On TC's website, they state the following:
"Once fully operational and meeting design production capacity, Mt. Milligan is expected to account for 50% of the Company's revenue"
Well, let's see... Mt Milligan is going to pull in $285MM/year. I guess that means TC is going to eventually be making $570MM/year total revenue. How? Moly just needs to go to $16.50/lb, which is the long term average. Then TC will be making $285MM/year from it's Endako/Thompson Creek mines, to go with the $285MM/year from Mt Milligan.
So let's see... $570 million dollars a year. Hmm. I guess by the end of 2014 all of TC's debt will be fully paid off and they will then be collecting $570 million dollars per year in cash. So by 2020 maybe they will have around 2 to 3 billion dollars in cash. With 3 billion dollars cash, that is $13 per share. Plus another $21 from EPS, at a PE of around 8.
So my calculator shows that by 2020, TC's share price will be $34, at least. Easy money.
Sentiment: Strong Buy
Revenue and Earnings are two different things. Revenue from MM will be 565M based on the investor presentation at todays metals prices. Costs will be 280M so profit from MM at current commodity prices will be 285M. Currently TC has revenue of about 400M from its moly operations with very little earnings. So the combined company at todays metals prices will have about 1 Billion in Revenue and about 300M in profit. Then subtract from that profit the about 100 Million that they will be paying on their 1 billion in debt and you get a profit of about 200M. The share count when the Tmeds convert will be about 200 Million to 220 Million shares so that is about $1 per share in earnings. Throw the average mining sector PE of 12 on that and you get a share price target of 12 per share based on todays gold and copper prices.
If Moly goes to 16 per pound well then the company will earn about 100 Million more in profits so the earnings would be about 300 Million per year or 1.50 per share. Put a multiple of 12 on that and you get 18 per share. If commodity prices fall, then the share prices would be less than $12.
No, no, no. 12 is not an average Le for the mining sector. For base metals producers like copper and moly it's more like 6/7/8 pe. And a better rule of thumb is to use about 5x cash flow.
You say if moly goes from $11 to $16, it will create earnings of $100MM more per year. Yet, when I do the math, I calculate $5 x 30 million lbs of moly = $150MM. Where did you cause that $50 million to go?
And you are very quick to assume TC's moly operations are not profitable at current prices. Last year they weren't, but next year the cash costs come way down, so moly will be profitable. Your numbers are simply way off.
Mt Milligan will have $285MM/year in EARNINGS at current prices, and if Molybdenum goes to $16.50/LB then their moly operations will also have roughly $285MM/year in EARNINGS.
That's $570MM/year in EARNINGS, not revenue. Good attempt to try and say it would only be $400MM though. I love your math. But let's assume your math is correct, is $400MM/year really that bad? You said currently after Mt Milligan is done it would be $300MM/year and then you said (incorrectly) that Moly at $16 would add $100MM, which is FYI how I arrived at $400MM/year.
But yeah, you say $400MM I say $575MM. But is either all that bad?
good analysis!!! this is why it is soon to be DTIME! all my followers listen we will buy stock monday lots. this goes above $3.00 and never looking back, then headed to 4,5,6,7,8,9,10,11,12,13,14,$15.
LOTS of money to be made!!!! It's DTIME!!!
Sentiment: Strong Buy