LITTLETON Nov 9, 2015 (Thomson StreetEvents) -- Edited Transcript of Thompson Creek Metals Company Inc earnings conference call or presentation Monday, November 9, 2015 at 5:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Pam Solly Thompson Creek Metals Company Inc - Director of IR * Jacques Perron Thompson Creek Metals Company Inc - President, CEO & Director * Pam Saxton Thompson Creek Metals Company Inc - EVP & CFO * Mark Wilson Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer ================================================================================ Conference Call Participants ================================================================================ * Brett Levy CRT Capital - Analyst * Jorge Beristain Deutsche Bank - Analyst * Melissa Tan RW Pressprich - Analyst * Matthew Fields BofA Merrill Lynch - Analyst * John Tumazos Private Investor - Analyst * Mike Neary Neary Asset Management - Analyst * Mark Wade Rogge Global Partners - Analyst * Henry Reukauf Deutsche Bank - Analyst * Steve Bristo RBC Capital Markets - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Welcome to the Thompson Creek Metals Company third-quarter 2015 financial results conference call and webcast. To participate in today's webcast and access the slides will company this call, please visit the Company's website under the events calendar for more information. The presentation has also been posted in the Investor Presentations page of the website. (Operator Instructions) As a reminder, this conference call is being recorded today, Monday, November 9, 2015, and will be available within two hours after the call. I would now like to turn the call over to Pam Solly, Director of Investor Relations of Thompson Creek Metals Company. Please go ahead -------------------------------------------------------------------------------- Pam Solly, Thompson Creek Metals Company Inc - Director of IR [2] -------------------------------------------------------------------------------- Thank you, Operator. Good morning, everyone, and welcome to the Thompson Creek Metals Company third quarter 2015 financial results conference call. Today's call will take approximately 20 minutes and we will then open the call for questions and answers. Before we begin, I would like to caution you that we expect to make forward-looking statements on this call. Please be aware that actual results may differ materially from these forward-looking statements due to risks and uncertainties. We refer you to our filings with the SEC and SEDAR for a discussion of factors that could cause our actual results to differ materially from those in our forward-looking statements. During the call, we will also discuss certain non-GAAP financial measures. We refer you to today's third quarter 2015 conference call presentation, which has been posted to our website and furnished as an exhibit to the form 8-K dated November 9, 2015 for more information about these non-GAAP measures and reconciliations to the most likely comparable GAAP financial measures. Unless specifically noted, all comparisons of results for the third quarter of 2015 are made against the corresponding period in 2014. Joining us on the call today, will be Jacques Perron, President, Chief Executive Officer and Director. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [3] -------------------------------------------------------------------------------- Good morning. This is Jacques Perron. -------------------------------------------------------------------------------- Pam Solly, Thompson Creek Metals Company Inc - Director of IR [4] -------------------------------------------------------------------------------- Pam Saxton, Executive Vice President and Chief Financial Officer. -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [5] -------------------------------------------------------------------------------- Good morning, everyone. This is Pam Saxton. -------------------------------------------------------------------------------- Pam Solly, Thompson Creek Metals Company Inc - Director of IR [6] -------------------------------------------------------------------------------- And Mark Wilson, Executive Vice President and Chief Commercial Officer. -------------------------------------------------------------------------------- Mark Wilson, Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer [7] -------------------------------------------------------------------------------- Good morning. This is Mark Wilson. -------------------------------------------------------------------------------- Pam Solly, Thompson Creek Metals Company Inc - Director of IR [8] -------------------------------------------------------------------------------- I will now turn the call over to Jacques Perron. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [9] -------------------------------------------------------------------------------- Thank you, Pam. Welcome everyone and thank you for joining us today. We will begin this morning as we always do with our safety performance. We are pleased to report that our safety record has once again significantly approved from one year ago. Our all incidents recordable rates for the third quarter of 2015 was 0.3 compared to 2.67 in the third quarter of 2014. We thank all of our employees for embracing our vision that we live safe every day. During the quarter, we generated $39 million of operating cash flow, achieved unit cash cost of negative $0.16 per pound of copper produced on the byproduct basis net of gold credits and ended the quarter with an excellent cash position of $217 million, which included $19 million of tax refunds received during the quarter. As result of our low unit cash cost to date together with the continued weakness in the Canadian dollar, we have lowered our 2015 cash cost guidance for copper on a byproduct basis to $0.55 to $0.75 per pound produced. Our molybdenum business contributed $29 to our total revenue in the third quarter, which included $23 million from molybdenum sales and $6 million from our tolling business. Operationally, throughput at Mount Milligan for the third quarter, averaged just over 44,000 tonnes per day and mill availability averaged 90.2%. Throughput did not substantially change from the second quarter of this year for the reasons we disclosed previously, which are mainly related to the single SAG discharge screen deck. In a minute, I will discuss the recent installation of the second SAG screen deck, which we expect will allow us to increase throughput going forward. Third quarter recoveries, which were adversely impacted by the processing of oxidized material, averaged 76.1% for copper and 67.3% for gold. For the quarter, we completed five shipments of copper and gold concentrate from Mount Milligan and recorded all five sales. Copper and gold sales contributed $113 million to our total revenue. As we continue to focus on improvements at Mount Milligan, I am pleased to report that the installation of the second stack discharge screen deck was completed on time, on budget and safely. The commissioning of the new configuration was completed at the end of October with both screen decks operating as expected. Since restarting operations following the mill shut down, we have been experiencing gradual improvements in throughput. Other than the permanent secondary crushing plant, all major modifications required to achieve our objectives have now been successfully completed. We believe the new SAG and screen deck configuration together with the continuation of secondary crushing will allow us to increase throughput during the fourth quarter with a goal to be at or near design throughput by year end. In October, we committed to purchase certain long-lead items for the permanent secondary crusher, which we believe will maximize the asset value of Mount Milligan mine. With these long-lead items ordered we believe we are well-positioned to construct and commission the permanent secondary crusher by the end of 