Thompson Creek cancels bondholder site visit following final M&A bids

23 June 2016

by Kyle Younker, and Reshmi Basu

 

Thompson Creek Metals has cancelled a bondholder site visit to its Mt. Milligan mine scheduled for next week as it focuses on its auction process, according to two sources familiar with the situation. The company is working through final bids from at least three potential buyers, and the site visit cancellation implies bullish auction results, the sources continued.

 

The Denver-based gold and copper producer has received interest from a number of strategic bidders – mostly gold producers, the sources and two additional sources involved said. Centerra GoldKinross Gold, and Stillwater Mining Co. have been reported as potential final-round bidders in the range of CAD 1bn (USD 780m), according to an 8 June story from the Globe and Mail.

 

In the case of Kinross, the gold producer has a USD 624m tax credit for non-capital losses in Canada that could potentially apply to future taxable profit at Mt Milligan, an additional source that tracks the company noted. The expected tax savings, shown in the company’s most recent annual filings, could allow Kinross to submit a higher bid for Mt Milligan than its competitors, the source added.

 

Theoretical bids in the CAD 1bn range compare to the company’s total debt of USD 880m including capital lease obligations. As of 31 March, Thompson Creek also had USD 139m of balance sheet cash, filings show.

 

Sellside analysts have valued the company at up to USD 1.7bn.

 

“A gold producer with a meaningful market cap could easily offer equity as part of the consideration,” one of the sources noted.

 

Kinross equity trades with a market cap of USD 6.07bn, while Centerra and Stillwater have market caps of USD 1.74bn and USD 1.35bn, respectively.

 

Gold futures prices for August hit USD 1,263 per ounce today, down from the USD 1,300 range last week, but still higher from the USD 1,220 area in late May, according to the CME Group. Copper for July delivery is trading at USD 2.16 per pound today, up from yesterday’s close of USD 2.13 per pound and from recent lows at USD 2.03 per pound last week.

 

Thompson Creek’s USD 334m 7.375% unsecured bond due 2018 last changed hands on 10 June at 64.75, up from 52 in late May and from trades at 14 in February, while its USD 200m 12.5% unsecured note due 2019 traded at 66.5 on 14 June, similarly soaring from levels in the mid-teens in February, MarketAxess shows. Its USD 315m 9.75% first lien notes due 2017 have popped to trade at 100.263 yielding 9.135%, compared to lows at 70 in February.

 

Thompson Creek declined comment.