globe&mail TORONTO(Globe and Mail)--Thompson Creek Metals Co.'s(TC) stock has been bludgeoned by bad news on many fronts, most recently cost over-runs at a project seen becoming the new jewel in its crown, but analysts and the company say investors will be rewarded for their patience.
The Mount Milliganproject, acquired under the $650 millionacquisition of Terrane Metals Corp.in 2010, will diversify Thompson Creek from a pure molybdenum miner, adding copper and gold from the deposit in British Columbia.
The move was initially lauded by the market, with the stock jumping more than 60% in the six months after the acquisition was announced. But share-price levels started to taper off amid a wave of inflation and as commodity prices began to teeter--and then plummeted after the company announced a project-financing deal that amounted to a massive dilution of its existing shares.
"It has been a cash burden for us, and continues to be, but one I think that will pay off over time," Thompson Creek Chairman and Chief Executive Kevin Loughrey said by telephone from Denveron Thursday. "We believe the stock is significantly undervalued and as Mount Milligancomes closer on line, that value will be realized more fully."
The stock closed at $3.56a share on Thursday, compared with highs of more than $9in February and $25five years ago. Market capitalization is just over $600 millionnow, compared with about $3 billionin 2007. Only two analysts of 18 who cover the stock suggest investors sell, with nine recommending a "buy" and seven more suggesting a "hold," Bloombergdata show.
"We believe it will take some time to rerate," Ian Parkinson, an analyst with CIBC World Markets, said in a recent report, noting Thompson Creek was deeply discounted to its peers.
John Hughes, an analyst with Desjardins Securities, fresh from a Mount Milligansite visit, reiterated his buy recommendation on the company on Thursday, with a target price of $9.10per share.
Much of the price erosion followed the global economic crisis in 2008-09, when commodity prices plunged briefly. But it also has a lot to do with the confusing growth cycle surrounding Mount Milligan.
The latest twist came in May, when the company said it would cost 20% more to build the project--bringing the total bill to as much as $1.5 billion--and then announced plans to raise about $412 millionin two debt and equity financings.
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