TC Earnings Call

In academia, one hears of ten-o’clock scholars. In the hurly-burly world of molybdenum speculation, it’s 10:40 AM-o’clock would-be metals analysts. I was not finished preparing Friday morning’s dynamics lecture, and so I wasn’t live on the line for Thompson Creek’s 5:30 AM earnings call. Conveniently, however, the call is online, and so I was able to listen in a day late.

TC’s 2010 full-year performance was pretty much in line with expectations. Full-year production was 32.6 million pounds of mol, costing an average of $6.07 a pound to dig out of the ground and process, and selling for an average of $15.67 per pound. Net income was $113.7 million using generally accepted accounting principles. TC has a slew of outstanding warrants priced in Canadian dollars, which are treated as derivative exposure using US accounting rules. They take a big bite out of the official bottom line. I have not had time to fully understand the underlying story, but I do intend to look in more detail at exactly what’s going on with those bad boys. Non-GAAP net profit for the year was $163.3 million, and $34.4 million for the fourth quarter.

The most interesting part of the call is the Q/A session following the canned presentation. There is a lot of talk about the effect of price inflation on capital expenditures. TC is building out at full bore on both an expansion of the Endako mine, and also on the Mt. Milligan copper-gold project. With metals prices up across the board, there is heavy competition for skilled workers, which drives up Cap-X. Oil’s going up, and ironically, so is the price of steel. TC had 316 mil in the bank at the start of the year. They expect to spend all that, plus all their profits for the year, and are talking about going out on the credit markets for even more dough. It’s clear why they don’t pay a dividend. “Look, dude, it takes money to make money.”