Zusammenfassung der UBS Kaufstudie
Conclusion
Until the recent purchase of Thompson Creek, a privately owned moly producer, Blue Pearl was a junior Canadian exploration company whose major asset was the Davidson Project. However, through the Thompson Creek acquisition, Blue Pearl became the largest publicly traded moly producer in the world with integrated mines, mills and roasting capacity in politically stable regions.
With total mineral resources of 742 million lbs, including 246 million of proven and probable reserves, Blue Pearl has the ability to increase production.
While 2007 production is forecast to decrease given the lack of stripping at Thompson Creek, production could rise to 33 million lbs by 2009 as Thompson Creek returns to more normal production levels and assuming the Davidson Project enters production.
Importantly, Blue Pearl has access to its own roasting capacity for all of its production and growth, in fact with roasting capacity of 50 million lbs it is one of the largest roasters in the world and has excess roasting capacity.
Given UBS’ favourable near-term view of the moly price and the company’s production growth we expect earnings growth in 2007 and 2008. Applying a P/E multiple of 5.8 (versus the average target multiple of 8.3) to our 2008 EPS estimate of US$1.46, we derive a valuation of C$9.80.
Applying a P/CFPS multiple of 4.4 (versus the average target multiple of 6.3) to our 2008 CFPS estimate of US$2.23, we derive a valuation of C$11.37.
Applying an EV/EBITDA multiple of 2.9 (versus the average target multiple of 4.1) to our 2008 EBITDA estimate of US$364 million, we derive a valuation of C$11.70.
Using an average of the P/E, P/CFPS and EV/EBITDA methodologies, we derive a target price for Blue Pearl of C$11. Given the implied return, we are initiating on Blue Pearl with a rating of Buy 2.
World\'s largest publicly traded pure molybdenum play
UBS forecasts continued strength in moly prices
UBS believes the outlook for moly is favourable given: strong steel production; roaster constraints; Chinese production problems; and, static western output. UBS forecasts moly prices of US$22.50/lb and US$20.00/lb for 2007 and 2008 respectively, versus the 1994-2004 average of US$4.50/lb.
Blue Pearl grows substantially through large acquisition
Blue Pearl recently agreed to acquire Thompson Creek for about US$575mm. The major assets acquired include multiple mines, mills and roasters in North America and working capital of ~US$170mm. This transformed Blue Pearl into the world\'s largest publicly traded moly producer.
Production down in 2007, but up thereafter
While production could decrease >from ~26mm lbs in 2006 to ~20mm lbs in 2007 (given the lack of stripping at the Thompson Creek mine), production could rise to ~33mm lbs by 2009 as the Thompson Creek mine returns to more normal production levels and the Davidson Project enters production.
Valuation
Given UBS’s favourable near-term moly price and the company’s production growth, we expect EPS and CFPS growth in 2007 and 2008. Using an average of the P/E, P/CFPS and EV/EBITDA methodologies (see pg 25), we derive a target price of C$11. Given the implied return we are initiating with a rating of Buy 2.
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