In 2008, Kevin Loughrey of Thompson Creek Metals Co. Inc.finished in second place on our annual CEO Scorecard.
At the time, that made sense: Thompson Creek mines molybdenum, asilvery-white metal ("moly" for short) that's used to strengthen steel-- and moly prices were in the midst of a multi-year boom. ThompsonCreek, as North America's dominant producer, was riding high.
But the good times weren't to last. As the economic crisis set inlast fall, moly prices collapsed, falling from US$30 a pound to lessthan US$8 in a matter of days. So how did Loughrey move up this year'sranking? "We made the correct financial decisions," he says.
That comment is a rather large understatement considering thatThompson Creek has rewarded shareholders with a 464% three-year return.
Its secret? Under Loughrey, Thompson Creek has laid out a perfectblueprint -- both long and short term -- for surviving commodity pricecrashes, one that many rivals must envy today. It begins with the factthat Thompson Creek has always kept a clean balance sheet. Throughoutthe boom, Loughrey ignored endless calls to borrow money to fundinvestments that could have backfired during a downturn. Instead, hetook advantage of high moly prices to pay off Thompson Creek's debt, agoal that was reached in early 2008.
When moly prices collapsed later that year, Loughrey realizedthat Thompson Creek could no longer sell as much product as it wasproducing. So he delayed mine expansions and cut production guidance byas much as 40%. The decisions were tough, but not as tough as thosetaken by other miners, who were forced to shut down operations orconduct mass layoffs.
"We went into a recession-style, not a depression-style, ofoperations," says Loughrey. "It was our sense that while the market wasdifficult, the weakness was not as long-term or drastic as some werepredicting."
In other words, Loughrey and Thomas Creek had faith in thelong-term fundamentals of moly, which is needed for many largeindustrial projects.
The prediction was dead-on. By the middle of 2009, moly priceswere rallying again.
Loughrey is now increasing production at both of the company'smines (Thompson Creek in Idaho and Endako in British Columbia). He isalso developing two greenfield projects. And since Thompson Creekweathered the economic storm better than competitors, acquisitionopportunities have emerged. If all goes well in the moly market, 2010promises to be another banner year. Even if it doesn't, this is onemining company that has proven it knows how to get through tough times.
"We have the advantage of having employees and management thathave gone through this business cycle many times," says Loughrey. "Theyknow how to operate in difficult times."