Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

or

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from             to                   

 

Commission File Number:  001-33783

 

THOMPSON CREEK METALS COMPANY INC.

(Exact name of registrant as specified in its charter)

 

British Columbia, Canada

 

98-0583591

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

26 West Dry Creek Circle, Suite 810, Littleton, CO

 

80120

(Address of principal executive offices)

 

(Zip Code)

 

(303) 761-8801

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

 

As of August 9, 2012 there were 168,726,984 shares of our common stock, no par value, outstanding.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

Page

 

 

Part I. Financial Information

 

 

 

Item 1. Financial Statements:

 

 

 

Consolidated Balance Sheets (Unaudited)

1

 

 

Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)

2

 

 

Consolidated Statements of Cash Flows (Unaudited)

3

 

 

Consolidated Statement of Shareholders’ Equity (Unaudited)

4

 

 

Notes to the Consolidated Financial Statements (Unaudited)

5

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

46

 

 

Item 4. Controls and Procedures

47

 

 

Part II. Other Information

 

 

 

Item 1. Legal Proceedings

47

 

 

Item 1A. Risk Factors

48

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

50

 

 

Item 3. Defaults Upon Senior Securities

51

 

 

Item 4. Mine Safety Disclosures

51

 

 

Item 5. Other Information

51

 

 

Item 6. Exhibits

51

 

 

Signatures

53

 



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2012

 

2011

 

 

 

(in millions, except share data)

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

409.5

 

$

294.5

 

Accounts receivable

 

56.3

 

71.8

 

Accounts receivable—related parties

 

11.0

 

6.8

 

Product inventory

 

91.4

 

77.9

 

Material and supplies inventory

 

36.5

 

35.9

 

Prepaid expense and other current assets

 

5.1

 

5.6

 

Income and mining taxes receivable

 

14.3

 

9.1

 

 

 

624.1

 

501.6

 

Property, plant, equipment and development, net

 

2,723.7

 

2,359.4

 

Restricted cash

 

27.0

 

39.0

 

Reclamation deposits

 

0.3

 

24.6

 

Goodwill

 

47.0

 

47.0

 

Other assets

 

32.6

 

22.6

 

 

 

$

3,454.7

 

$

2,994.2

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

209.3

 

$

186.2

 

Income, mining, and other taxes payable

 

0.4

 

2.2

 

Current portion of long-term debt

 

16.8

 

5.7

 

Current portion of long-term capital lease obligation

 

2.2

 

1.0

 

Deferred income tax liabilities

 

12.0

 

14.0

 

Other current liabilities

 

0.8

 

9.0

 

 

 

241.5

 

218.1

 

Gold Stream deferred revenue

 

454.6

 

364.6

 

Long-term debt

 

583.1

 

361.0

 

Capital lease obligation

 

9.0

 

7.2

 

Other liabilities

 

16.9

 

15.9

 

Asset retirement obligations

 

34.0

 

32.8

 

Common stock purchase warrant derivatives

 

 

3.0

 

Deferred income tax liabilities

 

226.2

 

262.1

 

 

 

1,565.3

 

1,264.7

 

Commitments and contingencies (Note 12)

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock, no-par, 168,537,094 and 167,963,639 shares issued and outstanding, as of June 30, 2012 and December 31, 2011, respectively

 

1,016.9

 

1,014.3

 

Additional paid-in capital

 

231.2

 

52.6

 

Retained earnings

 

624.9

 

638.6

 

Accumulated other comprehensive income

 

16.4

 

24.0

 

 

 

1,889.4

 

1,729.5

 

 

 

$

3,454.7

 

$

2,994.2

 

 

See accompanying notes to consolidated financial statements.

 

1



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

CONSOLIDATED STATEMENTS OF OPERATIONS and COMPREHENSIVE (LOSS) INCOME

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

REVENUES

 

 

 

 

 

 

 

 

 

Molybdenum sales

 

$

109.6

 

$

186.2

 

$

219.2

 

$

388.6

 

Tolling, calcining and other

 

3.9

 

4.7

 

7.9

 

9.0

 

Total revenues

 

113.5

 

190.9

 

227.1

 

397.6

 

COSTS AND EXPENSES

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 

 

 

 

 

 

 

Operating expenses

 

107.8

 

91.7

 

210.2

 

189.7

 

Depreciation, depletion and amortization

 

14.3

 

17.6

 

31.1

 

36.0

 

Total cost of sales

 

122.1

 

109.3

 

241.3

 

225.7

 

Selling and marketing

 

1.6

 

2.5

 

3.1

 

4.9

 

Accretion expense

 

0.6

 

0.4

 

1.1

 

0.9

 

General and administrative

 

7.0

 

6.4

 

15.1

 

14.3

 

Exploration

 

0.6

 

3.2

 

1.4

 

6.8

 

Total costs and expenses

 

131.9

 

121.8

 

262.0

 

252.6

 

OPERATING (LOSS) INCOME

 

(18.4

)

69.1

 

(34.9

)

145.0

 

OTHER EXPENSE (INCOME)

 

 

 

 

 

 

 

 

 

Change in fair value of common stock purchase warrants

 

(1.9

)

(60.4

)

(1.8

)

(126.4

)

Loss (gain) on foreign exchange

 

7.9

 

(2.4

)

1.3

 

(2.1

)

Interest and finance fees

 

1.5

 

1.4

 

3.0

 

2.7

 

Interest income

 

(0.2

)

(0.6

)

(0.4

)

(1.0

)

Other

 

(0.1

)

(0.3

)

(0.4

)

(0.5

)

Total other expense (income)

 

7.2

 

(62.3

)

1.7

 

(127.3

)

(Loss) income before income and mining taxes

 

(25.6

)

131.4

 

(36.6

)

272.3

 

Income and mining tax (benefit) expense

 

(10.8

)

14.6

 

(22.9

)

26.6

 

NET (LOSS) INCOME

 

$

(14.8

)

$

116.8

 

$

(13.7

)

$

245.7

 

COMPREHENSIVE (LOSS) INCOME

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(35.0

)

10.2

 

(7.6

)

40.7

 

Total comprehensive (loss) income

 

$

(49.8

)

$

127.0

 

$

(21.3

)

$

286.4

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS) INCOME PER SHARE

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.09

)

$

0.70

 

$

(0.08

)

$

1.48

 

Diluted

 

$

(0.09

)

$

0.68

 

$

(0.08

)

$

1.41

 

Weighted average number of common shares

 

 

 

 

 

 

 

 

 

Basic

 

168.2

 

167.3

 

168.1

 

166.4

 

Diluted

 

168.2

 

172.3

 

168.1

 

174.7

 

 

See accompanying notes to consolidated financial statements.

 

2



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(in millions)

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(14.8

)

$

116.8

 

$

(13.7

)

$

245.7

 

Items not affecting cash:

 

 

 

 

 

 

 

 

 

Change in fair value of common stock purchase warrants

 

(1.9

)

(60.4

)

(1.8

)

(126.4

)

Depreciation, depletion and amortization

 

14.3

 

17.6

 

31.1

 

36.0

 

Accretion expense

 

0.6

 

0.4

 

1.1

 

0.9

 

Amortization of finance fees

 

0.5

 

0.6

 

1.2

 

1.1

 

Stock-based compensation

 

1.8

 

2.1

 

3.3

 

3.9

 

Product inventory write-downs

 

9.8

 

5.7

 

20.9

 

5.7

 

Deferred income tax benefit

 

(11.4

)

(0.8

)

(22.7

)

(6.1

)

Unrealized loss (gain) on foreign currency derivative instruments

 

0.5

 

(0.5

)

2.1

 

(0.5

)

Unrealized foreign exchange loss (gain)

 

3.7

 

 

(1.4

)

 

Change in working capital accounts (Note 16)

 

(23.5

)

(27.9

)

(37.4

)

(30.1

)

Cash (used) generated by operating activities

 

(20.4

)

53.6

 

(17.3

)

130.2

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

Capital expenditures

 

(193.3

)

(155.2

)

(381.2

)

(248.1

)

Capitalized bond interest payment

 

(13.1

)

 

(13.1

)

 

Restricted cash

 

9.2

 

(2.1

)

11.9

 

(4.0

)

Reclamation deposits

 

19.1

 

0.3

 

24.3

 

0.3

 

Cash used in investing activities

 

(178.1

)

(157.0

)

(358.1

)

