TD ReportTDSI Morning Action Notes:
Methanex Corp. (MEOH-Q, MX-T) US$10.14
Australia growth initiative cancelled due to capital costs - BUY
Leo Villegas,
(TD Securities-Chemicals)
Methanex announced that they are not proceeding with the construction of the proposed Australia plant as capital costs have risen significantly. The implied cost per tonne was roughly US$385 and was up 40% over recent plant builds/expansions thus making it marginally economic in such a volatile industry. The 1.3mm tonne plant was due to come onstream in 2006. MX is taking a non-cash write off of US$40mm related to development costs incurred thus far - our numbers above reflect the charge. While growth into 2006 remains in question, 2004 and 2005 growth initiatives are well under way: 1) Atlas will add approx. 1.1 mm tonnes of run rate production in Q2/04, and 2) Chile expansion set to add 840,000 tonnes of capacity in 2005. Free cash flow next year remains strong as well as the possibility for another special dividend. Q3/03 results will be released on Oct 20th - expecting operating EPS of $0.25.