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Thompson Creek Metals cuts capex, puts off expansion of Endako mine

Last updated: 04:00 05 Dec 2008 GMT, First published: 05:00 05 Dec 2008 GMT

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Molybdenum producer Thompson Creek Metals Co Inc said that given the sharp decline in the molybdenum price, it has decided to cut planned capital expenditures, including a suspension of expansion activities at the 75 percent-owned Endako mine in British Columbia.

Postponement of the Endako expansion is the second initiative by Thompson Creek to reduce planned capital expenditures until market conditions improve. It already announced postponement of the Davidson mine expansion project on November 6 2008.

Chairman and chief executive Kevin Loughrey said: "While work on the Endako expansion project will be suspended, we will leave the project in a position to start up again when the molybdenum market improves. We will complete certain activities already underway at the mine site and the purchase and storage of equipment on which we have already made partial payment. All or some portion of the equipment purchased may be funded through the use of equipment financing."

The company estimates it will have cash balances of approximately CDN$225 million on December 31 2008. It also has available an undrawn CDN$35 million revolving bank credit facility.

Capital spending in 2009 is expected to be CDN$69 million, including CDN$36 million for sustaining capital expenditures and CDN$33 million for Thompson Creek’s share of Endako expansion capital expenditures.

Prior to these changes, Thompson Creek was planning capital expenditures of CDN$600 million over three years 2008 to 2010 including CDN$280 million for its share of the Endako expansion, CDN$109 million for the Davidson project and the remainder for maintenance capital expenditures. Of the CDN$600 million of capital expenditures, approximately CDN$300 million had originally been planned for 2009.

Thompson Creek expects to achieve its previously announced 2008 operational guidance for molybdenum sales of 22 million pounds, molybdenum production of 25 to 26 million pounds and average cash costs to produce molybdenum oxide of CDN$7.30 per. Management currently is not revising its production guidance of 31.5 to 34 million pounds of molybdenum in 2009.

The company added it is currently assessing potential impairments of goodwill and other assets. If the current weak market conditions continue through the end of this year, it may be required to record impairments against goodwill and potentially against other assets.

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