There's no sugarcoating it: It's been U-G-L-Y with a capital "U" for miners of all forms over the past couple of years, as a slowdown in growth from China coupled with weakening in commodity prices caused practically every miner to clamp down on its capital expenditures and go into cost-saving mode. Most companies have lost a substantial amount of market value over that time while gold and silver, the two most commonly followed precious metals, have only demonstrated flashes of their former glory without any long-term rallies.

Despite this somewhat grim scene for the metals sector, I still see one small-cap company that has all the tools necessary to completely embarrass Wall Street analysts before the end of the year by crushing their current revenue and earnings projections. This miner in question is none other than Thompson Creek Metals (NYSE:TC).

Now, let me clear something up before I move forward, so there's absolutely no shred of doubt as you read my thesis for why Thompson Creek could be set to embarrass Wall Street. I am currently a Thompson Creek shareholder, I also own call options in Thompson Creek, and I've held my shares for longer than a year. My position is targeted as a long-term hold, but I am at least partially biased since Thompson Creek currently is the largest holding in my portfolio. In short, consider that the words you're reading right now come from an investor who has a lot riding on Thompson Creek's long-term success.

Source: Thompson Creek Metals.

Why Thompson Creek has been hammered
There are two main reasons Thompson Creek's share price has been clobbered since the start of 2011.

Perhaps no factor has loomed larger than the development of Mt. Milligan, its copper and gold mine based in British Columbia, which was supposed to originally cost $750 million to develop and wound up seeing costs double to about $1.5 billion. The end result was that Thompson Creek was left with $1 billion in debt (compared to $203 million in cash at the moment), and had to negotiate two upfront cash deals with royalty interest company Royal Gold (NASDAQ:RGLD) that essentially gave away a 52.25% interest in the mines' gold production simply to fund Mt. Milligan's development.


Source; Thompson Creek Metals.

Also working against Thompson Creek was a fairly precipitous decline in molybdenum prices. Molybdenum is a material commonly used to strengthen steel, and when construction levels around the globe dropped, an oversupply of molybdenum from miners sacked prices. As moly prices fell, Thompson Creek had no choice but to produce less and cut costs, which adversely affected its profitability in a big way.

Altogether, trying to build out a mine that's costing twice as much as expected, all while the only metal you are producing is precipitously falling made for one horrendous couple of years for Thompson Creek shareholders.

Why Thompson Creek might embarrass Wall Street
But, there are also a number of positive takeaways throughout its struggles to get Mt. Milligan on track that I believe put Thompson Creek on a path to long-term success, as well as on a path to embarrass Wall Street analysts in 2014.

Although the cost of Mt. Milligan far exceeded estimates -- and I certainly can't fault short-sellers for attacking Thompson Creek based on that -- at no point since Thompson Creek acquired Mt. Milligan in 2010 through its acquisition of Terrane Metals has the mine's development not remained on schedule. I believe this is an important and overlooked point that most investors who don't follow Thompson Creek as closely as I do usually miss.

Mine development delays are fairly common today, and they can certainly result in bottom-line underperformance. However, in Mt. Milligan's case it opened up exactly when scheduled, it reached commercial production in February, as expected, and it's set to be cash flow positive in the second-half of 2014. Based on its historical performance there's nothing to make me believe otherwise that this mine won't deliver positive cash flow by the second half of this year.

Mt. Milligan daily mill throughput. Source: Thompson Creek Metals. 

Another recent surprise has been a surge in molybdenum prices. With the U.S. economy finally finding solid footing and sanctions against Russia clouding the future of its molybdenum exports, molybdenum oxide prices have rebounded from roughly $10 a pound in late March to close at $14.52 a pound by the end of May. These higher moly prices mean the potential to ramp up production at its Endako and Thompson Creek moly mines in the coming months in order to benefit from these advantageous prices.

Furthermore, Thompson Creek has instituted significant cost cuts and operational improvements in these mines over the past couple of years which should allow it to produce better margins compared to when molybdenum was at roughly $14.50 a pound two years ago. In Q1 2012 Thompson Creek spent nearly $40 million in capital expenditures on its two moly mines. By comparison, capex didn't even reach $1 million in Q1 2014.  

The end result, I believe is the potential to trample Wall Street's EPS expectations. Current expectations have Thompson Creek producing $0.13 in EPS in 2014. By my personal estimations, taking into consideration higher moly prices, lower capital costs, and Mt. Milligan's track record for staying on schedule, as well as gold and silver prices remaining stable where they're at now, I believe Thompson Creek could double Wall Street's projections and earn somewhere in the neighborhood of $0.25-$0.30 in EPS in 2014. Keep in mind I'm a shareholder and am inherently biased on that accord, but the track record would appear to speak for itself. As long as Thompson Creek continues to manage its debt levels prudently I see no reason this investment won't deliver sizable gains over the long run.

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Sean Williams owns shares of Thompson Creek Metals and owns a Jan. 17, 2015, $2 strike as well, but he has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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