Thompson Creek provides update on capital expenditure plans
Thompson Creek Metals Company Inc., one of the world’s largest publicly traded, pure molybdenum producers, today announced a reduction in planned capital expenditures including the postponement of the completion of the expansion project at its 75%-owned Endako Mine.
“Given the sharp decline in the molybdenum price, Thompson Creek has decided to curtail planned capital expenditures. This initiative to conserve cash leaves Thompson Creek with a strong cash position and minimal debt of $18.1 million in equipment loans and puts the Company in an excellent position to weather the downturn in worldwide economic activity,” said Kevin Loughrey, Chairman and Chief Executive Officer.
“While work on the Endako expansion project will be suspended, we will leave the project in a position to start up again when the molybdenum market improves. We will complete certain activities already underway at the mine site and the purchase and storage of equipment on which we have already made partial payment. All or some portion of the equipment purchased may be funded through the use of equipment financing.”
The Company estimates it will have cash balances of approximately $225 million on December 31, 2008. The Company also has available an undrawn $35 million revolving bank credit facility.
Capital spending in 2009 is expected to be $69 million, including $36 million for sustaining capital expenditures and $33 million for the Company’s share of Endako expansion capital expenditures. The Company’s share of Endako expansion capital expenditures in 2008 is expected to be approximately $37 million.
Postponement of the Endako expansion is the second initiative by Thompson Creek to reduce planned capital expenditures until market conditions improve. The Company announced postponement of the Davidson Project on November 6, 2008.
Prior to these changes, Thompson Creek was planning capital expenditures of $600 million over three years 2008 to 2010 including $280 million for its share of the Endako expansion, $109 million for the Davidson Project and the remainder for maintenance capital expenditures. Of the $600 million of capital expenditures, approximately $300 million had originally been planned for 2009.
Thompson Creek expects to achieve its previously announced 2008 operational guidance for molybdenum sales of 22 million pounds, molybdenum production of 25 to 26 million pounds and average cash costs to produce molybdenum oxide of $7.30 per pound (assuming a US/Canada exchange rate of 1.20 for the fourth quarter of 2008). Management currently is not revising its production guidance of 31.5 to 34 million pounds of molybdenum in 2009. However, the Company can adjust its 2009 production plans promptly if market conditions worsen.
The Company is currently assessing potential impairments of goodwill and other assets. If the current weak market conditions continue through the end of this year, the Company may be required to record impairments against goodwill and potentially against other assets.
