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Analyst Actions: Credit Suisse Analyzes Thompson Creek Metals Q2

Event: "TCM reported adjusted 2Q11 FD EPS of $0.33, which compares to our $0.22 and consensus of $0.25. Adjusted EPS excludes a positive $0.35 impact from non-cash charges on warrants under US GAAP. Revenues of $191Mln were better vs. our $160Mln on stronger sales volume."

View - Glass appears half-full: "We believe YTD underperformance of market prices for molybdenum (vs. our expectations and other metals), strong currency (CAD/Dollar) and capital cost increases at Mt Milligan (recently increased +38% to C$1.265Bln) and Endako (recently increased +15% to $633Mln) are putting pressure on the funding alternatives TCM has at its disposal for funding its growth initiatives, primarily construction of the Mt. Milligan and Endako projects."

Catalyst: "Funding analysis. TCM has current cash of $560Mln and debt/equity ratio of 21%. We believe that in a $15/lb molybdenum and $1750/oz gold price environment TCM can fund the Mt. Milligan construction costs over the next 3-3.5 years through a combination of (i) pro-forma cash; (ii) proceeds from another gold stream transaction; (iii) potential warrant proceeds; (iv) further debt financing; and (v) internal cash generation. Based on our stress-testing using spot prices for molybdenum and gold, we estimate TCM will require multiple alternative funding sources to successfully execute its growth plan of completing construction at Endako/Mt. Milligan, while maintaining a healthy balance sheet, and minimize risk of equity dilution. Our FY11/12/13 EPS estimate goes to $0.95/0.40/0.37 (from 0.91/0.48/0.39) on higher unit cost assumptions."

Valuation: "A gold stream transaction could help shares. In our view, the most accretive form of financing is entering into another 25% gold stream in addition to incremental debt-financing. Our TP of C$15 remains unchanged, based on a 60/40 weighting of 1x our NAVPS of C$14 and 6x FY11EV/EBITDA."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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