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Analyst Actions: Credit Suisse Trims Target, Estimates on Mercator Minerals

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ML reported adjusted 4Q12 EPS of $0.02. "Results compare to our estimate of $0.03 (consensus EPS: $0.01). ML's adjusted loss excludes the previously announced asset impairment at El Creston (GAAP impact: $0.43). Sales of $78Mln were better vs. our $72Mln on higher copper sales (12.7Mln lbs vs. our 11.5Mln lbs) on copper inventory held back at the Port of Guaymas at end-3Q12. We are lowering our 2014 EPS estimates to $0.09 from $0.12."

View: "Neutral; 4Q12 operating results were pre-released. ML previously reported 4Q12 copper/moly production of 10.9/2.9Mln lbs. Copper/moly cash costs came in higher at $2.56/9.52 per pound (vs. our $2.29/7.62 per pound). Mineral Park operations continue to show an improving trend of throughput and recoveries through debottlenecking and process optimization, with metal grades expected to be similar in FY13 vs. 4Q12. ML expects FY13 copper-equivalent production of 93-102Mln lbs (or +6-17% YoY) which includes 41.5-46.5Mln lbs copper and 11-12Mln lbs molybdenum. ML forecasts cash costs to average $2.25-2.50/lb copper and $8.55-9.45/lb molybdenum on a co-product basis. The El Creston project impairment charge of $120Mln has no impact on our valuation as we carry no value for the project."

Catalyst: "Balance sheet and liquidity looking better; revised technical report/mine plan at Mineral Park in the next few weeks. Capital expenditures in FY13 are now expected to total $13.7Mln (previously $15Mln) on a reduction in estimated sustaining capital. We forecast a steadily increasing cash balance with an end-2013 cash balance of $39Mln."

Valuation: Lowering TP to C$0.95. Our revised TP of C$0.95 from C$1.45 is based on a 50/50 weighting of 0.7x (previously 0.8x) our revised NAVPS (C$1.75) and 4.5x FY13/14 EV/EBITDA. Our target multiples are at the low-end of the peer group range (0.7-1x) reflecting our view of ML's relative strategic position and balance sheet flexibility within the peer group of North American base metals producers.

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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