Thompson Creek Metals Company (NYSE:TC) – What the Insider Selling Tells Us
Thompson Creek (NYSE:TC), the Toronto-based molybdenum mining company with operations in Canada and the US, has seen increased insider selling in February and March. To get a better sense of what this may mean for the company we turn to Chris Mayer, research editor of the Agora Financial newsletter Mayer’s Special Situations.
On business in Leon, Nicaragua, here’s his latest assessment:
“I have noted the insider selling. I don’t like it. I’d rather not see that. However, insider selling is less reliable than insider buying as far as predicting results. Buyers buy because they think the stock will go up. Sellers sell for all kinds of reasons.
“Beyond that, every investment idea has something wrong with it. Nothing is perfect. This is a negative to consider with Thompson Creek (NYSE:TC). I think the positives outweigh this concern.
“Thompson Creek mines molybdenum, an important metal in strengthening steel. It’s particularly important for energy applications — such as refineries, deep-water drilling, oil sands pipelines, nuclear facilities and more. The price of molybdenum has come back from the depths where it once traded for single digits. It’s currently around $17/lb. That’s still well below the $30-35/lb. it commanded most of the time in recent years.
“TC has cash costs of $6-7 lb. It will produce around 30 million pounds this year. And it has about 1.2 billion pounds in the ground. If prices go nowhere from here, TC could generate cash flows of $300 million. So it trades for around six times what I would argue is a fairly depressed cash flow number. If molybdenum prices rise to $30/lb. again, TC’s cash flows could go bananas. Holding TC is like holding a cheap option on that event.
“Plus, TC has a ton of cash, and I have made no adjustments for that. It had $511 million in cash and virtually no debt.”
As a mining company, Mayer considers Thompson Creek reasonably speculative… but still finds the financial condition and resource base compelling. You can read more of his opinions by subscribing to his newsletter, which is available at the Agora Financial research page here.
You also have a chance to catch Chris Mayer speaking live, in person at the annual Agora Financial Investment Symposium in July. You can find additional details about how to attend the Vancouver event here.
[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]