Thompson Creek has dropped from around $9.50 at the beginning of February, and now sits at its lowest point since early 2009.

The financing news came not long after the company announced first quarter results, which included net income of US$1.1 million, or 1¢ per share, compared with net earnings of US$128.9 million for the same quarter in 2011.

The company was hit with lower production and higher costs at its 75%-owned Endako mine, on which the company recently spent $500-million expanding operations. Thompson stated that it still expects to meet its 2012 guidance for the mine of between 14 and 15 million lbs. of molybdenum. The company also saw lower production and higher costs at its Thompson Creek mine as the company moved through the mine sequence and needed to perform more waste stripping.

Overall, Thompson Creek still plans to meet its total 2012 guidance of between 26 and 28 million lbs. of moly, though at the higher end of the US$7.75 and US$9 per lb. price range.