(251.8

)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

(Costs) proceeds from issuance of common shares, net

 

(1.4

)

20.4

 

(0.9

)

25.8

 

Proceeds from senior unsecured note issuance

 

200.0

 

350.0

 

200.0

 

350.0

 

Proceeds from tangible equity units, net

 

213.6

 

 

213.6

 

 

Debt issuance costs

 

(8.2

)

(10.4

)

(8.2

)

(11.9

)

Gold Stream proceeds

 

45.0

 

 

90.0

 

 

Repayment of long-term debt, including capital lease obligation

 

(1.9

)

(1.3

)

(3.4

)

(2.8

)

Cash generated by financing activities

 

447.1

 

358.7

 

491.1

 

361.1

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

(1.8

)

2.0

 

(0.7

)

4.9

 

INCREASE IN CASH AND CASH EQUIVALENTS

 

246.8

 

257.3

 

115.0

 

244.4

 

Cash and cash equivalents, beginning of period

 

162.7

 

303.1

 

294.5

 

316.0

 

Cash and cash equivalents, end of period

 

$

409.5

 

$

560.4

 

409.5

 

$

560.4

 

Supplementary cash flow information (Note 16)

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

3



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Six Months Ended June 30, 2012

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

Common Stock

 

Paid-in

 

Retained

 

Comprehensive

 

 

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Income (Loss)

 

Total

 

 

 

(in millions, except share data in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2012

 

167,964

 

$

1,014.3

 

$

52.6

 

$

638.6

 

$

24.0

 

1,729.5

 

Issuance of tMEDS

 

 

 

177.7

 

 

 

177.7

 

Amortization of stock-based compensation

 

 

 

3.2

 

 

 

3.2

 

Stock option exercises

 

180

 

1.8

 

(1.4

)

 

 

0.4

 

Tax benefit of stock option exercises

 

 

 

(0.9

)

 

 

(0.9

)

Warrant exercises

 

393

 

0.8

 

 

 

 

0.8

 

Net loss

 

 

 

 

(13.7

)

 

(13.7

)

Other comprehensive loss

 

 

 

 

 

(7.6

)

(7.6

)

Balances at June 30, 2012

 

168,537

 

$

1,016.9

 

$

231.2

 

$

624.9

 

$

16.4

 

1,889.4

 

 

See accompanying notes to consolidated financial statements.

 

4



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

1. Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q.  In compliance with those instructions, certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”) have been condensed or omitted. This report should be read in conjunction with Thompson Creek Metals Company Inc.’s (“TCM” or the “Company”) consolidated financial statements and notes contained in its Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”) filed with the Securities and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported.  Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. TCM bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.  Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.  Certain comparative information has been reclassified to conform to the current year’s presentation.

 

The consolidated financial statements include the accounts of TCM and its subsidiaries, and intercompany accounts and transactions have been eliminated in consolidation.  Financial amounts are presented in United States (“US”) dollars unless otherwise stated.  References to C$ are Canadian dollars.

 

2. Liquidity

 

At June 30, 2012, TCM had $409.5 million of consolidated cash on hand, remaining proceeds from Royal Gold under the amended gold stream arrangement of $126.9 million, $120.8 million of undrawn capacity under its equipment lease financing for the mobile mining fleet at Mt. Milligan, $276.0 million of undrawn capacity under its revolving credit facility, and ongoing expected cash flow from operations.  At June 30, 2012, TCM’s future estimated cash capital project expenditures total approximately C$640 million to C$770 million for the Mt. Milligan project (through completion) together with the remaining cash payments for the Endako mill expansion. TCM continues to monitor its current costs, future cost estimates and scheduling for the Mt. Milligan project.

 

TCM’s ability to fund the completion of the Mt. Milligan project, satisfy its working capital needs and make its scheduled debt payments depends on its future operating performance and cash flow, average realized molybdenum prices, and its ability to access its current funding sources including its revolving credit facility, its equipment lease financing and its gold stream arrangement with Royal Gold.  As a result of operating losses in the second quarter of 2012, anticipated continued volatility in molybdenum prices, and TCM’s revised estimated production and cash cost guidance for Endako Mine, TCM anticipates that it will also need to obtain additional financing to complete the Mt. Milligan project.  TCM’s ability to access its existing funding sources depends on its compliance with certain financial covenants described below, including maintaining a ratio of consolidated secured total debt to consolidated EBITDA of 3.00 to 1.00 or less.  While as of June 30, 2012 TCM was in compliance with its financial covenants, given the recent operating results and the negative impacts to cash flow, TCM anticipates that it will be in breach of the consolidated secured total debt to consolidated EBITDA ratio as of September 30, 2012.

 

TCM is currently in negotiations with the lenders under its revolving credit facility to waive this financial covenant and amend its Credit Agreement to include additional new covenants.  TCM expects that any amendment to its Credit Agreement would be conditioned on its ability to supplement its existing liquidity.  To this end, on August 8, 2012, TCM entered into an amendment to its amended and restated gold stream agreement with Royal Gold pursuant to which TCM agreed to sell to Royal Gold an additional 12.25% of the refined gold production from Mt. Milligan for $200 million, plus $435 per ounce, or the prevailing market rate, if lower than $435 per ounce, when the gold is delivered.  Upon the closing of this transaction, TCM will have agreed to sell to Royal Gold a total of 52.25% of the refined gold production from its Mt. Milligan project, and Royal Gold’s aggregate investment (including amounts previously funded and commitments for future funding) in the refined gold from Mt. Milligan will have increased from $581.5 million to $781.5 million. The amendment will restrict TCM’s ability to incur debt in excess of $350 million that is secured by the assets of the Mt. Milligan project until the earlier of the date upon which 425,000 ounces of refined gold have been sold and delivered to Royal Gold pursuant to the agreement or the date upon which the aggregate dollar amount of the difference between the market price for the gold delivered to Royal Gold under the agreement and the price actually paid by Royal Gold pursuant to the terms of the agreement exceeds $280 million. The consummation of the transaction with Royal Gold is subject to the condition that the Company receives final approval for an amendment to its senior secured revolving credit agreement satisfactory to Royal Gold and approval of the Royal Gold transaction by the lenders thereunder within 30 days of the date of the Royal Gold amendment.  The Company is currently in negotiations with the revolving credit facility lenders to obtain these approvals.

 

There is no assurance that these transactions with TCM’s revolving credit facility lenders and Royal Gold will be completed or will provide sufficient liquidity to meet its ongoing needs.  Therefore, TCM is also exploring other alternatives to supplement its liquidity, including sales of assets, the issuance of additional debt or equity securities, and project finance transactions.  If TCM is unable to access its existing funding sources or to obtain additional financing on terms acceptable to TCM, or at all, TCM could incur significant delays in completing, or be unable to finance the completion of, the Mt. Milligan project, which could result in a material adverse effect on its operating results and financial condition.  If TCM is unable to secure an amendment to its revolving credit facility and to complete the proposed new transaction with Royal Gold, or to obtain alternative financing in replacement thereof, and it continues to incur expenditures at Mt. Milligan pursuant to its current development plan without delaying or suspending construction, TCM could face solvency issues in the September through December 2012 timeframe.

 

Continued declines in molybdenum prices in future periods will have a material adverse effect on TCM’s operating results and cash flows, resulting in difficulty in satisfying its working capital needs, scheduled debt service obligations and project development costs.

 

3. Accounts Receivable

 

Accounts receivable are carried at their estimated collectible amounts. Accounts receivable include trade receivables of $40.5 million and other receivables of $15.8 million as of June 30, 2012. Accounts receivable as of December 31, 2011 included trade receivables of $41.9 million and other receivables of $29.9 million. Other receivables primarily consist of $10.3 million and $25.8 million of Canadian Harmonized Sales Tax refundable to TCM as of June 30, 2012 and December 31, 2011, respectively.

 

4. Inventory

 

The carrying value of product inventory is as follows:

 

 

 

June 30,

 

December 31,

 

 

 

2012 

 

2011

 

Finished product

 

$

 63.4

 

$

 50.3

 

Work-in-process

 

20.1

 

25.7

 

Stockpiled ore

 

7.9

 

1.9

 

 

 

$

 91.4

 

$

 77.9

 

 

As of June 30, 2012, the carrying value of our inventory exceeded the market value.  Total write-downs were $16.6 million and $27.7 million for the three and six months ended June 30, 2012, respectively. The write-downs of inventory have been included in operating expenses and depreciation, depletion and amortization in the accompanying consolidated statements of operations and comprehensive (loss) income for the three and six months ended June 30, 2012.  As of June 30, 2011, the carrying value of TCM’s 75% share from the Endako Mine inventory exceeded the market value, resulting in an inventory write-down of $5.7 million.

