Thompson Creek Mine sale to close mid-October

Although the sale isn’t final, a Canadian company has agreed to purchase the Thompson Creek Metals Company and its local molybdenum mine for $575 million.

Kent Watson, Thompson Creek Mine manager, told The Challis Messenger this week that Blue Pearl Mining Ltd. is in the process of acquiring the company’s two mines and molybdenum processing facility from Denver-based owner Steve Mooney, with the sale scheduled to close by mid-October.

The Toronto-based company plans to continue with existing mine and mill operations without laying off any local employees and is interested in keeping the local management team in place, Watson said.

There are no plans to lay off any of the 250 local employees, Watson said, but the new company does not intend to increase personnel, either.

The day Blue Pearl announced its intention to buy Thompson Creek Metals on September 5, its stock price rose by more than 47 percent on the Toronto Stock Exchange, according to Resource Investor, an online news service of The Canadian Press.

Thompson Creek officials announced the purchase plan to employees the same day.

“The future looks very good,” for the local mine and its employees, Watson said, adding Blue Pearl wants to continue developing local molybdenum reserves. Moly prices have remained high for the past two years on the world market and the mineral is now trading at $27.30 per pound, Watson said.

Mooney told employees his decision to sell was made reluctantly, said Watson. Mooney loves the mining business, but is at a point in his life where he wants to look at alternatives, according to Watson. Local Thompson Creek employees have felt a strong sense of loyalty to Mooney, Watson said. Mooney in turn has been generous to staff and the local community. He’s made substantial donations to community organizations over the years.

So although future mining and employment prospects look good, local miners have mixed emotions about the pending sale, Watson said. “It’s tough to say goodbye,” he said.

With the sale still not final, Watson said he’s not sure whether the new company will keep the mine’s current name or whether managers will report to bosses in Denver or Toronto.

Thompson Creek’s 250 employees are working two mine shifts 24 hours a day, seven days per week, while the mill is now being operated for seven days on and seven days off, Watson said. After the first of the year, the mill is scheduled to operate for 10 days on and four days off.

The Thompson Creek mine is completing phase six of mining and everything indicates it will go on to phase seven, Watson said. The mine has identified reserves beyond phase seven, but needs to look at additional storage space for tailings, he said.

Steve Mooney’s Thompson Creek Metals Co. is made up of the local Thompson Creek Mine, Endako, another open pit moly mine near Frazier, British Columbia, and the Langeloth (Pennsylvania) processing plant.

Watson said Endako is close to the Davidson molybdenum deposit that Blue Pearl is developing near Smithers, British Columbia. “That’s really what started the [sale] discussions,” he said.

In addition to the $575 million base price, Blue Pearl has agreed to contingent payments of up to another $125 million to Mooney and his family, depending upon the future price of moly, Watson said.

Under the purchase agreement, Blue Pearl will acquire a 100 percent interest in the Thompson Creek Mine and Langeloth metallurgical refinery plant, a 75 percent interest in the Endako mine and processing plant and $150 million in working capital. A silent, financial partner will retain 25 percent of the Endako mine and plant, Watson said.

New company

Blue Pearl Mining expects the purchase to rank the company among the top five overall moly producers worldwide.

“The Thompson Creek acquisition immediately propels Blue Pearl to the top ranks of world primary molybdenum producers,” said Blue Pearl Chairman and CEO Ian McDonald in a September 5 news release. “We will be transformed from a single-project development company into an integrated North American producer at a time when molybdenum trades at historically high levels.”

During Blue Pearl’s “due diligence” site visits this summer to Thompson Creek’s Clayton-area operations, “management’s expertise and commitment right across the slate of assets were very much in evidence,” McDonald said. “We do not plan to tamper with a winning management formula.”

Stats

The Thompson Creek Mine’s production for 2006 is estimated at 16.9 million pounds. It’s expected to produce 148 million pounds of moly at an estimated average operating cost of $3.68 per pound over the next 10 years, according to a news release.

Thompson Creek Metals reported net income of $323 million for the fiscal year ending September 30, 2005. For the first nine months of 2006, net income has been $286 million.

In 2004, Thompson Creek Metals produced 5 percent of the world’s moly, according to the publication “The Econo-mics of Molybdenum, 2006.”