Mercator Minerals Ltd. (ML.TO)
CP: C$ .26
TP: C$ .75
CAP: C$ 82.7m
1 416 352 4563
Q1 Sales Lighter; Mineral Park Optimization Holds the Key to
ML reported adjusted 1Q13 EPS loss of $0.03. Results compare to
our estimate of $0.01 and consensus loss of $0.01. ML's adjusted
loss excludes gains from derivative instruments ($0.04 impact).
Compared to our EPS, lower copper sales (7.9Mln lbs vs. our 10.3Mln
lbs) had a $0.03 impact.
View: Neutral; 1Q13 operating results were pre-released. ML
previously reported 1Q13 copper/moly production of 9.1/2.4Mln lbs.
Copper/moly cash costs came in higher at $2.72/11.08 per pound (vs.
our $2.21/9.14 per pound). Optimizations are now complete at
Mineral Park resulting in increased throughput rates and mining
flexibility, and ML expects 2Q13 production to exceed 1Q13 levels.
Guidance largely unchanged. ML reiterated FY13 Mineral Park
copper-equivalent production guidance of 93-102Mln lbs (or +6-17%
YoY) which includes 41.5-46.5Mln lbs copper and 11-12Mln lbs
Catalyst: Steady improvements at Mineral Park should help
balance sheet. We forecast a steadily increasing production profile
and cash balance for ML with an end-2013 cash balance of $17Mln
(from $8Mln at end-1Q13), excluding restricted cash of $18Mln.
Co-product cash cost and capex guidance were re-iterated at
$2.25-2.50/lb of copper and $8.55-9.45/lb of moly, and $13.7Mln,
although ML is reviewing the scope and requirement for the $5Mln
pebble crusher at Mineral Park with a view that it may no longer be
required. FY13 capex guidance for El Pilar remains unchanged at
$2Mln ($0.3Mln spent in 1Q13) but remains deferred until ML can
obtain value accretive financing.
Valuation: Maintain Neutral on weak moly markets and lack of
balance sheet flexibility. Our C$0.75 target price is based on a
50/50 weighting of 0.7x our net asset value (
) of $1.71/share and 4.5x FY13/14 EV/EBITDA.
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