Metalnewsnet 7 May:

Molybdenum producer Thompson Creek Metals Co. built inventory during the first quarter in order to supply customers during a scheduled five-week maintenance shutdown of its roasting facility in Pennsylvania.

The Denver-based company said that the temporary closure of its Langeloth metallurgical operation starting April 26 prompted the build of an additional 1.5 million pounds of inventory in the first quarter. The company's total stocks now stand at about 6 million pounds, Kevin Loughrey, chairman and chief executive officer, said during a conference call Thursday.

"Six million (pounds of inventory) is probably a good number to keep our product flow strong and make sure we can make deliveries to all of our customers," Loughrey said.

Despite lower anticipated production in the second quarter, the company reconfirmed its full-year output estimates of between 29 million and 32 million pounds of molybdenum at a cash cost of $6 to $7 per pound.

The company produced 8.3 million pounds of molybdenum in the first quarter, up 36.1 percent from 6.1 million pounds in the same period last year. The flagship Thompson Creek Mine in Idaho produced 6.3 million pounds, up 43.2 percent from 4.4 million pounds a year earlier, while the company's 75-percent share of the Endako Mine in British Columbia equated to 2.0 million pounds, up 17.6 percent from 1.7 million pounds.

The company estimated 2010 production costs of $5.50 to $6.50 per pound at the Thompson Creek Mine and $7 to $8 per pound at the Endako Mine.

Loughrey said the company is in growth mode, with $523 million in cash on hand and only $11 million in debt. "We're very active on the acquisition front and we have been looking at (properties) both inside and outside of North America and both inside and outside the moly sector," he said. "Our balance sheet is underleveraged at the moment so we have the ability to take on debt for a sizable acquisition."

While Loughery was tight lipped about possible targets, he hinted that the company might prefer a property that is already in production or will be in the near-term in order to make up for possibly reduced molybdenum output in 2012.

While it has not released official production guidance for 2011 or 2012, the company has said in financial documents that its molybdenum production could drop by about 6 million pounds in 2012 as its Thompson Creek Mine moves away from a particularly high-grade area.

"We think that 2011 will be a good year, and then there will be a production drop in 2012," Loughrey said. "Our acquisition effort is aimed at addressing that problem in terms of finding additional revenue sources that will enable us to grow our company's profile."

Thompson Creek posted first-quarter net income of $1.1 million, including a non-cash charge of $24.5 million related to the previously announced change to U.S. generally accepted accounting principles (GAAP), vs. net income of $8.7 million in the same period last year.

First-quarter revenue increased 62.2 percent to $127.8 million from $78.8 million as the company's average realized price for molybdenum rose by 43 percent.

"A continuation of the economic recovery can be expected to yield a positive trend for molybdenum prices and an improving financial performance for the company over the medium term," Loughrey said.