2016, if we decide to move forward with construction. We will make a final decision regarding timing of construction in the first quarter of 2016, after we further assess our liquidity needs and current and expected metals prices. In addition to maximizing the value of Mount Milligan, we remain focused on addressing our debt. We have reduced our debt balance by almost 13% since Mount Milligan commenced operations, but we have a lot more work to do. As our Management team has spent the past several quarters diligently considering a number of potential opportunities to deal with our debt, we are now in position to move forward with the next steps. We have engaged Moelis & Company and BMO Capital Markets to assist us in evaluating strategic and financial alternatives which may include debt refinancing and the restructuring, new capital transaction and asset sales. During the quarter, we completed significant scheduled maintenance at the Langeloth facility, which occurs every few years and allows the Company to continue providing tolling services and to upgrade purchase molybdenum concentrate for sale in the metallurgical and chemical markets. In 2015, we expect our molybdenum business to generate positive cash flow before capital expenditures of approximately $21 million to $23 million, net of care and maintenance costs at our two molybdenum mines. I will now turn the call over to Pam Saxton, to review the third-quarter financial results. Pam? -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [10] -------------------------------------------------------------------------------- Thank you, Jacques. In the third quarter of 2015, we generated revenue of $142 million, operating income of $11 million and non-GAAP EBITDA of $44 million. Non-GAAP adjusted net loss for the third quarter was $5 million, or $0.02 per diluted share, excluding the non-cash foreign exchange losses primarily related to inter-Company notes net of related income tax. On a GAAP basis, we had a net loss of $61 million or $0.28 per diluted share. During the first nine months of this year, we had total revenues of $399 million, operating income of $28 million and non-GAAP EBITDA of $112 million. Revenues and operating income decreased in the third quarter and the first nine months of the year compared to the same periods in 2014, primarily as a result of lower copper prices and lower molybdenum sales due to the suspension of the production at the Thompson Creek and Endako mines. Non-GAAP adjusted net loss for the first nine months of the year was $33 million, or $0.15 per diluted share excluding non-cash foreign exchange losses related to inter-Company notes net of related income tax effects. On a GAAP basis, we had a net loss of $148 million or $0.68 per diluted share. Cash capital expenditures for the first nine months of 2015, were $48 million, which primarily related to Mount Milligan. We ended the quarter with approximately $217 million of cash, $189 million of working capital and $892 million of debt. As reflected on slide 17, we have updated our 2015 guidance as follows; Copper payable production 70 million to 80 million pounds, gold payable production 210,000 to 220,000 ounces, unit cash costs per pound of copper produced on a byproduct basis of $0.55 to $0.75 as Jacques previously noted, and cash flow from our moly operations of $21 million to $23 million. Capital expenditure guidance for 2015 remains unchanged and we expect to be at the lower end of the guidance range. Please note that all of the guidance assumes a foreign-exchange rate of $1 equals CAD1.28 for the fourth quarter of this year. Slide 19 reflects our non-GAAP EBITDA to date of $112 million. We estimate full-year 2015 non-GAAP EBITDA to be approximately $120 million to $125 million. With expected cash flows at current metal prices, exchange rates and cash on hand as of September 30, 2015, we believe we will have sufficient liquidity to fund our planned capital expenditures, working capital needs and scheduled debt and interest payments over the next two years. However, given current commodity prices as our outstanding notes approach maturity, we will need to refinance the notes to extend maturities or seek additional financings to ensure that we can maintain sufficient liquidity in future years. As Jacques mentioned earlier, we will be working with two advisory firms to actively evaluate and execute on refinancing and debt reduction opportunities in advance of our first note maturity in December 2017. Slide 20 reflects our current hedging program to provide downsized price protection for 11 million pounds of copper for October through December 2015, and 40,000 ounces of our share of the gold for October 2015 through August 2016. During the first nine months of 2015, we had gains of approximately $6 million from copper hedges and approximately $1 million from gold hedges. We also have foreign exchange and fuel hedges in place. We will continue to be opportunistic putting in future hedges taking advantage of the current volatility in the commodity markets. US to Canadian exchange rate during the first nine months of 2015 averaged $1 equals CAD1.26. With approximately 90% of Mount Milligan costs in Canadian dollars, foreign exchange rate has a significant positive impact on Mount Milligan's operating margin. For illustration purposes, the US dollar to Canadian dollar exchange rate for the first nine months of 2015 had a positive cost impact on Mount Milligan operating costs of approximately $16 million, or a positive unit cost impact of $0.30 per pound of copper compared to applying the average US dollar to Canadian dollar exchange rate for the first nine months of 2014 of $1 equals CAD1.10. As you can see from slides 22 and 23, the weakening Canadian dollar continues to support margins and somewhat mitigates the effects of copper and gold price volatility. At this time, I will turn the presentation over to Mark Wilson, who will provide the sales summary. -------------------------------------------------------------------------------- Mark Wilson, Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer [11] -------------------------------------------------------------------------------- Thank you, Pam. Looking at our copper and gold sales for Mount Milligan in the third quarter, we completed five concentrate shipments and recorded all five sales. In total, we sold 47,000 tonnes of concentrate containing approximately 24 million pounds of copper and 75,000 ounces of gold. These five sales resulted in $43 million in sales revenue from copper at an average realized price of $2.09 per pound and $69 million in sales revenue from gold with a weighted average realized price of $926 per ounce after recognizing the sale of gold under the Gold Stream arrangement with Royal Gold. For the nine months ended September 30, we completed 12 concentrate shipments and recorded all 12 sales. In total, we sold 115,000 tonnes of concentrate containing approximately 60 million pounds of copper and approximately 170,000 ounces of gold. These 12 sales resulted in $125 million in sales revenue from copper at an average realized price of $2.37 per pound and $162 million from gold with a weighted average realized price of $956 per ounce. The average realizations we receive for both copper and gold were adversely affected by declining prices over the third quarter and over the first nine months of the year. Since we sell copper and gold contained in concentrate, the pricing is based on a forward price following the time when we first record the sale. So at any point in time when provisional revenue is booked, it is subject to change when the pricing period is finalized. As the price changes from the end of one pricing period to another, there is an adjustment in revenue and thus the change in the average realized price. For the third quarter before any adjustments, our average realizations were $2.44 per pound for copper and $2.59 per pound for the first nine months of the year. A