Thompson Creek Faces Possible Writedowns as Moly Prices Continue to Fall

Dec. 7.08 | About: Thompson Creek (TCPTF)

It continues to be a rough week for shares of Thompson Creek Metals Co. (TC), which continues to suffer as molybdenum spot prices have fallen to roughly $8 per pound and the company faces possible write-downs.

On Friday, one of the world’s largest producers of the metal used in high-strength steel alloys announced a reduction in capital expenditures and the postponement of the expansion of its 75%-owned Endako Mine.

“We are not surprised by the postponement given the steep fall in moly prices over recent weeks,” UBS analyst Brian MacArthur told clients, suggesting the company may record non-cash charges against goodwill and other assets at year-end if the market continue to be weak.

The stock was down about 4.5% in morning trading but has lost 20% of its value since Monday.

Mr. MacArthur noted that while Thompson is maintaining guidance of 31.5 to 34 million pounds of production in 2009 and said it can adjust its production plans promptly if market conditions worsen, the company could build inventories next year to reduce moly supply in the market.

He continues to rate the shares a "buy" with a C$8.50 price target.