 

During the second quarter of 2012, TCM evaluated and revised its average cost calculations and estimates to consider the commissioning of the new mill, as well as, the frequency of our lower of cost or market assessment from quarterly to monthly.  In accordance with

 

5



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

authoritative guidance, these changes were accounted for as a change in accounting estimate and were made on a prospective basis effective April 1, 2012. For the three months ended June 30, 2012, the effect of these changes on product inventory was an increase of $8.4 million, on depreciation was a decrease of $1.5 million, and on cost of sales was a decrease of $1.3 million.

 

5. Property, Plant, Equipment and Development

 

Property, plant, equipment and development is comprised of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2012 

 

2011

 

Mining properties

 

$

 1,157.7

 

$

 1,141.2

 

Mining equipment

 

813.4

 

355.0

 

Processing facilities

 

140.2

 

135.8

 

Construction in progress

 

888.9

 

972.8

 

Other

 

9.7

 

11.3

 

 

 

3,009.9

 

2,616.1

 

Less: Accumulated depreciation, depletion and amortization

 

(286.2

)

(256.7

)

 

 

$

 2,723.7

 

$

 2,359.4

 

 

The construction in progress balance includes nil and $403.5 million related to the mill expansion project at the Endako Mine and $858.7 million and $553.8 million related to the Mt. Milligan project as of June 30, 2012 and December 31, 2011, respectively.  No depreciation is currently being recognized on construction in progress related to the Mt. Milligan project as it has not been completed or placed into service.

 

6. Derivative Financial Instruments

 

TCM enters into various derivative financial instruments in its normal course of operations.  None of TCM’s derivative instruments are treated as hedges for accounting purposes, and all are recorded on the consolidated balance sheet at fair value with changes in fair value recorded to the consolidated statements of operations and comprehensive (loss) income, except those contracts for which TCM has elected to apply the normal purchases and normal sales scope exception. TCM is exposed to credit loss when counterparties with which it has entered into derivative transactions are unable to pay. To reduce counterparty credit exposure, TCM deals only with large credit-worthy financial institutions and companies and limits credit exposure to each. TCM believes the counterparties to the contracts to be credit-worthy entities, and therefore, TCM believes credit risk of counterparty non-performance is relatively low.  For information regarding the nature and types of TCM’s derivatives, see the references noted in the following tables.

 

The following table summarizes the location and fair value amounts of all derivative financial instruments in the consolidated balance sheets:

 

 

 

 

 

Fair Value

 

 

 

 

 

June 30,

 

December 31,

 

Derivative Type

 

Balance Sheet Classification

 

2012

 

2011

 

Derivative assets

 

 

 

 

 

 

 

Forward currency contracts(a)

 

Prepaid expense and other current assets

 

$

0.3

 

$

1.6

 

Total derivative assets

 

 

 

$

0.3

 

$

1.6

 

Derivative liabilities

 

 

 

 

 

 

 

Forward currency contracts(a)

 

Other current liabilities

 

$

0.7

 

$

 

Provisionally-priced sales(d)

 

Other current liabilities

 

0.1

 

 

Common stock purchase warrant derivatives(c)

 

Common stock purchase warrant derivatives

 

 

3.0

 

Total derivative liabilities

 

 

 

$

0.8

 

$

3.0

 

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

The following table sets forth the gains (losses) on derivative instruments for the three and six months ended June 30, 2012 and 2011:

 

 

 

 

 

Gain/(loss)

 

Gain/(loss)

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

Statement of Operations

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

Derivative Type

 

Classification

 

2012

 

2011

 

2012

 

2011

 

Provisionally-priced sales(d)

 

Molybdenum sales

 

$

(0.1

)

$

(0.3

)

$

(0.1

)

$

(0.4

)

Provisionally-priced purchases(d)

 

Operating expenses

 

 

1.1

 

 

0.7

 

Commodity contract (b)

 

Operating expenses

 

(0.1

)

 

 

 

Fixed-priced contracts(e)

 

Molybdenum sales

 

 

(0.4

)

 

(0.8

)

Forward currency contracts(a)

 

(Loss) gain on foreign exchange

 

(4.4

)

(0.3

)

(3.0

)

0.3

 

Common stock purchase warrant derivatives(c)

 

Change in fair value of common stock purchase warrants

 

1.9

 

60.4

 

1.8

 

126.4

 

 

 

 

 

$

(2.7

)

$

60.5

 

$

(1.3

)

$

126.2

 

 


(a)                               Forward Currency Contracts

 

TCM transacts business in various currencies in the normal course of its operations and for capital expenditures.  In addition, with all of its revenues denominated in US dollars, TCM has on-going foreign exchange risk with respect to its Canadian operations.  To help mitigate this risk, TCM, from time to time, enters into various derivative instruments such as foreign currency forward contracts, options and collars. The terms of these instruments are typically less than one year.  TCM records its currency contracts at fair value using a market approach based on observable quoted exchange rates and contracted notional amounts.  As of June 30, 2012, TCM had open foreign currency option contracts for C$69 million at exchange rates ranging from $1.00 to $1.04.

 

(b)                               Commodity Contract

 

TCM has commodity risk related to its natural gas purchases. To manage this risk, TCM has entered into a commodity forward contract with a supplier. TCM records the fair value of this contract using a market approach based on quoted New York Mercantile Exchange rates. This derivative contract is not designated as a cash flow hedge. Therefore, the periodic change in fair value of this contract is recorded directly to earnings.

 

(c)                                Common Stock Purchase Warrant Derivatives

 

TCM accounts for its common stock purchase warrants as derivative liabilities with the changes in fair value recorded to earnings.

 

The following table summarizes common share warrant transactions during the current period:

 

 

 

Number of Warrants

 

 

 

(000’s)

 

Balance, December 31, 2011

 

7,621

 

Warrants exercised

 

(7,550

)

Warrants expired

 

(71

)

Balance, June 30, 2012

 

 

 

During the second quarter of 2012 approximately 7.5 million warrants were exercised.  In connection with this

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

exercise approximately 388,000 shares of common stock were issued and $0.4 million was paid in cash. As of June 30, 2012, there are no outstanding warrants.

 

For the six months ended June 30, 2012, TCM recorded a non-cash increase to common stock of $1.2 million representing the fair value of warrants exercised on the date of such exercise.

 

(d)                               Provisionally-Priced Contracts

 

Certain molybdenum sales contracts provide for provisional pricing as specified in such contracts.  These sales contain an embedded derivative related to the provisional pricing mechanism, which is bifurcated and accounted for as a derivative.

 

TCM also enters into provisionally-priced molybdenum purchase contracts that also contain an embedded derivative, which is bifurcated and accounted for as a derivative.  Changes to the fair values of the embedded derivatives related to provisionally-priced molybdenum purchases are included in operating expenses in the consolidated statements of operations and comprehensive (loss) income as the product is sold.

 

TCM determines the fair value of its provisionally-priced contracts using a market approach based upon observable inputs from published market prices and contract terms.

 

The following table sets forth TCM’s outstanding provisionally-priced contracts as of June 30, 2012, which all mature in 2012:

 

 

 

Pounds to be

 

 

 

Sold/Purchased

 

 

 

(000’s lb)

 

Provisionally-priced sales

 

270

 

Provisionally-priced purchases

 

895

 

 

(e)                                Fixed-Priced Contracts

 

TCM’s results of operations and operating cash flows are affected by changes in market prices for molybdenum. To mitigate a portion of this risk, TCM enters into certain molybdenum sales contracts pursuant to which it sells future production at fixed prices. These fixed prices may be different than the quoted market prices at the date of sale.  As of June 30, 2012, there are no fixed-priced contracts outstanding.