detailed reconciliation for both the copper and gold realizations is provided in the appendix to this presentation, as well as in our Form 10-Q and earnings release. In the fourth quarter, we expect to make three shipments of concentrate for a total of 15 for the year. In the third quarter, molybdenum sales totaled approximately 3 million pounds and generated approximately $23 million in sales revenue at an average realized price of $7.86 per pound. Our sales included nearly 600,000 pounds of molybdenum produced from our mines in 2014. We will sell out the remaining balance of approximately 300,000 pounds of our mined inventory in the fourth quarter. For the first nine months of the year, molybdenum sales totaled 9.5 million pounds and generated $87 million in sales revenue at an average realized price of $9.15 per pound. Out of this total, 3.7 million pounds were from our mined inventory in 2014 with a balance resulting from molybdenum purchased from molybdenum concentrate producers. Since the beginning of this year, we have emphasized our tolling business at our Langeloth facility for converting molybdenum concentrate to molybdenum oxide and to therm molybdenum for customers that deliver concentrates to our plant. Sales revenue, primarily from the tolling contracts, generated $6 million and $25 million for the three and nine months ended September 30, respectively. We see this business growing over time. Lastly, I'd like to make a few comments regarding the current market outlook for copper. The mining industry in general is now feeling the pain following the capacity expansion stimulated by a strong metal price environment over the past 10 or so years. China's slowing industrial demand has hit the copper market hard as China represents such a high level of total world copper consumption at over 40%. A recognition of the China demand slowdown quickly caused a [Barus] change for the copper outlook. The high point this year for the copper pricing occurred in May at $2.92 per pound and a low in late August at $2.22 per pound. The financial shock and consumer belt tightening that resulted from the A-share collapse on the Shanghai Stock Exchange in July, became the focus for the softening of the Chinese economy. It now appears that the market imbalance can only be corrected from the supply side as the demand growth is not likely to be able to respond strongly in the near-term. With the recent reductions in forecast copper output by both Glencore and Freeport, we now see the possibility for the market to be in a slight deficit in 2016. This should result in a copper price consolidation around the current price level with modest price improvements to occur over 2016. And with that, I'll turn the presentation back over to Jacques. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [12] -------------------------------------------------------------------------------- Thank you, Mark. During the third quarter, Mount Milligan has payable copper production of approximately 16 million pounds with the cash cost on a byproduct basis net of gold credits of negative $0.16 per pound and on a co-product basis of $1.66 per pound. Payable copper production for the first nine months of the year, was approximately 52 million pounds with a cash cost and a byproduct basis net of gold credits of $0.46 per pound and on a co-product basis of $1.61 per pound. Payable gold production for the third quarter was approximately 54,000 ounces with a cash cost on a co-product basis of $527 per ounce. Payable gold production for the first nine months of the year was approximately 160,000 ounces with a cash cost on a co-product basis of $484 per ounce. For the first nine months of the year, recoveries averaged 80.5% for copper and 69% for gold. In closing, I would like to leave you with a few key messages. Despite current market conditions, we increased our cash during the third quarter and continue to maintain excellent liquidity of more than $200 million. Unit cash cost guidance on a byproduct basis has been lowered to 55% to 75% per pound. At Mount Milligan, with the exception of the permanent secondary crushing plant, all major modifications required to achieve our objectives have been successfully completed and we are confident that throughput will continue to increase through the remainder of the year. A decision on the timing of the permanent secondary crushing circuit is expected to be made during the first quarter of 2016. If we decide to move forward with the project at that time, we expect construction to be completed by the fourth quarter of 2016. And finally, we have been saying all year, addressing our debt continues to be a top rarity for us. We have engaged two very experienced firms with excellent track records to assist us in evaluating strategic and financial alternatives available to the Company. Thank you again for joining us today. I will now open the call for questions. Operator, please review the instructions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Brett Levy, CRT Capital. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [2] -------------------------------------------------------------------------------- Hey, Jacques. Hey, Pam. Can I just ask you to make it clear that shareholder interests are a priority here and you'd like to actually have some value to the shareholders after you refinance? And that if doing the streaming agreement or asset sales or anything else like that, that would be a higher priority than exchanging debt for equity? -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [3] -------------------------------------------------------------------------------- Good morning, Brett. This is Pam. Certainly as we go through this period given current commodity prices, we have our eye on all of our stakeholders. Both bondholders as well as shareholders. We understand your comment and we're mindfully watching all of our stakeholders. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [4] -------------------------------------------------------------------------------- And then also in terms of how we view the third quarter results and your fourth-quarter guidance, should we look at the third quarter as a period that you've tried to maximize everything and maybe the fourth quarter is a time are trying to just correct some things that needed correcting and it's like a correction quarter or something like that? And as you look to 2016, can you give us some cause for optimism? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [5] -------------------------------------------------------------------------------- Brett, we didn't do anything different in the third quarter to get the results, especially on the unit cash cost that we got. It's mainly related to the timing of the sales and the shipments. As we mentioned, we have five shipments and five sales during the quarter which impacted positively our unit cash costs. But nothing was done operationally to change, to drive these results. As we mentioned in the past, we were waiting for the second SAG screen deck to be able to start to increase throughput again. Second quarter and third quarter as far as production is concerned, have been very similar due to the constraint that we had in the grinding circuit. But now that these are behind us, we expect things to improve significantly. As Pam mentioned, the Canadian dollar, the weakness in the Canadian dollar is tremendously improving our financial results. We expect the Canadian dollar to continue to be somewhat weak compared to the US dollar next year. So we are optimistic that we are going to have very good cash, unit cash costs in 2016. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [6] -------------------------------------------------------------------------------- Last two questions and I'll get back in the queue. First off, the streaming agreement market, you've got 52% streams right now. You've got well over $700 million for that. Is it a different market now maybe as a result of current gold prices or something align along those lines? First that one and then the second one. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [7] -------------------------------------------------------------------------------- The market evolves all the time and changes all the time so yes, the conditions are different. I wasn't with Thompson Creek when the streaming agreement was put in place but I understand that current conditions are different than at that time. There's a lot of companies right now out there discussing streaming agreements so the dynamics are different but the opportunities are always available. -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [8] -------------------------------------------------------------------------------- Brett, given the current commodity prices for across the sector, financing is difficult to come by and you certainly see a number of companies that are stepping into streaming transactions going forward. So the market certainly is on the streaming side is very robust right now. -------------------------------------------------------------------------------- Brett Levy, CRT Capital - Analyst [9] -------------------------------------------------------------------------------- And then the last question is, as you see Mount Milligan as potentially only a copper mine, is it still in North America affecting floor tile or a reasonably low cost producer that should be considered from a financing standpoint? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [10] -------------------------------------------------------------------------------- It will definitely be -- Mount Milligan is definitely a low cost producer currently. We are on the first base aisle. If as you mentioned, we were to go to a full copper producer, we would still have very very low cost at Mount Milligan. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank. -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank - Analyst [12] -------------------------------------------------------------------------------- Good morning. It's Jorge with DB here. Could you walk through what some of the strategic alternatives that you have already been discussing with these firms you've hired could look like? Could you just give us some ideas as to what you're thinking? I'm think the obvious one is you need to refi the debt, but is there a likelihood of coming out of this with a lower interest service cost or some kind of a deferral in the interest payments? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [13] -------------------------------------------------------------------------------- Jorge, at this time as we mentioned in the past, we have been doing our homework for the last I would say at least three quarters now. We've looked at a number of alternatives. We have narrowed down the number of options but it's not possible for us to give too much color on what we're going to be doing going forward just to keep our ability to negotiate and ability to get the best possible deals, so we would prefer not to get into the details on that front. -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank - Analyst [14] -------------------------------------------------------------------------------- Okay, on the CapEx for the secondary crusher, could you comment if that is optional in the sense that the timing on when you would deploy that would be subject to first coming to an agreement on your refinancing or you view those as two completely independent factors? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [15] -------------------------------------------------------------------------------- They are independent, Jorge. What we want to do is in the first quarter depending on where we are, where are the mill prices, discussing discussions around the debt, we will relook at the crusher project and decide at that point if we move forward or not. But it's a multitude of factors that are involved in that decision. It's not only conditional on a refinancing of debt. -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank - Analyst [16] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Melissa Tan, RW Pressprich. -------------------------------------------------------------------------------- Melissa Tan, RW Pressprich - Analyst [18] -------------------------------------------------------------------------------- Thanks for taking my question. First of all just to follow up on the previous caller's question in terms of your options. I guess you won't go into details, but can you at least comment on have you been approached or approach some of your offtake customers and some of these streaming companies as well? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [19] -------------------------------------------------------------------------------- We would not be able to comment on that. -------------------------------------------------------------------------------- Melissa Tan, RW Pressprich - Analyst [20] -------------------------------------------------------------------------------- Okay, that's fair. And in terms of just getting into your operations for the fourth quarter, just trying to understand what type of outage does the Company is expecting for the fourth quarter for the EBITDA to be basically only be in possibly single digits or low double digits? -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [21] -------------------------------------------------------------------------------- So Melissa, this is Pam. In terms of the EBITDA guidance, of course that really has to do with the current prices. We took into account copper prices at the $2.25 or so to $2.30 going up to $2.40. And then also, keep in mind in the third quarter we had five shipments and five sales. And as Mark had mentioned, in the fourth quarter, we're only going to have three shipments and three sales. So that certainly has an impact on quarter over quarter. -------------------------------------------------------------------------------- Melissa Tan, RW Pressprich - Analyst [22] -------------------------------------------------------------------------------- Okay, thank you. But what about just in terms of throughput and your expected outages compares to the first three quarters? Just trying to understand from a production standpoint how we should expect that to progress going forward? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [23] -------------------------------------------------------------------------------- As we mentioned, third quarter was similar to second quarter at about 44,000 tonnes per day on average for each quarter. We expect the average for the fourth quarter to be higher. We have incurred a 120 hours or about five-day shutdown at the beginning of October, to complete the SAG realign and also install the second screen deck. So the month of October will have a significant downtime but we expect November and December to be very very low downtime, in fact almost nonexistent. We expect very high availability in the month of November December. When we come out of a SAG realign there's always a period of adjustment in the SAG. So our throughput as we mentioned, has been increasing since we restarted the mill. And our objective is to end the quarter at or very near to the design capacity of Mount Milligan. So we are encouraged by what we see so far. And we hope that if we forget, if we forget about the month of October with very low availability, we expect very good production during the months of November and December. -------------------------------------------------------------------------------- Melissa Tan, RW Pressprich - Analyst [24] -------------------------------------------------------------------------------- Okay, so on the average basis for the quarter, does that mean you could possibly get to 50,000 or you would still be closer to a 45,000? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [25] -------------------------------------------------------------------------------- We'll be higher than 45,000 and the average for the quarter should be around the 50,000. -------------------------------------------------------------------------------- Melissa Tan, RW Pressprich - Analyst [26] -------------------------------------------------------------------------------- Around 50,000? Okay, thank you. Just the last one. I'll get back to the queue. Can you explain a little bit of the adjustments for your average realized copper price? I understand there is some $0.29 net adjustment for the quarter. Can you just provide a little bit more detail what that was? -------------------------------------------------------------------------------- Mark Wilson, Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer [27] -------------------------------------------------------------------------------- As I mentioned in the my comments, we price on a forward basis for final price realizations. But provisionally, we record a sale upon loading of the ship. So in a declining market, the forward price will always be lower than the provisional price so it just gets corrected continuously. And as a result of this though, we provide detailed reconciliation in our press release and the 10-Q and also in this presentation. I would just direct you to that reconciliation for I think will answer any questions you may have. -------------------------------------------------------------------------------- Operator [28] -------------------------------------------------------------------------------- Matthew Fields, Bank of America Merrill Lynch. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [29] -------------------------------------------------------------------------------- Hey, guys. Just wanted to follow up on the throughput questions. Can you let us know what the throughput has been on the two weeks since you installed the secondary screen? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [30] -------------------------------------------------------------------------------- We've been increasing steady. When we came out of the SAG realign, we were in the low 40s to mid 40s. And now we're above the 50,000 mark. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [31] -------------------------------------------------------------------------------- So you've reached above 50,000? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [32] -------------------------------------------------------------------------------- Yes, we have been operating steady for the last -- I can't remember now. I think it's four or five days above the 50,000 mark. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [33] -------------------------------------------------------------------------------- Okay, very good. Thank you. And then can you talk a little about the tax refund you received in the quarter. I think I heard $19 million if that is right. Can you just talk about the nature of that and then if we can expect anymore tax refunds coming in the door in the near future? And then sort of more broadly, the value of your tax losses and how monetizable any of those are? -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [34] -------------------------------------------------------------------------------- Sure, Matt. I'd be happy to answer that. The tax refunds we had in the quarter, we actually took a tax position and filed our tax returns that way and that is the refund. We aren't expecting anymore refunds really from that. You will notice as you get into the balance sheet, under US GAAP because this tax position could be audited, we treated it as an uncertain tax position and it shows up in a long-term liability. Just so you know how all that is going through. In terms of future losses, we certainly are currently looking at is both our tax and legal structure of how to optimize the use of all of our NOLs that are out there. And certainly we should be able to conclude on that hopefully at the end of the fourth quarter or the first part of next year first quarter and conclude on optimizing all of those, the use of all of those NOLs. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [35] -------------------------------------------------------------------------------- Okay. Another one sort of tolling at Langeloth, will you move towards 100% tolling in 2016? And can you talk about the margins that maybe able to -- will the margins you get on that continue do you think? -------------------------------------------------------------------------------- Mark Wilson, Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer [36] -------------------------------------------------------------------------------- This is Mark Wilson. We have for a number of years and expect to continue to compliment the tolling business with our purchase activity where we buy concentrate from a select group of mines. And we try to maintain that purchased volume at approximately 10 million pounds a year and we expect to continue with that. We would like to get as much tolling volume as we could but there is a limit as to what we have been able to secure at about 20 million pounds. And we see that continuing next year. We have capacity of 35 million pounds for roasting and we are trying to target between 25 million pounds of 30 million pounds. The purchased volume is important in order to realize that. As for the margins for competitive reasons, we really don't like discussing that. Securing tolling business is a competitive business and we would rather not reveal our margins. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [37] -------------------------------------------------------------------------------- Okay. And finally, a couple of questions about Royal Gold. Obviously, you are reviewing a lot of different options but given their sort of stake in the overall operation, have they been in discussions with you as regards to the influence they expect to exert over your ability to maneuver? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [38] -------------------------------------------------------------------------------- I would not be able to comment on that, give you comment on that question. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [39] -------------------------------------------------------------------------------- Okay and maybe just one more on the side of that. Have they approached you ever about redoing the existing deal? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [40] -------------------------------------------------------------------------------- Again, we would not be in a position to discuss that. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [41] -------------------------------------------------------------------------------- Okay. Thanks very much. -------------------------------------------------------------------------------- Operator [42] -------------------------------------------------------------------------------- John Tumazos, Private Investor. -------------------------------------------------------------------------------- John Tumazos, Private Investor - Analyst [43] -------------------------------------------------------------------------------- Thank you. Congratulations on your progress. Two questions if I may. First, could you tell us how you expect the grinding index of your ore to average in 2016 and 2017, and how that varies from your knowledge of the entire deposit life of mine? Second, could you explain the engagement of Moelis and BMO a little bit more? Are they both engaged to propose ways to refinance or repay the bonds? Are they jointly engaged? Are they competing to make solutions? Sometimes too many cooks not good for soup and maybe this is -- Could you just give us a little comfort of how they're working together? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [44] -------------------------------------------------------------------------------- Okay John. The first question regarding the grinding index or the hardness of the rock or the grindability of the rock, we don't expect that to vary on average year-to-year or quarter-to-quarter. However, within the ore body we have a number of different structures and geological groups and in each zoning of the pit, we have different hardness and different grinding index. The team at site is doing a good job at monitoring drilling penetration rates and getting a number of data comparing this with R2Ds that were gathered during the drilling program, the expiration drilling program, and we do as best as we can. We do some blending somewhat for grade and somewhat for grindability so we get the best possible performance out of the mill. We are still in the learning in that respect. The mine is developing and we are opening new areas all the time so we are getting new information all the time. But we don't expect on average year-over-year to see a variation in the grindability of the ore over time. In regards to your second question, we believe that working with these two firms will meet our needs and will give us the best outcome for the Company. They will be working together. Sometimes on different specific mandates or aspects of what we want to achieve. As I mentioned earlier, we still have, we have narrowed down the number of alternatives that are presented to us, but we still have more than one so we have a few extra alternatives to look at. And both groups bring expertise and knowledge that is valuable to us in our opinion. -------------------------------------------------------------------------------- John Tumazos, Private Investor - Analyst [45] -------------------------------------------------------------------------------- How do you keep Jacques, from getting confused if one advisor proposes one thing and the second one something different or the disagree? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [46] -------------------------------------------------------------------------------- That is always important for us John to be in control of the process. As I mentioned, we've been looking at a number of alternatives and despite the challenges that some people may see, we think again that we have a very good combination here and that we will be able to navigate the next months with a very successful outcome. -------------------------------------------------------------------------------- John Tumazos, Private Investor - Analyst [47] -------------------------------------------------------------------------------- Thank you. We all want to see everything move ahead and we hope you really get it together there. Thank you. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Mike Neary, Neary Asset Management. -------------------------------------------------------------------------------- Mike Neary, Neary Asset Management - Analyst [49] -------------------------------------------------------------------------------- A couple of questions. When exactly would you expect to get to 60,000 tonnes per day? Is it in November? Is it in December? Are you going to announce it and then how does that throughput, what are your anticipations for 2016? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [50] -------------------------------------------------------------------------------- As I mentioned earlier, we are above the 50,000 tonnes per day right now. We are higher than that. For the whole quarter, we expect to be above the 50,000 tonne per day mark including low throughput in the month of October. As we do every quarter, once the quarter is finished, so early in January, we will be putting out our usual press release announcing our production results. And so that information will be available early after the end of the quarter. In regards to 2016, we are still finalizing our budget. We are in the process of finalizing all that. So at this time, I don't have any numbers to give you but we will also put our guidance information early in the new year so that will be available at that time. -------------------------------------------------------------------------------- Mike Neary, Neary Asset Management - Analyst [51] -------------------------------------------------------------------------------- Is it just that we'll hit 60,000 and then it will drop off a cliff and we'll just have it for a couple of days or is this more of a sign of things to come? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [52] -------------------------------------------------------------------------------- It's not our expectation to hit close to 60,000 or and then drop off a cliff. We expect to maintain that level. The next step to have significant increase in throughput is dependent on the decision to or not to, but the decision to construct the permanent crushing system. All the major modifications that we had to do this year around the grinding circuit, flotations, circuit improvements, they have been done. We're going to continue to optimize and do what we would call minor changes and continue to improve the system, but there is nothing major right now in our forecast for the 2016. The only major thing that we would do would be the construction of the permanent crushing system which will give us the ability to push the tonnage even higher. But at this time, we expect once we get to the end of the year to be somewhat fairly stable throughout 2016. -------------------------------------------------------------------------------- Mike Neary, Neary Asset Management - Analyst [53] -------------------------------------------------------------------------------- Okay. And then on the moly side, what does moly cash flow look like in 2016? Or what are just the carrying costs on your mines on care and maintenance look like assuming we keep those assets and then do we intend to keep those assets? -------------------------------------------------------------------------------- Mark Wilson, Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer [54] -------------------------------------------------------------------------------- The care and maintenance for the two mines should be approximately $10 million to $14 million. I would target at $12 million for the two together. As for the cash flow, we really haven't finalized our budget yet and so we're not yet giving guidance on that level. But the care and maintenance side, if we're already our costs are stable and so that is more predictable. But we do see the molybdenum business very likely being able to exceed the revenue generated exceeding the cost of care and maintenance. So our goal is to run the moly business on a cash neutral business. -------------------------------------------------------------------------------- Mike Neary, Neary Asset Management - Analyst [55] -------------------------------------------------------------------------------- And do we intend to keep -- we mentioned we want to maintain the optionality of that business but then we also mentioned we're considering assets sales. Is it something we'd probably keep or something we might get rid of? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [56] -------------------------------------------------------------------------------- As we mentioned in the past, if we were to receive acceptable offers for the moly business, that is something we would consider. However, if that is not the case, we're happy to keep it and wait for better days as long as it is not costing us any, it's not causing negative cash to the Company. If we keep that business at cash neutral or better, we'll be happy with that. But again, if we receive interest that are acceptable to us, we would consider that. -------------------------------------------------------------------------------- Operator [57] -------------------------------------------------------------------------------- Mark Wade, Rogge Global Partners. -------------------------------------------------------------------------------- Mark Wade, Rogge Global Partners - Analyst [58] -------------------------------------------------------------------------------- Hi, there. Just a couple of follow-up questions. Can you tell us when you did you actually engage with Moelis and BMO? Secondly, you vaguely said a couple of months, can you give us a bit more details regarding the timing of conclusion of those an announcement of those alternatives? And I'm still struggling a bit. In your own mind you said you'd been working on this for the last three quarters. Through that time, you've done liability management but from easy low hanging fruit here. I am trying to really understand here what's prevented you from taking additional liability management up until now? Is it been administratively burdensome? Because it does seem to me certainly, look at the bonds, that there are options available to you prior to now that would've put you in a better position. