Interview with Thompson Creek CEO Kevin Loughrey

| About: Thompson Creek (TCPTF)

The Wall Street Transcript recently interviewed Kevin Loughrey, Chairman of the Board and Chief Executive Officer of Thompson Creek Metals Company Inc. (TC). Key excerpts follow:

TWST: Let's begin with a brief historical sketch of the company and a picture of the things you're doing at the present time.

Mr. Loughrey: Thompson Creek is a molybdenum company and we have existed in our current format since October 26, 2006, when there was a merger between an existing small Toronto Stock Exchange company known as Blue Pearl and Thompson Creek. Blue Pearl was a very small company and it was what I think of as almost a reverse merger, where the surviving entity was Blue Pearl. Prior to that time, Thompson Creek had been a private company solely engaged in the business of mining and selling molybdenum. So the two companies came together in 2006 and became public on the Toronto Stock Exchange. In 2007, we were listed on the New York Stock Exchange and we're now a public company in that setting. What we do is mine molybdenum.

We have two operating molybdenum properties. One is a large surface mine in Idaho known as Thompson Creek Mine and the other is a large surface mine in British Columbia known as the Endako mine. In Endako we own 75%, and the other 25% is owned by a large Japanese trading concern called Sojitz Corporation. They've been very good partners for us there for over 10 years. The two mines produce molybdenum.

At Endako, because we have a roaster there, we produce the commercial-grade product, which is called molybdenum tech-oxide. At Thompson Creek, we produce molybdenum disulfide through our mill and then we truck that concentrate material to our Langeloth Metallurgical Facility located in western Pennsylvania where we take sulfide and roast it to remove the sulfur and produce molybdenum tech oxide, the salable product in the industry. Molybdenum is used as an alloying agent in steel, primarily. It hardens steel, makes steel stronger and less brittle in high and low temperature applications, and it also lends anti-corrosive properties to steel.

So molybdenum is used in the formula to create stainless steel. Molybdenum also has a wide variety of other uses. Probably the primary one, outside of that steel business, is as a catalyst. In petroleum hydrocracking, molybdenum is a sulfur attractant, so as more petroleum becomes dirtier, if you will, containing higher percentages of sulfur, you take the molybdenum and use it as part of the catalyst formula, which attracts the sulfur out and cleans the petroleum into a salable product. It is used in a variety of other applications: high-speed tools, drills, cast iron. It is used primarily in large industrial applications such as oilfield drilling, in petrochemical, in chemical and in refinery plants as a catalyst, as I mentioned. It's used in all kinds of power plant applications. It's used somewhat in automobiles. It's not used very much in residential or consumer uses, so the movement in that market doesn't mean much molybdenum demand.

So that's what we do. We mine, process and sell molybdenum, which is used in the steel industry.

TWST: I understand that the uses of molybdenum may increase over the next few years and that it will be more widely used in things like car manufacturing.

Mr. Loughrey: Yes, there is a growing use of molybdenum. In almost all its areas, molybdenum use is growing, if you take a longer-term trend. Unfortunately, as with a lot of other industries, the very short-term trend is that demand is down somewhat as a result of the economic conditions. But if you step back and look at the longer-term trends, molybdenum is being used in more and more products, so lot of the things that molybdenum does are very en vogue, if you will. In an automobile, it reduces weight, strengthens the automobile, and makes it somewhat more fuel-efficient. It's used in the linings of pistons.

It's also starting to be used in certain motor oils. So there is more use of molybdenum in vehicles. We think right now, and it is kind of hard to say exactly because it gets dispersed throughout a wide variety of products, but something in the range of a pound of molybdenum is used in a typical western world car, which is not a large percentage amount.

But we think that's going to grow and it's growing in other areas. The catalyst area, for example, that I mentioned earlier, has seen more molybdenum; petroleum has more sulfur and cleaner petroleum products are becoming mandated by governments all over the world. Nuclear power plants, which we believe will be a growing industry in the future, also use a high degree of molybdenum. The variety of uses of molybdenum, the percentage of use in the product, is all growing.

TWST: You are a molybdenum pure play. What are the advantages and disadvantages of that?

Mr. Loughrey: It allows us obviously to be focusing on a very manageable sector of the economy. We know the molybdenum business very well. We're very attractive as producers to the customers; we have long-standing relationships with our customers. They know that we know and rely upon the moly business and it's enabled us to become regarded as a leading producer in the field. People come to us for moly, they know the quality of the moly, they know it is what we do and that is good customer relations. From a financial standpoint, we have been attracted to people who are looking to find a way to play the moly business. The only two other producing pure moly companies are both Chinese entities; other than that, we're the only one. So it's been helpful from a financial standpoint. Obviously, when the moly price was very high, it enabled us to be very profitable. We made big amounts of cash during the times when moly prices were high.

The flip side of that, the downside, is when the moly price is low then we have nowhere to hide; there is no place to go. We're reliant upon molybdenum for our revenue and the moly price is low right now, so it's a difficult time. Fortunately for us, we have been smart in the way we've gone about managing our business and our balance sheet is very strong. We have over $250 million in cash in the bank and we have very little debt, less than $20 million of debt, all of it related to sort of longer-term equipment financing debt, so no balloon payments coming due any time soon like some of the mining companies are faced with.

The balance sheet is strong, which enables us to get through these difficult times and come out producing when the moly price comes back. It also puts us in a position to look and see what else is out there in terms of producing assets and see if there is an opportunity for us to do some acquisition work at a time when prices for those assets are at historic lows.

TWST: What is the picture that you hope would emerge for Thompson Creek in three to five years?

Mr. Loughrey: I think we're in very good shape in the three to five year time frame. Our balance sheet today is strong, which will ensure that we can maintain and continue doing business, even with these depressed prices, for some time. We have opportunities to grow internally and externally, and I think it's conceivable that we'll get more molybdenum properties, or perhaps expand outside the molybdenum area into a more diverse source of revenue stream for us. We have the management expertise and the experience within the company to do that. We have the financial strength to do it, and I think we have the engine of revenue in terms of molybdenum and the molybdenum industry. So I think the future for our company strategically, in the time frame you mentioned, is quite good.

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