According to Deutsche Bank Securities:
Price target: $5.50
4Q12 results: earnings miss on ice;
Endako written-down/ guidance cut
Thompson Creek (TC) reported 4Q12 EBITDA of $5m, 77% lower than DBe of $24m, due to l-t-e volumes (-13% vs DBe) and lower realized molybdenum prices of $11.77/lb (-4%), despite l-t-e cash costs of $6.58/lb (-16%). Adj dil EPS loss of $0.11 was 13c lower than DBe of +2c and missed FactSet consensus loss of 3c. Headline EPS loss of $2.87 includes a $531m ($3.15/share) fixed asset write-down for TC’s 75% share of PP&E at Endako mine (on lower moly), implying NPV (@100%) only $252m, despite $550m capex spent on new mill.
Moly sales rose to 8.1m lbs (+43% QoQ, -13% DBe) and were higher than production (5.5m lbs, +67%, -19%) at a realized price of $11.77/lb (-8%, -4%) and cash cost $6.58/lb (-30%, -16%). Sales outstripped production due to inventory drawdown as stockpile mining took place at both Endako and TC mines, while 3rd-party re-sales increased 9% QoQ to 2.6m lbs. Endako mine experienced frozen water in its tailings pond which led to insufficient water feed to the new mill. Management has modified piping and procedures to address this issue and ensure sufficient water supply in future but will impact 1H13 results. Net debt increased $378m (-5% DBe) on Mt. Miligan capex.
2013/14 outlook: 2013 moly volumes cut to 27-30.5m lbs (-2m lbs, DBe 30.8m lbs) on Endako water issues at a cash cost of $6.50-7.50/lb ($6.76/lb) and 2014 guidance remains with volumes of 27.5-30.5m lbs (29m lbs) at cash cost of $6.50-7.75/lb ($7.11/lb). Mt. Milligan on schedule (81% complete) with commissioning and start-up expected in 3Q13, and commercial production by 4Q13. 2013E capex at $440-480m ($412m) with $425-$460m attributable to Mt. Milligan ($1.1bn spent since inception). Upcoming milestones include completion of the concentrator building, 400-meter conveyor line from primary crusher to mill, pebble crushing circuit, truck maintenance shop and admin building. 2014 capex at $55-80m ($60m) with production still expected to be approximately 89m lbs of copper and 262k oz of gold annually. Cash cushion now ~$90m less (currently $217m) due to permanent work camp ($45m), reclamation deposit ($45m) and w/c use $28m off-set by h-t-e bond proceeds.