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Should You Steel Yourself for Thompson Creek's Recovery?

Rich Duprey
November 6, 2012

The world's top value investors love it when their best stock ideas are selling at bargain-basement prices. For those rarefied investors, companies offering fire-sale prices become no-brainer buys. So regular investors like you and me would do well to emulate the masters and look at companies offering a "buy one, get one" sale on their stocks.

Molybdenum miner Thompson Creek Metals (NYSE: TC  ) has dug itself a deep hole it needs to climb out of. Falling metals prices, steep financing needs, a costly financing partnership, and its best mine still at least a year away from production have stacked the deck against it. While you'll naturally want to do more due diligence before buying in, this still might be an opportunity to pick up a quality stock at a severe discount.

Thompson Creek Metals snapshot

Market Cap

$467 million

Revenues (TTM)

$499 million

1-Year Stock Return


Return on Investment


Dividend and Yield


Estimated 5-Year EPS Growth


52-Week High


Recent Price


% Below 52-Week High


CAPS Rating


Source: N/A = not available, Thompson Creek Metals doesn't pay a dividend

Let's just make sure there's nothing more seriously wrong with it before you go and plug it into your portfolio.

A dirty word
It all boils down to the Mt. Milligan copper mine in Canada. Thompson Creek already mines and markets molybdenum the U.S. and Canada, but it has been hurt by depressed pricing for the metal that's key to producing steel. Southern Copper (NYSE: SCCO  ) recently reported its third-quarter earnings were hurt in part by falling molybdenum prices that were down more than 19% from the year-ago period. The market researchers at CPM Group say molybdenum hit $11.10 a ton in August, the lowest it's been since 2009, but Freeport-McMoRan (NYSE: FCX  ) has been modeling $13 per ton for the second half of 2012.

In addition to battling lower pricing, Thompson Creek has been waging a war on rising costs associated with its Endako Mine and its Thompson Creek Idaho mine, which caused it to post operating losses of $18 million last quarter, not to mention lower-than-anticipated ore grades and recovery at both. Of course, cost overruns are nothing new to mining operations as Taseko Mines (NYSEMKT: TGB  ) is also experiencing a period of