Merger TalkThompson Creek Metals looking at M&A?
Molybdenum producer Thompson Creek Metals Co. announced a bought-deal financing on Tuesday worth $217-million for development and expansion, but there may be other options for the company, including acquisitions.
The company announced plans to use the cash for development and expansion of existing mining assets, exploration, acquisitions, working capital, and general corporate purposes. The financing deal, at $14 a share, can be further upsized to $250-million and is expected to close on Sept. 16.
Blackmont analyst George Topping notes some capital will be spent on the Endako expansion in British Columbia, but should max out at about $100-million and would be easily funded by existing cash flows.
"As Thompson Creek Metals already had $262-million in cash as of June 30 and is expected to be strongly free cash flow positive in 2010 (about $167-million), the raise could suggest management expects a pull-back in the moly price in near term or there may be an acquisition in the pipeline," Mr. Topping said in a note to clients Wednesday.
Good matches for the company include Mercator Minerals or a team-up with Quadra Mining on its large Sierra Gorda project in Chile.
Meanwhile, neither a weaker moly price nor an M&A will help Blackmont's evaluation of the company's share price, which has been lowered slightly to $16.80 from $17.
Mr. Topping maintains a Sector Perform rating with average risk for Thompson Creek Metals.