Update Thompson Creek Metals (TC)

02/26/2010 11:40 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

Thompson Creek Metals (TC) announced earnings of 15 cents a share for the fourth quarter last night (February 25) after the market close. Revenue for the quarter came to $106 million. Both beat Wall Street projections for 8 cents a share in earnings and $94 million in revenue.

Those numbers represent a 42% decline in revenue from the fourth quarter of 2008 and an 86% drop from earnings per share of 56 cents in that same quarter. These numbers are Thompson Creek’s first financial report under U.S. accounting rules (required since more than 50% of the shares of the Canadian company are now owned by U.S. citizens.)  If the company were still reporting under Canadian accounting rules earnings per share for the fourth quarter would have been 17 cents.

In its guidance the company said that it continues to see signs of recovering demand for molybdenum in 2010. The company’s mines are currently operating at full capacity and it expects molybdenum production in 2010 to reach a record 29 to 32 million pounds. Cash costs are expected to remain low in a range of $6 to $7 a pound.

Now there’s just the question of price of molybdenum.

Currently molybdenum prices are near $17 a pound. At the end of 2009 the forecast was for $16 a pound in 2010. I think it’s now reasonable to project the current price of $17 a pound for the year as a whole, even with the uncertainties about economic growth in the second half. But I am starting to see forecasts that call for higher prices in 2011—and in 2010.

As of February 26 I’m going to raise my projection for molybdenum prices in 2010 to $17 and I’m taking my target price for shares of Thompson Creek to $18 by September 2010 from the current $17 by July target.

Full disclosure: I own shares of Thompson Creek Metals in my personal portfolio.
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