 

7. Fair Value Measurement

 

US GAAP accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standards establish a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1

 

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2

 

Quoted prices in markets that are not active or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3

 

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

The following table sets forth TCM’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

 

 

Fair Value at June 30, 2012

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Foreign currency contracts 

 

$

 0.3

 

$

 —

 

$

 0.3

 

$

 —

 

 

 

$

 0.3

 

$

 —

 

$

 0.3

 

$

 —

 

Liabilities:

 

 

 

 

 

 

 

 

 

Foreign currency contracts 

 

$

 0.7

 

$

 —

 

$

 0.7

 

$

 —

 

Senior unsecured notes

 

469.0

 

 

 

469.0

 

tMEDS

 

29.8

 

 

 

29.8

 

Provisionally-priced sales

 

0.1

 

 

0.1

 

 

 

 

$

 499.6

 

$

 —

 

$

 0.8

 

$

 498.8

 

 

 

 

Fair Value at December 31, 2011

 

 

 

Total

 

Level 1

 

Level 2

 

Level 3

 

Assets:

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

 1.6

 

$

 —

 

$

 1.6

 

$

 —

 

 

 

$

 1.6

 

$

 —

 

$

 1.6

 

$

 —

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes

 

$

 309.0

 

$

 —

 

$

 —

 

$

 309.0

 

Common stock purchase warrant derivatives 

 

3.0

 

3.0

 

 

 

 

 

$

 312.0

 

$

 3.0

 

$

 —

 

$

 309.0

 

 

The following table sets forth a summary of the fair value of TCM’s Level 3 financial assets and liabilities for the six months ended June 30, 2012:

 

 

 

 

 

Fixed-

 

 

 

 

 

 

 

Priced

 

 

 

 

 

Total

 

Contracts

 

Debt

 

Balance at January 1, 2012

 

$

 309.0

 

$

 —

 

$

 309.0

 

Issuance of senior unsecured notes

 

200.0

 

 

 

200.0

 

Issuance of tMEDS

 

35.9

 

 

 

35.9

 

Unrealized gain (loss)

 

(46.1

)

 

 

(46.1

)

Balance at June 30, 2012

 

$

 498.8

 

$

 

 

$

 498.8

 

 

The sensitivity to changes in the unobservable inputs and their impact on the fair value measurement of senior unsecured notes can be significant.  The significant unobservable inputs for the senior unsecured notes are risk-free interest rates and credit spread assumptions.  The risk-free interest rate is negatively correlated to the fair value measure. An increase (decrease) in risk-free interest rates will lower (increase) the fair value measure.  The credit spread is negatively correlated to the fair value measure.  An increase (decrease) in the credit spread will decrease (increase) the fair value measure.

 

There were no transfers into or out of Level 3.  TCM’s policy is to recognize transfers into and out of Level 3 as of the actual date of the event or change in circumstances.

 

8.  Capital Lease

 

On March 30, 2011, TCM entered into an equipment financing facility, which was amended and restated on December 9, 2011 (the “Equipment Facility”), pursuant to which Caterpillar Financial Services Limited (“Caterpillar”) agreed to underwrite up to $132.0 million in mobile fleet equipment financing for the Mt. Milligan project. Each borrowing under the Equipment Facility

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

represents a capital lease and will have a term of 60 months. Interest on the amounts borrowed under the Equipment Facility is payable at either floating or fixed rates, at TCM’s option. TCM’s ability to borrow under the Equipment Facility terminates in December 2013 (or such later date as may be agreed upon by Caterpillar), and any unused commitments under the Equipment Facility will then terminate and no longer be available to TCM. At the end of each 60-month lease period, TCM has the option to purchase the underlying equipment for a nominal sum. Under the terms of the Equipment Facility, we are required to be in compliance with the financial covenants contained in our revolving credit facility described below.  As of June 30, 2012, TCM had $11.2 million in outstanding borrowings under the Equipment Facility and was in compliance with its covenants. Interest pertaining to the Equipment Facility is allocable to the cost of developing mining properties and is capitalized until assets are ready for their intended use. For the three and six months ended June 30, 2012, TCM capitalized $0.3 million, respectively, of the interest and debt issuance costs associated with the Equipment Facility.

 

9. Debt

 

TCM’s total debt consists of the following:

 

 

 

June 30,

 

December 31,

 

 

 

2012 

 

2011

 

Senior unsecured notes

 

$

 550.0

 

$

 350.0

 

Tangible Equity Units (tMEDS)

 

35.9

 

 

Equipment loans

 

13.6

 

16.1

 

Other

 

0.4

 

0.6

 

Total debt

 

599.9

 

366.7

 

Less: Current portion

 

(16.8

)

(5.7

)

Total long-term debt

 

$

 583.1

 

$

 361.0

 

 

Credit Facility

 

As of June 30, 2012, TCM has in place a $300 million senior secured revolving credit agreement (the “Credit Agreement”).  On May 11, 2012, the Company executed a fourth amendment to the Credit Agreement which provided for certain changes to the negative covenants in the Credit Agreement to permit the issuance of the tMEDS and the 2019 Notes.  The amendment also suspended the consolidated leverage ratio and consolidated interest coverage ratio tests from the fiscal quarter ending June 30, 2012 through the fiscal quarter ending December 31, 2013, but provides that the Company must satisfy (i) a consolidated secured leverage ratio test as of June 30, 2012 through December 31, 2013 by maintaining a ratio of consolidated secured total debt to consolidated EBITDA of 3.00 to 1.00 or less and (ii) a minimum liquidity test of $75,000,000 at the end of each fiscal quarter until the completion of the Mt. Milligan project. The consolidated secured leverage ratio test is calculated at the end of each quarter based on the prior four quarters financial results. As of June 30, 2012, TCM was in compliance with the Credit Agreement’s financial covenants. The obligations of TCM under the Credit Agreement are secured by a senior lien on substantially all of the tangible and intangible assets of TCM.

 

As further discussed in Note 2, TCM is currently in negotiations with the lenders under its revolving credit facility to waive this financial covenant and amend its Credit Agreement to include additional new covenants.  TCM expects that any amendment to its Credit Agreement would be conditioned on its ability to supplement its existing liquidity.  To this end, on August 8, 2012, TCM entered into an amendment to its amended and restated gold stream agreement with Royal Gold pursuant to which TCM agreed to sell to Royal Gold an additional 12.25% of the refined gold production from Mt. Milligan for $200 million, plus $435 per ounce, or the prevailing market rate, if lower than $435 per ounce, when the gold is delivered.  Upon the closing of this transaction, TCM will have agreed to sell to Royal Gold a total of 52.25% of the refined gold production from its Mt. Milligan project, and Royal Gold’s aggregate investment (including amounts previously funded and commitments for future funding) in the refined gold from Mt. Milligan will have increased from $581.5 million to $781.5 million. The consummation of the transaction with Royal Gold is subject to the condition that the Company receives final approval for an amendment to its senior secured revolving credit agreement satisfactory to Royal Gold and approval of the Royal Gold transaction by the lenders thereunder within 30 days of the date of the Royal Gold amendment.  The Company is currently in negotiations with the revolving credit facility lenders to obtain these approvals.

 

During 2012, TCM’s reclamation bond at TC Mine increased from $25.5 million to $42.3 million and its share of reclamation costs at Endako Mine increased from $5.2 million to $11.6 million.  The $42.3 reclamation bond at TC Mine was issued in the form of a surety bond and the original escrow reclamation deposit of $19.1 million was released.  The $11.6 million reclamation bond at Endako Mine was issued in the form of a letter of credit under TCM’s Credit Agreement, and the original $5.2 million reclamation deposit was released. As of June 30, 2012, TCM had no outstanding borrowings under the Credit Agreement and had issued and outstanding $24.0 million in letters of credit under the Credit Agreement. Commitment fees for the three and six months ended June 30, 2012 related to the Credit Agreement were $0.6 million and $1.3 million, respectively. For the three and six months ended June 30, 2012, TCM capitalized $0.1 million of the interest and debt issuance costs associated with the Credit Agreement. At June 30, 2012 TCM had undrawn borrowing capacity of $276.0 million under the revolving credit facility.

 

7.375% Senior Unsecured Notes

 

On May 20, 2011, TCM issued $350 million of 7.375% senior unsecured notes (the “2018 Notes”).  The proceeds received in the offering were $339.9 million, which were net of financing fees of $10.1 million. For the three and six months ended June 30, 2012, TCM capitalized $6.7 million and $13.7 million, respectively, of the interest and debt issuance costs associated with the 2018 Notes. TCM is utilizing the net proceeds from the 2018 Notes offering to fund the development of Mt. Milligan and for general working capital purposes. The 2018 Notes are guaranteed on a senior basis by substantially all of our subsidiaries.

