Big Week for Molybdenum

Includes: MLKFF, TCPTF
by: Streetwise Blog

Moly is back!

Molybdenum, a metal that’s used in steel production, was all the rage two years ago, when the economy was on rails and commodity plays were soaring.

Recession knocked the stuffing out of the price of the metal: It dropped from $35 (U.S.) a pound late in 2007 to less than $10 early in 2009. But in the past month, moly prices have almost doubled, to $18. That led to financing activity this week by a pair of Canadian metal miners that want to ramp up projects, and potentially buy up weaker rivals.

Thompson Creek Metals, (TC) one of the largest plays on moly, raised $217-million in a bought deal led by UBS Securities. And Mercator Minerals, (OTC:MLKFF) which mines copper and molybdenum, rolled out a $70-million financing led by Jennings Capital and Scotia Capital.

Thomson Creek was up front about the fact that it is looking at possible acquisitions with the capital it has raised. Analyst Ian Parkinson at CIBC World Markets has an ‘underperform” rating on this stock and warned that investors may want to wait to see what the company actually does with its war chest. In a report, the analyst said: “It remains to be seen whether this is an opportunistic financing or a chance to go out and grow the company.”

Mercator is expected to pay down debt and expand an existing mine with the money it raised. In review this financing, CIBC’s Mr. Parkison said: “With a tremendous amount of cash flow to be generated next year, a healthier balance sheet, and a 36 per cent discount to our net asset value, our recommendation remains sector out-performer.”