Once again time to ask, Time to sell Thompson Creek Metals (TC)? I still don’t think so. It’s absolutely true that the commodities rally of has taken shares of this molybdenum miner way above my old Jubak Picks target price of $7 a share by December 2009. And it’s almost likely that the current rally is due for a correction at the least, which would probably see Thompson Creek and all other commodity stocks give back at 33% of the gain since the March 9 bottom. But I think this stock has more room to run in 2009 and it’s worth holding the shares through any correction.
First, because earnings and earnings expectations are up for Thompson Creek because the price of the molybdenum it produces from its Canadian mines has climbed off the floor. As of July 15 the spot price had moved up to $11.75 a pound. That’s still down 65% for the last 12 months but up 37%, according to National Bank Financial, from the 12-month high and lows, respectively.
And second, because costs are running well below projections. In the first quarter of 2009, cash costs fell to just $5.93 a pound. That was way below the $7.25 to $8.25 a pound the company had earlier told investors to expect for 2009. It doesn’t look like falling costs are a one-time phenomenon either. The company has lowered its cost projections for all of 2009 to $6.25 to $7.25 a pound. As of July 17, I’m raising my target price for Thompson Creek Metals to $15 a share by May 2010. (Full disclosure: I own shares of Thompson Creek Metals in my personal portfolio.)