 

The 2018 Notes mature on June 1, 2018 and accrue interest from May 20, 2011 until maturity at a fixed rate of 7.375% per year. Interest is payable in cash semi-annually in arrears on June 1 and December 1 to the holders of record at the close of business on the May 15 and November 15 prior to each interest payment date, and the first interest payment occurred on December 1, 2011.

 

The 2018 Notes are redeemable at TCM’s option, in whole or in part, at any time on or after June 1, 2014. TCM may also redeem up to 35% of the original principal amount of the 2018 Notes at any time prior to June 1, 2014 with the proceeds of certain equity offerings at a redemption price of 107.375% of the principal amount of the 2018 Notes, together with accrued and unpaid interest to, but not including, the date of redemption. The Company may also redeem the 2018 Notes at any time on or after June 1, 2014 at the redemption prices specified in the Indenture together with accrued and unpaid interest to, but not including, the date of redemption. Finally, the Company may redeem the 2018 Notes at any time upon the occurrence of specified events relating to Canadian tax law, at a redemption price of 100% of the principal amount of the 2018 Notes plus accrued and unpaid interest to, but not including, the date of redemption.

 

For purposes of the fair market value disclosed in Note 7, the carrying values of the 2018 Notes as of June 30, 2012 and December 31, 2011, were higher than the fair values of approximately $272.6 million and $309.0 million, respectively.  TCM determined the fair values of the 2018 Notes using a discounted cash flow valuation model, consisting of inputs such as risk-free interest rates and credit spreads.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

The 2018 Notes include both standard financial and non-financial covenants, including, among others, limitations on incurring additional indebtedness, making restricted payments and allowing new liens.  As of June 30, 2012, TCM was in compliance with these covenants.

 

As further discussed in Note 2, TCM’s ability to fund the completion of the Mt. Milligan project, satisfy its working capital needs and make its scheduled debt payments, depends on its future operating performance and cash flow, average realized molybdenum prices, and its ability to access its current funding sources, including its revolving credit facility, its equipment lease financing and its gold stream arrangement with Royal Gold.  As a result of operating losses in the second quarter of 2012, anticipated continued volatility in molybdenum prices, and TCM’s revised estimated production and cash cost guidance for Endako Mine, TCM anticipates that it will also need to obtain additional financing to complete the Mt. Milligan project.  TCM’s ability to access its existing funding sources depends on its compliance with certain financial covenants described below, including maintaining a ratio of consolidated secured total debt to consolidated EBITDA of 3.00 to 1.00 or less.  While as of June 30, 2012 TCM was in compliance with its financial covenants, given the recent operating results and the negative impacts to cash flow, TCM anticipates that it will be in breach of the consolidated secured total debt to consolidated EBITDA ratio as of September 30, 2012.

 

12.5% Senior Unsecured Notes

 

On May 11, 2012, TCM issued $200 million of 12.5% senior unsecured notes (the “2019 Notes”). The proceeds received in the offering were $193.1 million, which were net of financing fees of $6.9 million.  For the three months and six months ended June 30, 2012, TCM capitalized $3.6 million of the interest and debt issuance costs associated with the 2019 Notes. TCM is utilizing the net proceeds from the 2019 Notes offering to fund the development of Mt. Milligan and for general working capital purposes. The 2019 Notes are guaranteed on a senior basis by substantially all of our subsidiaries.

 

The 2019 Notes mature on May 1, 2019 and accrue interest from May 1, 2012 until maturity at a fixed rate of 12.5% per year. Interest on the 2019 Notes is payable on May 1 and November 1 of each year, commencing November 1, 2012, to the holders of record at the close of business on the April 15 and October 15 prior to each interest payment date.

 

The 2019 Notes are redeemable at TCM’s option at any time prior to May 1, 2016 at a price equal to 100% of the principal amount of the 2019 Notes, plus accrued and unpaid interest and a make-whole premium.  TCM may also redeem up to 35% of the original principal amount of the 2019 Notes at any time prior to May 1, 2015 with the proceeds of certain equity offerings at a redemption price of 112.5% of the principal amount of the 2019 Notes, together with accrued and unpaid interest to, but not including, the date of redemption. TCM may also redeem the 2019 Notes at any time on or after May 1, 2016 at the redemption prices specified in the Indenture together with accrued and unpaid interest to, but not including, the date of redemption. Finally, TCM may redeem the 2019 Notes at any time upon the occurrence of specified events relating to Canadian tax law, at a redemption price of 100% of the principal amount of the 2019 Notes plus accrued and unpaid interest to, but not including, the date of redemption.

 

For purposes of the fair market value disclosed in Note 7, the carrying values of the 2019 Notes as of June 30, 2012 were higher than the fair values of approximately $196.4 million.  TCM determined the fair values of the 2019 Notes using a discounted cash flow valuation model, consisting of inputs such as risk-free interest rates and credit spreads.

 

The 2019 Notes include both standard financial and non-financial covenants, including, among others, limitations on incurring additional indebtedness, making restricted payments and allowing new liens.  As of June 30, 2012, TCM was in compliance with these covenants.

 

As discussed above, while as of June 30, 2012 TCM was in compliance with its financial covenants, given the recent operating results and the negative impacts to cash flow, TCM anticipates that it will be in breach of the consolidated secured total debt to consolidated EBITDA ratio as of September 30, 2012.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

Mobile Mining Equipment Loans

 

On December 8, 2010, TCM executed an equipment financing agreement with Caterpillar Financial Services Ltd. (“Caterpillar”) in the amount of $12.8 million secured by six units of mobile mining equipment purchased by TCM during 2010. This fixed rate loan bears interest at 3.6%, is scheduled to mature no later than December 8, 2015 and has an outstanding payable amount of $9.2 million as of June 30, 2012. TCM has an additional fixed rate loan bearing interest at 5.9% that is scheduled to mature no later than October 31, 2013 and has an outstanding payable of $4.4 million as of June 30, 2012.

 

10. Tangible Equity Units (tMEDS)

 

On May 11, 2012, TCM completed a public offering of 8,800,000 tMEDS with a stated value of $25.00. Each tMEDS unit consists of a prepaid common stock purchase contract and a senior amortizing note due May 15, 2015. The prepaid common stock purchase contracts have been recorded as additional paid-in-capital (a component of shareholders’ equity), net of issuance costs, and the senior amortizing notes have been recorded as long-term debt. Issuance costs associated with the debt component were recorded as a prepaid expense, which will be amortized using the effective interest rate method over the term of the instrument to May 15, 2015. TCM allocated the proceeds from the issuance of the tMEDS to equity and debt based on the relative fair values of the respective components of each tMEDS unit. The proceeds received in the offering were $212.3 million, which were net of financing fees of $7.7 million.  For the three and six months ended June 30, 2012, TCM capitalized $0.6 million of the interest and debt issuance costs associated with the tMEDS. The aggregate values assigned to each component of the tMEDS offering are as follows:

 

(unaudited — US$ in millions except per unit amounts)

 

 

 

Equity

 

Debt

 

tMEDS

 

 

 

Component

 

Component

 

Total

 

Units issued (1)

 

8.8

 

8.8

 

8.8

 

Unit price

 

$

20.924688

 

$

4.0753120

 

$

25.00

 

Gross proceeds

 

184.1

 

35.9

 

220.0

 

Issuance costs

 

(6.4

)

(1.3

)

(7.7

)

Net proceeds

 

$

177.7

 

$

34.6

 

$

212.3

 

 

 

 

 

 

 

 

 

Balance sheet impact:

 

 

 

 

 

 

 

Other assets (prepaid issuance costs)

 

$

 

$

1.3

 

$

1.3

 

Long-term debt

 

$

 

$

35.9

 

$

35.9

 

Additional paid-in capital

 

$

177.7

 

$

 

$

177.7

 

 


(1)          There are two components of each tMEDS unit; therefore, there are 8.8 million units of the equity component, 8.8 million units of the debt component, and 8.8 million units of tMEDS, which includes both the debt and equity components.

 

The fair value of the debt component was determined using a discounted cash flow model using the following assumptions: (1) quarterly cash payments of 6.5%; (2) a maturity date of May 15, 2015; and (3) an assumed discount rate of 11.68%. The discount rate used for estimating the fair value was determined by obtaining yields for comparably-rated issuers trading in the market, considering the market yield of existing TCM debt and the credit rating of TCM. The debt component was recorded at fair value, will be amortized using the level yield method over the term of the instrument, and will be fully amortized at the settlement date of May 15, 2015.

