By Stewart Bailey
Feb. 25 (Bloomberg) -- Thompson Creek Metals Co., the operator of molybdenum mines in North America, said it would like to make an all-stock acquisition to boost output and the company is in no rush because asset prices may continue falling.
“We’d like to go out there and do an acquisition, but we don’t feel an immediate sense of urgency because there may be some more pain to be felt in the marketplace,” Chief Executive Officer Kevin Loughrey said yesterday in an interview in Hollywood, Florida. “That will be felt most acutely by undercapitalized companies that have debt.”
Thompson Creek will buy mines or deposits that contain molybdenum and copper and may consider other metals, Loughrey said. High debt levels in target companies would deter deals in the current market, he said. Loughrey declined to name acquisition targets.
Loughrey, along with larger rival Freeport-McMoRan Copper & Gold Inc., has postponed projects and slashed production in response to a slump in the price of molybdenum, used to toughen steel for pipelines, refineries and drilling equipment. The drop in metal prices and a freeze in credit markets caused share prices of metal explorers and mine developers to crater.
Thompson Creek rose 2 cents to C$3.75 yesterday in Toronto Stock Exchange trading. The stock has dropped 77 percent in the six months before today, paring the company’s market value to C$458.5 million ($368.1 million).
Shareholders are “coming to grips with the fact that assets are worth a small fraction of what they were before,” Loughrey said.
Preserve Capital
Thompson Creek has $270 million in cash, a $35 million untapped credit line and $15 million in debt, Loughrey said. He said he plans to preserve capital until market conditions improve and may change production targets if there is a significant gain or decline in prices.
Molybdenum prices have dropped 70 percent in the past six months and now trade at $9.75 a pound, according to Metal Bulletin.
The company said on Feb. 18 annual production would be 20 million pounds to 24 million pounds, down from an earlier estimate of 31.5 million to 34 million.
Molybdenum prices will recover as government economic- stimulus packages take effect, emerging-market economies build new energy infrastructure and developed countries replaced worn pipelines and aging oil refineries, he said.
“Long term, we still feel very comfortable where moly is headed,” Loughrey said.
To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.
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