CIBC World Markets: Sector Performer rating and $3.50 target price for Thompson Creek Metals Company Inc.
According to CIBC World Markets:
tr (dot) im/4hr6k
December 11, 2013
Thompson Creek Metals Company Inc.
Stock Rating: Sector Performer
12-18 mo. Price Target: C$3.50
End Of The Spend - Revisiting The Investment Case - Debt Repayment
- We have lowered our near-term outlook on the Mt. Milligan ramp-up, ascribed option value to the Thompson Creek Mo mine after assuming it is placed on care & maintenance in Q1/14, and assume firm-wide cost cutting initiatives.
- With the caveat that operational flexibility exists and all else is rarely held constant, our conclusion is that metal prices must trend higher by ~30% vs. current spot to avoid some form of debt restructuring. The path of the metal prices is the key variable but TCM has time in its favour, in our view.
- The financial risk profile is high given the required US$900MM in debt repayments beginning in Dec. 2017 through to May 2019. The operating risk profile is also high since TCM is dependent on the successful ramp up of Mt. Milligan. The Mo segment contributes little to cash flow at present.
- We maintain our SP rating and 12- to 18-month price target of C$3.50 per share. TCM shares trade at a P/NAV of 0.76x versus the peers at 0.73x. TCM is making positive progress at Mt. Milligan and the recent share price pullback has provided a buying opportunity, albeit a risky one, in our view.
This is about the fifth drive-by analyst flash reports that you've posted (thanks for posting, by the way....) whereby the analyst operates on the assumption that moly is all shut down (or at least the TC mine is....), yet they estimate forward moly prices at $12 or above.....what is that all about.?!?!?? I don't get it. At what price (of moly) is needed for a company to be expected to keep the mine that can produce at $5 per lb. cash cost open? And yet is expected to keep the $9-10 per lb. cash cost producing mine open, the same mine that is operating on an already expired collective bargaining agreement.....??? These guys must be English majors.
Ultra, listen carefully to Perron's BNN interview (I think it was there where he said this)... paraphrasing as I dont know all the industry jargon, admittedly. 'The reason why the cash cost on moly production was so low for TC ($5/lb) was that they are not 'stripping'. That will only last for maybe another year.
ultra, your posts remind me of the time back in the late 80's when I was a large investor in a bank and on it's loan committee. Our bank was absolutely sound. We knew all our loans were good. BUT, and it was a bit BUT, the Savings and Loan industry went through a crisis whereby hundreds were shut down and the banking segment took a broad hit. Our bank, which was listed on the American, was swept down along with the bad banks. We even got valued down to about half our net worth. We knew our loan portfolio was sound, but we were wrong about the stock price. When the banking segment finally turned up, three years later, our stock price recovered and we sold out to a major bank.
You're making the same short term mistake. You're probably right with all your nmbers. They work on paper, for you as a CPA and Mining Engineer. But, there is something in the investing public's eye that perceives risk. It may be real risk or physycological risk, but it's there and weighing on the stock.
TC will eventually recover in price, but but not until the investing public sees some evidence of it's turnaround. I would rather buy the stock at $3 on the way up, than buy it at $3 on the way down.
TC needs to state they can produce Mo at $5 per pound at TC mine before analysts can include that information in their models. Can't blame most of the analysts for their negative slant on their assessments. Just hope the $5 moly production costs materializes.