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Is Thompson Creek's Turnaround Still On Track?

By Dan Caplinger – May 6, 2013 at 9:15AM

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The miner is waiting for its new project to come on line.

On Wednesday, Thompson Creek Metals (TCPTF) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Thompson Creek is best known for producing molybdenum, a key ingredient for strengthening steel, as well as other base metals like zinc and lead. But its main potential for growth comes from its Mt. Milligan copper and gold mine, which is due to open later this year. Let's take an early look at what's been happening with Thompson Creek Metals over the past quarter and what we're likely to see in its quarterly report.

Stats on Thompson Creek Metals

Analyst EPS Estimate

($0.01)

Year-Ago EPS

$0.01

Revenue Estimate

$108.47 million

Change From Year-Ago Revenue

(1%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

What the recent metals crash means for Thompson Creek Metals
Analysts have recently cut their estimates for Thompson Creek's first quarter earnings, taking what had been a $0.05 per share profit and reversing it to a modest loss. Longer term, though, they see a less dramatic impact on 2013 and 2014 earnings, but the stock has still been under pressure, having lost nearly a quarter of its value since late January.

Thompson Creek has had a tough time lately, with the company's earnings report in February revealing the details and knocking the stock for a further loop. With a writedown of more than half a billion dollars associated with its Endako Mine and a big decline in molybdenum prices, the company posted a full-year 2012 loss that's greater than its current share price.

But the biggest issue that Thompson Creek now faces is getting its Mt. Milligan project up and running. Cost overruns to get the mine operational have skyrocketed, as we've seen throughout the mining industry. But even worse, the recent plunge in gold prices has reduced the potential value of its roughly 6 million ounces of estimated gold reserves. Streaming partner Royal Gold (RGLD 0.97%) will bear some of the financial cost of that price decline, but with Thompson Creek retaining a 48% interest in the mine's gold production, it too has a lot at stake.

The wildcard for Thompson Creek will be copper production, as Mt. Milligan has an estimated 2.1 billion pounds of the metal. Industry giant Freeport-McMoRan (FCX -2.98%) has said it expects to double sales of copper to China despite its economic slowdown, and recent events could restrict supplies enough to support copper prices. That would be good news for Mt. Milligan's prospects, especially if a recovery starts to take hold in the global economy.

In Thompson Creek's quarterly report, the biggest threat is adverse news in getting Mt. Milligan ready for production. Regardless of its current numbers, the share price depends on the prospects for the new mine going forward, so give the most importance to progress there.

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Motley Fool contributor Dan Caplinger owns shares of Freeport-McMoRan Copper & Gold. You can follow him on Twitter @DanCaplinger. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Thompson Creek Metals Company Inc. Stock Quote
Thompson Creek Metals Company Inc.
TCPTF
Freeport-McMoRan Inc. Stock Quote
Freeport-McMoRan Inc.
FCX
$27.33 (-2.98%) $0.84
Royal Gold, Inc. Stock Quote
Royal Gold, Inc.
RGLD
$93.82 (0.97%) $0.90

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