 

The fair value of the equity component was determined using a Kynex valuation model using the following weighted-average assumptions: (1) issue premium 17.5%; (2) expected volatilities of 40% and 37%; (c) credit spread of 900bps; and (4) term of 3 years.

 

Each senior amortizing note will have an initial principal amount of $4.075312, bear interest at 11.68% per annum, and have a scheduled final installment payment date of May 15, 2015. On each February 15, May 15, August 15, and November 15, commencing

 

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Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

on August 15, 2012, TCM will pay equal quarterly installments of $0.406250 on each amortizing note. Each payment will constitute a payment of interest and a partial repayment of principal.

 

Each prepaid common stock purchase contract will automatically settle on May 15, 2015, unless settled earlier as described below, and TCM will deliver not more than 5.3879 shares and not less than 4.5855 shares of its common stock based on the applicable market value (the average of the volume weighted average price of TCM common stock for the twenty (20) consecutive trading days immediately preceding May 15, 2015) as follows:

 

Applicable Market Value

 

Settlement

of TCM Common Stock

 

Rate

Less than or equal to $4.64

 

5.3879

Between $4.64 and $5.45

 

Number of shares equal to $25, divided by the applicable market price

Greater than or equal to $5.45

 

4.5855

 

At any time prior to the third business day immediately preceding May 15, 2015, the holder may settle the purchase contract early. Purchase contracts settled prior to November 10, 2012 will be settled at 4.3562, which is 95% of the minimum settlement rate.  Purchase contracts settled on or after November 11, 2012 but prior to the third business day preceding May 15, 2015 will be settled for 4.5855, subject in either case to certain adjustments.  Upon settlement, an amount equal to $1.00 per common share issued will be reclassified from additional paid-in capital to common stock.

 

For purposes of the fair market value disclosed in Note 7, the carrying values of the tMEDS as of June 30, 2012 were higher than the fair values of approximately $29.8 million.  TCM determined the fair values of the tMEDS using a discounted cash flow valuation model, consisting of inputs such as credit spreads and the current trading price of the tMEDS.

 

11.  Stock-Based Compensation

 

On May 6, 2010, TCM’s shareholders approved the 2010 Long-Term Incentive Plan (“LTIP”) and the 2010 Employee Stock Purchase Plan (“ESPP”).  The LTIP allows TCM to grant stock options, share appreciation rights, restricted shares, restricted share units, performance share units, or shares as bonus compensation.  As of June 30, 2012, TCM has granted stock options, performance share units (“PSUs”) and restricted share units (“RSUs”) under the LTIP, as discussed below.

 

a)                                    Stock Options

 

The expiration date and vesting provisions of options granted are established at the time an award is made. Options may be exercised by the holder upon vesting of the option award. When an option is exercised, TCM issues the requisite shares from authorized but unissued common stock. The exercise price of option grants awarded is equal to the weighted-average trading price of the underlying shares over the five consecutive trading days immediately before the award date.

 

The following table summarizes stock option activity during the six months ended June 30, 2012:

 

 

 

 

 

Weighted-Average

 

 

 

Shares (000’s)

 

Exercise Price (C$)

 

Stock options outstanding at January 1, 2012

 

2,989

 

$

12.72

 

Granted

 

114

 

6.15

 

Exercised

 

(35

)

7.12

 

Canceled/expired

 

(530

)

12.40

 

Stock options outstanding at June 30, 2012

 

2,538

 

$

12.85

 

 

For the three and six months ended June 30, 2012, TCM recorded compensation expense related to stock options of $0.3 million and $0.6 million, respectively.

 

For the three and six months ended June 30, 2011, TCM recorded compensation expense related to stock options of $1.3 million and $2.6 million, respectively.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

b)                                    Performance Share Units

 

The following table summarizes the PSU activity during the six months ended June 30, 2012:

 

 

 

 

 

Weighted-Average

 

 

 

Shares (000’s)

 

Fair Value (US$)

 

Outstanding at January 1, 2012

 

495

 

$

11.91

 

PSUs Granted

 

381

 

12.01

 

Outstanding at June 30, 2012

 

876

 

$

11.95

 

 

The vesting of PSUs granted prior to January 1, 2012 is contingent upon employee service and the performance of TCM’s share price relative to the established award price.  At each anniversary date during the vesting period, if the per share closing price of TCM’s common stock on such date is at or higher than the award price, then the awards will vest one-third, and the requisite shares will be issued.  If the closing price is less than the award price, and, therefore, the share price condition is not achieved, then those PSUs do not vest and are carried forward to the following anniversary date.  Any PSUs not vested at the end of the three-year vesting period will expire.

 

The vesting of the PSUs granted during the first quarter of 2012 is contingent upon two performance metrics:  1) the Company Total Shareholder Return (TSR) relative to the Russell 2000 Index as measured by the Relative TSR performance percentage as set forth by the plan administrator, and 2) the replaced proven and probable mine reserves as measured by the replacement reserves percentage as set forth by the plan administrator.  The PSUs cliff vest three years from the date of issuance upon achievement of the above metrics.

 

All PSUs granted are accounted for at fair value using a Monte Carlo simulation valuation model on the date of grant.  The Monte Carlo model is based on random projections of stock price paths.  For the three and six months ended June 30, 2012, TCM recorded compensation expense related to the PSUs of $0.7 million and $1.3 million, respectively.  TCM recorded $0.4 million and $0.7 million of expense related to the PSUs for the three and six months ended June 30, 2011.

 

c)                                      Restricted Stock Units

 

The following table summarizes the RSU activity during the six months ended June 30, 2012:

 

 

 

 

 

Weighted-Average

 

 

 

Shares (000’s)

 

Fair Value (US$)

 

Outstanding at January 1, 2012

 

306

 

$

10.33

 

RSUs granted

 

413

 

8.82

 

RSUs vested and common shares issued

 

(72

)

10.12

 

RSUs canceled/expired

 

(65

)

10.35

 

Outstanding at June 30, 2012

 

582

 

$

9.30

 

 

TCM accounts for RSUs at fair value, which is based on the market value of TCM’s common shares on the day of grant and recognized over the vesting period of one to three years.  Upon vesting, TCM will issue the requisite shares.  TCM recorded $0.7 million and $1.1 million of compensation expense related to its RSUs for the three and six months ended June 30, 2012, respectively.  TCM recorded compensation expense of $0.3 million and $0.5 million related to its RSUs for each of the three and six months ended June 30, 2011.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

12.  Commitments and Contingencies

 

Legal Matters

 

Below are descriptions of certain legal actions which involve certain properties of TCM.  Although the results of legal actions cannot be predicted with certainty, it is the opinion of management that the resolution of these actions are not likely to have a material adverse effect on TCM’s future consolidated financial position, results of operations or cash flows.

 

In May 2010, the Stellat’en First Nation filed a petition in the Supreme Court of British Columbia against the British Columbia Minister of Energy, Mines and Petroleum Resources and TCM alleging that the Endako Mine and the mill expansion project at the Endako Mine represent infringements of the aboriginal title of the petitioners and impacts to their aboriginal rights, and that the government breached its duty to consult with the Stellat’en First Nation in relation to the impacts of the Endako Mine and the mill expansion.  The petitioners sought a declaration that the Provincial Crown has not fulfilled its duty to consult with them in relation to the mill expansion project, a declaration that the mining permits and/or tenures held by TCM are invalid, an order quashing or setting aside the decision to issue a permit amendment to TCM, and an injunction prohibiting further construction or alterations relating to the mill expansion project.  The government and TCM filed materials in response to the petition, and the matter was heard by the Supreme Court of British Columbia in a hearing that took place in late February and early March of 2011.  On August 5, 2011, the Court dismissed the petitioners’ claims in full.  On August 17, 2011, the Stellat’en First Nation filed a notice of appeal from that decision to the Court of Appeal of British Columbia seeking to have the decision of the Supreme Court of British Columbia set aside and seeking an order staying the permit amendment and any future permitting until the Province has engaged in further consultation.  On April 13, 2012, the Stellat’en First Nation, the government and TCM agreed to put the appeal into abeyance for 120 days to allow for discussions between the Stellat’en First Nation and the government.  If these discussions do not result in a resolution of the matter, the hearing of the appeal will proceed on November 26, 27 and 28, 2012.

