Thompson Creek recovers on strong moly outlook

Tue Aug 9, 2011 1:51pm EDT

* Production outlook for 2011 maintained

* Demand for molybdenum seen high, sold out for year

* Mt Milligan, Endako expansion plans financed

* Shares rise 10.2 percent in Toronto

(In U.S. dollars unless noted)

By Julie Gordon

TORONTO, Aug 9 (Reuters) - Shares of Thompson Creek Metals (TCM.TO) climbed off a year low on Tuesday after the molybdenum miner backed its full-year production outlook and broader market fears of a double-dip recession calmed.

Shares closed at a year-low of C$6.94 on Monday ahead of the company's results. Later it posted a lower quarterly profit and warned that output at its flagship Thompson Creek mine would slip in the second half of the year as it produced a lower-grade ore. [ID:nL3E7J83JC]

Even so, the company said demand for molybdenum is strong and it boosted its sales forecast slightly.

"People are buying. We're sold out," Chief Executive Kevin Loughrey told Reuters. "There is material out there moving all the time at normal rates and prices."

Even though concerns about a possible double-dip recession pushed the stock lower on Monday, Loughrey pointed out that no orders were canceled and the spot market remains strong.

"To me this moment in time feels a lot different than 2008 when we saw the similar carnage in the marketplace," Loughrey said earlier in a conference call with investors. "Right now the moly market looks much stronger."

With the market for metal used to harden steel expected to grow by 25 to 30 million pounds a year on demand from emerging markets like China, Brazil and India, Loughrey said he expects molybdenum prices to be slightly higher on average in 2012.

The Denver-based company expects to produce 22 to 24 million pounds of molybdenum this year at cash costs of $5.50 to $6.50 a pound. The sales outlook for 2011 was tightened to 31 to 34 million pounds from 30 to 34 million pounds.

Preliminary production estimates for 2012 are 26 to 28 million pounds of molybdenum.

"We feel quite confident about the direction in which our company is headed," Loughrey said.

GROWTH AHEAD

Thompson Creek is in the process of expanding its mill at the Endako Mine and developing the Mt. Milligan copper-gold project, both in British Columbia, which will diversify the molybdenum miner into copper and precious metals.

Despite rising capital costs, Loughrey said he is confident that the company has the resources needed to finance its growth profile.

"We have the financing in place that will enable us to complete the Endako expansion and the Mt Milligan construction project with our existing capital assets," he said. "We're very comfortable that we can get these projects built and paid for without issuing additional equity."

Development at Mt Milligan, which is expected to produce some 81 million pounds of copper and 194,500 ounces of gold a year, is forecast to total around $1.3 billion.

That project is expected online in 2013, with the Endako mill expansion expected to come online in early 2012.

With gold prices at record highs over $1,700 an ounce, Loughrey said he open to locking in some of that production, via a streaming deal, hedging or forward-selling, should the company needs additional financing in the future.

"Our sense is that ... gold is apt to go up, but $1,700 is a pretty attractive gold price to do something with a portion of that production," he said.

Shares of Thompson Creek Metals were up 10.2 percent at C$7.65 on Tuesday afternoon on the Toronto Stock Exchange. Shares have slipped almost 50 percent so far this year.

($1=$0.99 Canadian) (Reporting by Julie Gordon)

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article