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [59] -------------------------------------------------------------------------------- To answer your questions, the engagement is very recent. I will leave it at that. I'm sorry if we miscommunicated, but we don't expect necessarily to have a resolution to our debt situation in the next couple months. We always said that we want to actively work on this and have a resolution in advance of our maturity date of December 2017. That is our objective and this is becoming the reason for engaging these advisors that we believe that we have a better understanding of the solutions available to us and we are moving to the next step. In the first nine months of this year, we've looked at a number of alternatives and we purposely did not make any decisions or any moves in regards to the liability because we wanted to analyze what was available to us. And also, in the declining copper price environment, we wanted to be prudent and maintain our liquidity position as high as possible. -------------------------------------------------------------------------------- Mark Wade, Rogge Global Partners - Analyst [60] -------------------------------------------------------------------------------- Okay, you say that you don't expect to have this debt sorted for the coming months. When do you expect to have a clearer understanding of the alternatives? Given that it's a decision on the second crusher is predicated on liquidity, presumably by January or February, the point at which you will have to make a decision about the second crusher, you will have to have made certain progress in terms of discussions on your financial alternatives. So whilst you may not have actually completed on your debt strategy, are we going to have a very clear road map by January or February? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [61] -------------------------------------------------------------------------------- Mark, your rationale is very good. I think in the first quarter, internally here we will have a much better understanding of where we are going. It does not mean that at that time that we will communicate our plan publicly. As I mentioned earlier, we're going to enter into important times for us and it's important that we keep our bargaining position and in our negotiation position as strong as possible. So that might not be something we are comfortable disclosing. But internally, we believe we're going to have a much better understanding of the steps and we may even have started to action on some steps in the first quarter. -------------------------------------------------------------------------------- Mark Wade, Rogge Global Partners - Analyst [62] -------------------------------------------------------------------------------- Sir, the point of making a decision -- the point of making a decision on the second crusher, let's say you say that you're going to proceed with the second crusher, how do you want us to look at that? That you're just trying to preserve optionality for differing stakeholders? One's predicated on the other. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [63] -------------------------------------------------------------------------------- Not necessarily. As Pam mentioned, we have -- when we look at our plans, we look at everything altogether. But we also need to make decision on the crusher based on operational performance at Mount Milligan and the value of Mount Milligan over time and copper prices and gold prices. And so, like I mentioned earlier, there's a number of factors that will impact our decision. And as well, in all the consideration regarding our debt position will also have some weight in the balance. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- Henry Reukauf, Deutsche Bank. -------------------------------------------------------------------------------- Henry Reukauf, Deutsche Bank - Analyst [65] -------------------------------------------------------------------------------- Yes, just curious in the first new bond, is there anything that prohibits you from streaming the rest of the gold at Mount Milligan? -------------------------------------------------------------------------------- Pam Saxton, Thompson Creek Metals Company Inc - EVP & CFO [66] -------------------------------------------------------------------------------- No, there's nothing that would prevent us from doing that in the indentures. -------------------------------------------------------------------------------- Henry Reukauf, Deutsche Bank - Analyst [67] -------------------------------------------------------------------------------- Okay. And then Pam, just on the shipments that you make, is there a size within a normal range that you will ship them out or is it just varies? -------------------------------------------------------------------------------- Mark Wilson, Thompson Creek Metals Company Inc - EVP & Chief Commercial Officer [68] -------------------------------------------------------------------------------- Targeted to ship 10,000 dry metric tonnes. It somewhat depends on the available -- you have to order the ships in advance of the material being available for loading. So the end of the third quarter, we had a shipment scheduled and got caught a couple short of volume. So that is why we did not average quite at 10,000 in the third quarter. In the fourth quarter in actual fact, we'll be building up some inventory so we may be a little bit longer than 10,000 tonnes for the three shipments. Our target is 10,000 dry metric tonnes a shipment. -------------------------------------------------------------------------------- Henry Reukauf, Deutsche Bank - Analyst [69] -------------------------------------------------------------------------------- Great. Thanks very much. -------------------------------------------------------------------------------- Operator [70] -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank. -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank - Analyst [71] -------------------------------------------------------------------------------- Hey, Jacques. I just wanted to follow up again on my earlier question. I do not understand why you're not holding back on committing to a crusher, on the secondary crusher, and it seems like you're pretty gung-ho to make a decision on that when that is something that fundamentally would alter your negotiating position with bondholders in terms of the future of the Company. And so I just wanted to reclarify what the urgency is in throwing more money into this Company assets when it seems like you have got a really good bargaining position right now to be able to induce bondholders into a refinance if you agree essentially to put more capital into that asset. Could you just clarify what the rush is to build that crusher? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [72] -------------------------------------------------------------------------------- There are a number of conditions, Jorge, that we monitor very closely. As you know, right now in order to increase our throughput, we are operating with a temporary crushing plant. These crushing plants definitely don't have the reliability of a permanent crushing plant and the costs are much more important. So in the coming months, we will monitor especially as winter comes, we'll monitor the performance of the temporary crushing plant. That's going to be something that will impact our decision in the month of January. And the other -- sorry, not in January but in the first quarter. The other aspect is depending on the results we get in the coming months, we see tremendous potential for us going into 2017, 2018, to reduce our operating costs even more with the permanent plan and also increase our throughput which would give us significant upside on cash flow generation in 2017, 2018, and going forward. Those are the two main I would say reasons why we are seriously considering building the plant. And at the same time, Jorge, depending on discussions we're going to have in the next months and what's going to happen in regards to the debt, that also will put us in a different place. And when the first quarter comes, we'll look at all that and make a decision. We haven't made the decision yet to do the construction. It's something that we will wait to see what happens in the first quarter and we'll address that question at that time. -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank - Analyst [73] -------------------------------------------------------------------------------- Just again to state the obvious, you are demonstrating in some tranches at $0.50 on the $1, it would seem like the best and highest use of benefit to equity holders is to restructure the debt and put everything on hold regardless of what the MPV tells you on maximizing your return on a $70 million investment. So I just I'm failing to understand why you seem to be pre-committing to make a decision on a crusher instead of using that as part of your bargaining leverage to restructure the debt in a way that benefits equity holders. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [74] -------------------------------------------------------------------------------- Like I said, Jorge, we've not made the decision yet. We are not pre-committing to a decision. We're going to look at all the aspects when the first quarter comes. We've been very clear to say that we have not made the decision yet. We look at everything that plays into the comes into the mix and we'll make that -- if we make that decision to go or not to go, it will be looked at in the first quarter. -------------------------------------------------------------------------------- Jorge Beristain, Deutsche Bank - Analyst [75] -------------------------------------------------------------------------------- Okay, thank you. -------------------------------------------------------------------------------- Operator [76] -------------------------------------------------------------------------------- Matthew Fields, Bank of America Merrill Lynch. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [77] -------------------------------------------------------------------------------- I just wanted to sort of continue on this fundamental point, which is it seems like a chicken and the egg problem. Is a crusher a requirement for long-term financing or is long-term financing requirement for a crusher? Do know what I'm saying? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [78] -------------------------------------------------------------------------------- I totally know what you're saying. If you can demonstrate that you're going to have higher throughput and better cost, that can help in the refinancing discussions. But at the same time, it's investment, so you have to be considered in the big picture as well. You are correct it is chicken and the egg question. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [79] -------------------------------------------------------------------------------- So you obviously have hired two different advisors. One seems to be more expertise in metals and strategic partners in mining and one seems to be more experienced in financial restructuring or whatnot. Is one set of constituents that you're negotiating with want one thing to happen with the crusher and the other set of constituents want the other thing, necessarily? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [80] -------------------------------------------------------------------------------- Again, we do want to discuss in detail what we're working on right now and the discussions we're having. We will leave it at that. -------------------------------------------------------------------------------- Matthew Fields, BofA Merrill Lynch - Analyst [81] -------------------------------------------------------------------------------- Okay. Fair enough. Thanks very much. -------------------------------------------------------------------------------- Operator [82] -------------------------------------------------------------------------------- Steve Bristo, RBC Capital Markets. -------------------------------------------------------------------------------- Steve Bristo, RBC Capital Markets - Analyst [83] -------------------------------------------------------------------------------- Thanks for taking my question. I just had a little more follow-up on this crusher. It looks like from reading your MD&A that the construction decision only relates to about $27 million to be spent of the $75 million whereas you're already committing to long-lead items that are going to cost you about $11 million in Q4 and the further, $27 million in 2016. So I guess my question is following up from the other ones. Why even order this long-lead equipment when you're not sure if you're going to commence construction? Maybe it would be better to save that cash and figure out what you're going to do with your debt first? -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [84] -------------------------------------------------------------------------------- If we don't order the long-lead items, then we completely close that door and the option is not available to us. So we're looking at our cash position and preliminary numbers for next year and where we're going. We felt that it was prudent to commit to the long-lead items to keep the ability to go ahead with the construction if we decide to do so. And we made that decision based on our best possible view of what is going to happen in the future. -------------------------------------------------------------------------------- Steve Bristo, RBC Capital Markets - Analyst [85] -------------------------------------------------------------------------------- Okay, that is it for me. Thanks. -------------------------------------------------------------------------------- Operator [86] -------------------------------------------------------------------------------- We have no further questions, Mr. Perron. I will turn the call back over to you. -------------------------------------------------------------------------------- Jacques Perron, Thompson Creek Metals Company Inc - President, CEO & Director [87] -------------------------------------------------------------------------------- Thank you very much everyone for joining us today. We'll be looking forward to talking to you again in the first quarter to give you an update on our results, production and financing. But as I mentioned earlier, we expect to put our production information out early in January. We are happy to see that we have completed all the major changes or modifications at Mount Milligan that we needed to do this year and we're confident in our ability to improve our performance in the next couple months. So have a good day, a good week and we will talk to you soon. Bye now. -------------------------------------------------------------------------------- Operator [88] -------------------------------------------------------------------------------- This concludes today's conference call. You may now disconnect.
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