 

In January, August and December of 2010, the Nak’azdli First Nation commenced separate legal proceedings against Federal or Provincial governments in Canada asserting that it was not adequately consulted by such governments before Terrane was granted various approvals relating to the Mt. Milligan project.  On June 12, 2012, the Provincial government and the Nak’azdli First Nation entered into a Economic and Community Development Agreement whereby the Nak’azdli First Nation agreed to terminate all of the pending litigation by filing in each of the proceedings a consent dismissal order (or its equivalent) within 30 days.

 

Legal Matters - Subsequent Events

 

As of July 12, 2012, the Nak’azdli First Nation has applied to the relevant courts and quasi-judicial tribunals to dismiss all of its pending litigation relating to the Mt. Milligan project.

 

Molybdenum Purchases

 

In the normal course of operations, TCM enters into agreements for the purchase of molybdenum. As of June 30, 2012, TCM had commitments to purchase approximately 14 million pounds of molybdenum sulfide concentrate throughout the remainder of 2012 to 2014, to be priced at a discount to the market price for molybdenum oxide at the time of purchase.

 

Molybdenum Sales

 

In the normal course of operations, TCM enters into certain molybdenum sales contracts where it sells future production at fixed prices.  As of June 30, 2012, TCM had no outstanding commitments.

 

Copper Concentrate Sales

 

On June 29, 2012, Terrane entered into two Copper Concentrate Sales Agreements whereby Terrane, among other things, agreed to sell 55% of the copper-gold-silver concentrate produced at Mt. Milligan during 2013 and 2014 and approximately 80,000 dry metric tons (“DMT”) in each of the two calendar years thereafter.

 

Capital Purchase Commitments

 

As of June 30, 2012, TCM had open purchase orders, contracts and capital purchase commitments of $288.3 million for engineering and equipment related to the development of Mt. Milligan and nil related to the mill expansion at the Endako Mine.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

Guarantees

 

As discussed in the 2011 Form 10-K, on December 9, 2009, TCM entered into a credit support agreement with British Columbia Hydro and Power Authority (“BC Hydro”) related to the mill expansion project at the Endako Mine. Under this agreement, TCM is required to post financial assurance in an amount equal to BC Hydro’s estimated out-of-pocket costs for work on the Endako mill expansion project.  Subsequent to the commissioning of the new mill and subject to annual measurements of BC Hydro’s incremental revenues following the mill’s commissioning, some or all of this financial assurance may, thereafter, be released in amounts equal to the incremental revenues generated until such time as the full amount of financial assurance has been released or until such time as the expiration period has been reached. The amount of the guarantee as of June 30, 2012 was C$16.5 million. As part of the financial guarantee, TCM provided a surety bond for C$11.2 million for additional financial assurance to BC Hydro.  The surety bond can be drawn down in the event of a shortfall in incremental revenues after the commissioning of the new mill facility.  At this time, TCM does not anticipate having to post any additional financial assurance with respect to the BC Hydro credit support agreement.

 

As of June 30, 2012, a shortfall in Endako’s future electric power usage that would result in incremental payments to BC Hydro is not deemed to be probable.  As such, no accrual has been recorded. An accrual for any expected shortfall will be recorded if and when it is determined that a shortfall is probable and a reasonable estimate can be made.

 

13.  Income and Mining Taxes

 

Income and mining taxes for the three months ended June 30, 2012 is a benefit of $10.8 million compared to an expense of $14.6 million for the three months ended June 30, 2011.  Income and mining taxes for the six months ended June 30, 2012 is a benefit of $22.9 million compared to an expense of $26.6 million for the six months ended June 30, 2011.  The tax benefit/expense differ from the tax that would result from applying the Canadian federal and provincial income tax rates primarily due to the US percentage depletion benefit and the pre-tax book loss (which was primarily attributable to Canadian operations) in the three and six months ended June 30, 2012 and the US percentage depletion benefit and the non-taxable gain due to the change in the fair value of TCM’s common stock purchase warrants in the three and six months ended June 30, 2011. The tax benefit for the six months ended June 30, 2012 was also impacted by an immaterial correction of $1.8 million related to the British Columbia mineral tax associated with TCM’s share of the expansion costs at the Endako Mine.  The adjustment relates to the quarter ended December 31, 2011.

 

14. Net (Loss) Income per Share

 

The following is a reconciliation of net (loss) income and weighted-average common shares outstanding for purposes of calculating diluted net (loss) income per share for the three and six months ended June 30, 2012 and 2011:

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Net (loss) income

 

$

(14.8

)

$

116.8

 

$

(13.7

)

$

245.7

 

Basic weighted-average number of shares outstanding

 

168.2

 

167.3

 

168.1

 

166.4

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

Common stock purchase warrants

 

 

4.5

 

 

7.5

 

Share based awards

 

 

0.5

 

 

0.8

 

Diluted weighted-average number of shares outstanding

 

168.2

 

172.3

 

168.1

 

174.7

 

Net (loss) income per share

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.09

)

$

0.70

 

$

(0.08

)

$

1.48

 

Diluted

 

$

(0.09

)

$

0.68

 

$

(0.08

)

$

1.41

 

 

For the three and six months ended June 30, 2012, approximately 2.5 million of stock options were excluded from the computation of diluted weighted-average shares as the exercise prices exceeded the average price of TCM’s common stock for the period.  In addition, 0.9 million PSUs were excluded from the computation of diluted weighted-average shares as the award price exceeded the closing price of TCM’s common stock as of June 30, 2012.

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

For the three and six months ended June 30, 2011, approximately 2.6 million and 1.2 million stock options, respectively, were excluded from the computation of diluted weighted-average shares as the exercise prices exceeded the average price of TCM’s common stock for the period.  In addition, 0.5 million PSUs were excluded from the computation of diluted weighted-average shares as the award price exceeded the closing price of TCM’s common stock as of June 30, 2011.

 

15. Related Party Transactions

 

Total sales by TCM to Sojitz Moly Resources, Inc. (“Sojitz”), Endako Mine’s joint venture partner, were $34.8 million and $68.5 million for the three and six months ended June 30, 2012, respectively. This represented 30.7% and 30.2% of TCM’s total revenues for the three and six months ended June 30, 2012, respectively.

 

Total sales to Sojitz were $50.6 million and $103.1 million for the three and six months ended June 30, 2011, respectively. This represented 26.5% and 25.9% of TCM’s total revenues for the three and six months ended June 30, 2011, respectively.

 

For the three and six months ended June 30, 2012, TCM recorded management fee income of $0.1 million and $0.2 million, respectively, and selling and marketing expenses of $0.1 million and $0.3 million, respectively, from Sojitz.

 

For the three and six months ended June 30, 2011, TCM recorded management fee income of $0.1 million and $0.2 million, respectively, and selling and marketing expenses of $0.2 million and $0.4 million, respectively, from Sojitz.

 

As of June 30, 2012 and December 31, 2011, TCM’s related accounts receivable owing from Sojitz were $11.0 million and $6.8 million, respectively.

 

16. Supplementary Cash Flow Information

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Change in working capital accounts:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

(10.7

)

$

2.0

 

$

9.5

 

$

(31.2

)

Product inventory

 

(17.5

)

(22.8

)

(34.9

)

(15.2

)

Material and supplies inventory

 

(2.0

)

(1.9

)

(0.6

)

(2.5

)

Prepaid expense and other current assets

 

2.8

 

1.1

 

0.6

 

3.5

 

Income tax receivable

 

(6.0

)

0.9

 

(5.3

)

6.7

 

Accounts payable and accrued liabilities

 

12.1

 

4.3

 

(5.7

)

8.7

 

Income and mining taxes payable

 

(2.2

)

(11.5

)

(1.0

)

(0.1

)

 

 

$

(23.5

)

$

(27.9

)

$

(37.4

)

$

(30.1

)

Cash interest paid

 

$

13.2

 

$

0.2

 

$

13.4

 

$

0.4

 

Cash income taxes paid

 

$

8.9

 

$

25.5

 

$

11.1

 

$

25.5

 

 

Non-cash investing and financing activities

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

-

 

-

 

Investing activities

 

 

 

 

 

 

 

 

 

Acquisition of property, plant and equipment

 

$

(3.7

)

$

 

$

(3.7

)

$

 

Change in capital expenditure accrual

 

$

0.1

 

$

(14.9

)

$

(20.2

)

$

(43.4

)

Financing activities

 

 

 

 

 

 

 

 

 

Capital lease

 

$

3.7

 

$

 

$

3.7

 

$

 

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

17. Concentration of Credit Risk

 

TCM is exposed to counterparty risk from its cash and cash equivalent balances and its reclamation deposits held by financial institutions and governmental entities. TCM monitors its positions with, and the credit quality of, the financial institutions and companies in which it invests its cash and cash equivalents and that hold its reclamation deposits. Counterparties to cash balances, investments and its reclamation deposits, other than balances maintained in various bank operating accounts, are US and Canadian institutions and the US and Canadian governments. TCM’s investment policy limits investments to government-backed financial instruments, commercial paper, and other investments meeting the guidelines of its investment policy.

