According to Dundee Securities:
Reiterate NEUTRAL and target of C$3.75/sh
Poor operational performance impacted Thompson Creek for the first three quarters in 2012 but we have witnessed a turnaround over the last two quarters. And while we previously said we would wait to see further signs of a turnaround in operational performance or commodity prices before changing our view on the stock, we now believe these results are not sustainable in the long term. Endako still has to prove itself and the TC mine will most likely be put on care & maintenance in 2015. Additionally, while the molybdenum prices rallied in early 2013 to roughly $12/lb, they are now back below $11. We believe we should start to look at Thompson Creek as "Milligan Creek". By this we mean that we currently would be more comfortable to pay only for Mt.Milligan and assume almost no value for the molybdenum business. Our NAV of $4.13/sh currently includes $1.35 for the TC mine and Endako. Removing these two moly assets our NAV would go down to roughly $2.78/sh. We believe that if the stock eventually trades around these levels it could represent a very good entry point for investors. Once completed, the Mt. Milligan copper-gold mine will provide increased cash flow and welcome diversification for TCM. But in the absence of a recovery in the molybdenum market and until Mt.Milligan is in production and proves itself, we still believe the investors are facing development and start up risk. We are reiterating our NEUTRAL recommendation and our 12-month target of C$3.75/sh based on a 0.9x multiple to our NAV of $4.13/sh (down from $4.05/sh).
Good Q1 with first operating profit since Q3 2011
Thompson Creek reported Q1/13 net income of $0.9M, or $0.00/sh. This was right in between our estimate of a loss of ($0.02)/sh and consensus of a gain of $0.02/sh. The main difference with our estimate came from better performance than anticipated at the TC mine due to increased mine grade. Overall it was a good quarter operationally as TCM achieved lower cash costs and higher sales volumes compared with last quarter. Molybdenum production was in-line with last quarter, totaling 7.7M lbs. Combined with some purchased material, TCM sold 8.8M lbs of moly at an average selling price of $11.87/lb for total revenues of $109M, up 10% QoQ. Average cash costs came down by 10% QoQ to only $5.91/lb (and down 54% YoY) and Thompson Creek was able to record an operating profit for the first time since Q3 2011.
Liquidity under control for now…
As of the end of Q1, TCM had $469M in cash & cash equivalent and total available liquidity of $532M. We believe this should be sufficient to cover our estimated remaining 2013 cash outflows of $416M and could leave TCM with roughly $115M by the end of 2013 (not accounting for operating cash flows).
…as Mt.Milligan remains on schedule and on budget
Mt.Milligan remains on schedule with commissioning and start-up expected in August (Q3), and commercial production of copper and gold expected in Q4. We currently forecast only 60 days of production in 2013 and the equivalent of 9 months of production in 2014 (75% capacity). Overall the project construction is 89% complete, up from 81% last quarter and 95% of total capex has been spent or is contractually committed (up from 91% last quarter).