 

TCM manages its credit risk from its accounts receivable through its collection activities. As of June 30, 2012, TCM had 5 customers which owed TCM more than $3.0 million and accounted for approximately 44.7% of all receivables outstanding. Another 7 customers had balances greater than $1.0 million but less than $3.0 million that accounted for approximately 13.0% of total receivables.  All of these customers were compliant with credit terms and scheduled payment dates.

 

TCM’s maximum counterparty and credit risk exposure is the carrying value of its cash and accounts receivable. The carrying amounts of accounts receivable, accounts payable, accrued liabilities, and fixed rate debt, excluding the senior unsecured notes, as discussed in Note 7, approximate fair value as of June 30, 2012.

 

18. Segment Information

 

TCM has three reportable segments, based on products and geography: US Operations Molybdenum, Canadian Operations Molybdenum, and Copper-Gold (Development). The US Operations Molybdenum segment includes all mining, milling, mine site administration, roasting and sale of molybdenum products from the TC Mine and the Langeloth Facility, as well as all roasting and sales of third-party purchased material. The Canadian Operations Molybdenum segment includes all mining, milling, mine site administration, roasting and sale of molybdenum products from the 75% owned Endako Mine. The Copper-Gold (Development) segment includes all development expenditures and development site administration from Mt. Milligan. The Inter-segment represents the elimination of management fee income, revenue, and cost of sales of product transported from the Canadian Operations to the US Operations for processing.

 

TCM’s chief operating decision makers (Chief Executive Officer and Chief Operating Officer) evaluate segment performance based on segment revenue less costs and expenses. TCM attributes other income and expenses to the reporting segments if the income or expense is directly related to segment operations, as described above. TCM does not allocate corporate expenditures such as general and administrative, exploration, and interest income and expense items to its reporting segments, unless such expenditures are directly related to segment operations.  Segment information for the three and six months ended June 30, 2012 and 2011 is as follows:

 

For the three months ended June 30, 2012:

 

 

 

US

 

Canadian

 

 

 

 

 

 

 

 

 

Operations

 

Operations

 

Copper-Gold

 

Inter-

 

 

 

 

 

Molybdenum

 

Molybdenum

 

(Development)

 

segment

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Molybdenum sales

 

$

90.0

 

$

20.8

 

$

 

$

(1.2

)

$

109.6

 

Tolling, calcining and other

 

3.9

 

 

 

 

3.9

 

 

 

93.9

 

20.8

 

 

(1.2

)

113.5

 

Cost and expenses

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

83.2

 

25.7

 

 

(1.1

)

107.8

 

Selling and marketing

 

1.2

 

0.7

 

 

(0.3

)

1.6

 

Depreciation, depletion and amortization

 

5.5

 

8.5

 

 

 

14.0

 

Accretion expense

 

0.4

 

0.1

 

0.1

 

 

0.6

 

 

 

90.3

 

35.0

 

0.1

 

(1.4

)

124.0

 

Segment revenue less costs and expenses

 

3.6

 

(14.2

)

(0.1

)

0.2

 

(10.5

)

Other segment expenses

 

 

 

 

 

 

 

 

 

 

 

Loss on foreign exchange

 

0.7

 

0.9

 

4.0

 

 

5.6

 

Segment income (loss) before income and mining taxes

 

$

2.9

 

$

(15.1

)

$

(4.1

)

$

0.2

 

$

(16.1

)

 

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THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

For the three months ended June 30, 2011:

 

 

 

US

 

Canadian

 

 

 

 

 

 

 

 

 

Operations

 

Operations

 

Copper-Gold

 

Inter-

 

 

 

 

 

Molybdenum

 

Molybdenum

 

(Development)

 

segment

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Molybdenum sales

 

$

163.0

 

$

23.2

 

$

 

$

 

$

186.2

 

Tolling, calcining and other

 

4.7

 

 

 

 

4.7

 

 

 

167.7

 

23.2

 

 

 

190.9

 

Cost and expenses

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

71.2

 

20.5

 

 

 

91.7

 

Selling and marketing

 

2.1

 

0.7

 

 

(0.3

)

2.5

 

Depreciation, depletion and amortization

 

9.9

 

7.3

 

 

 

17.2

 

Accretion expense

 

0.3

 

0.1

 

 

 

0.4

 

 

 

83.5

 

28.6

 

 

(0.3

)

111.8

 

Segment revenue less costs and expenses

 

84.2

 

(5.4

)

 

0.3

 

79.1

 

Other segment expenses

 

 

 

 

 

 

 

 

 

 

 

Loss (gain) on foreign exchange

 

 

0.4

 

(3.3

)

 

(2.9

)

Segment income (loss) before income and mining taxes

 

$

84.2

 

$

(5.8

)

$

3.3

 

$

0.3

 

$

82.0

 

 

For the six months ended June 30, 2012:

 

 

 

US

 

Canadian

 

 

 

 

 

 

 

 

 

Operations

 

Operations

 

Copper-Gold

 

Inter-

 

 

 

 

 

Molybdenum

 

Molybdenum

 

(Development)

 

segment

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Molybdenum sales

 

$

174.5

 

$

45.9

 

$

 

$

(1.2

)

$

219.2

 

Tolling, calcining and other

 

7.9

 

 

 

 

7.9

 

 

 

182.4

 

45.9

 

 

(1.2

)

227.1

 

Cost and expenses

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

154.1

 

57.2

 

 

(1.1

)

210.2

 

Selling and marketing

 

2.2

 

1.5

 

 

(0.6

)

3.1

 

Depreciation, depletion and amortization

 

11.2

 

19.0

 

 

 

30.2

 

Accretion expense

 

0.8

 

0.2

 

0.1

 

 

1.1

 

 

 

168.3

 

77.9

 

0.1

 

(1.7

)

244.6

 

Segment revenue less costs and expenses

 

14.1

 

(32.0

)

(0.1

)

0.5

 

(17.5

)

Other segment expenses

 

 

 

 

 

 

 

 

 

 

 

Loss on foreign exchange

 

0.1

 

 

1.0

 

 

1.1

 

Segment income (loss) before income and mining taxes

 

$

14.0

 

$

(32.0

)

$

(1.1

)

$

0.5

 

$

(18.6

)

 

19



Table of Contents

 

THOMPSON CREEK METALS COMPANY INC.

Notes to the Consolidated Financial Statements — Unaudited

(US dollars in millions, except per share amounts)

 

For the six months ended June 30, 2011:

 

 

 

US

 

Canadian

 

 

 

 

 

 

 

 

 

Operations

 

Operations

 

Copper-Gold

 

Inter-

 

 

 

 

 

Molybdenum

 

Molybdenum

 

(Development)

 

segment

 

Total

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

Molybdenum sales

 

$

330.4

 

$

58.2

 

$

 

$

 

$

388.6

 

Tolling, calcining and other

 

9.0

 

0.1

 

 

(0.1

)

9.0

 

 

 

339.4

 

58.3

 

 

(0.1

)

397.6

 

Cost and expenses

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

143.4

 

46.4

 

 

(0.1

)

189.7

 

Selling and marketing

 

4.0

 

1.7

 

 

(0.8

)

4.9

 

Depreciation, depletion and amortization

 

19.8

 

15.4

 

 

 

35.2

 

Accretion expense

 

0.7

 

0.2

 

 

 

0.9

 

 

 

167.9

 

63.7

 

 

(0.9

)

230.7

 

Segment revenue less costs and expenses

 

171.5

 

(5.4

)

 

0.8

 

166.9

 

Other segment expenses

 

 

 

 

 

 

 

 

 

 

 

Loss (gain) on foreign exchange

 

 

1.3

 

(3.3

)

 

(2.0

)

Segment income (loss) before income and mining taxes

 

$

171.5<