Thompson Creek Metals Company Inc. (NYSE:TC) released satisfactory second quarter operating results for its Mt. Milligan copper-gold mine during market trading hours. The ramp-up at Mt Milligan made material progress in the quarter (second quarter is the seventh full quarter of operation), as the mine produced (on a payable basis) 20.2 million lbs of copper and 59,900 ozs of gold, up 31% and 30% correspondingly from fourth quarter of 2014 levels of 15.4 million lbs and 46,119 ozs. Copper and gold production was 19% and 26% ahead of our estimate of 17.0 million lbs and 47,645 ozs.
Second quarter average daily mill throughput of 44,940 tpd (or 75% of nameplate) upgraded markedly from the first quarter throughput rate of just 39,569 tpd (or 66% of nameplate) and compares with our forecast of 41,758 tpd (or 70% of nameplate). The firm reflected that throughput in May and June averaged 49,913 tpd (or 83% of nameplate). While we are cheered by the throughput improvements, we continue to note that the operation has never come close to achieving its design capacity after two years of ramping up. As such, we remain cautious on the operation’s ability to ramp-up to the full design throughput of 60,000tpd by year-end.
Grades and recoveries also remained above our estimates. Mt. Milligan processed copper and gold grades of 0.28% and 0.65g/t correspondingly, which compares with our estimates of 0.26% and 0.60g/t. Copper and gold recoveries of 86% and 73% were above our estimates of 81% and 67% correspondingly, and upgraded from the first quarter recoveries of 79% (copper) and 67% (gold).
As per second quarter of 2015, copper sales of 21.2 million lbs represented 105% of payable production, and were 25% ahead of our forecast of 17.0 million lbs. second quarter gold sales of 57,900 ozs represented 97% of production and were 22% ahead of our forecast. TCM reflected that Mt. Milligan made three and seven shipments of copper and gold concentrate in the quarter, but recognized sales on four and seven shipments.
As at the end of first quarter of 2015, company had cash (including restricted cash) of $238 million and total debt of $868 million, translating in a more or less weak net debt position of $630 million (or $2.94 per share). The company’s total debt to capitalization ratio stood at a more or less high 55.2% as at the end of first quarter of 2015. We estimate the firm to exit 2015 with an constant cash balance of $238 million, but a little lower net debt balance of $622 million (or $2.82 per share). Our estimate trough cash balance remains well ahead of the company’s minimum cash balance target of $75 million-$100 million. While the firm has an overleveraged balance sheet, we perspective the possible for a near-term liquidity crisis as low. However, our analysis suggests that the firm will need to refinance and term out $675 million of debt to meet its $870 million of rest debt obligations due in the 2017 to 2019 periods.
We have revised our estimates derived from the second quarter operating results. At Mt. Milligan, we now estimate 2015 copper and gold production of 77 million lbs and 220,000 ozs at a cash cost of $0.70/lb Cu (we earlier estimate 72 million lbs and 198,000 ozs at a cost of $0.88/lb). Our updated 2015-2017 EPS estimates of $(0.02), $0.10, and $0.24 compare with our previous estimates of $(0.08), $0.09, and $0.24. Our updated 2015-2017 cash flow per share estimates of $0.39, $0.34, and $0.46 compare with our previous estimates of $0.31, $0.33, and $0.46. Our revised 8% net asset value per share forecast is C$1.34 (versus our previous net asset value per share forecast of C$1.25). Our updated 10% net asset value per share forecast is C$0.73.
Thompson Creek shares are presently trading at a 2015 estimate and 2016 estimate Enterprise value/EBITDA of 4.7 times and 4.1 times, which compares with our base metals producer universe averages of 6.5 times and 4.9 times respectively. On an 8% P/NAV basis, the firm trades at a 0.67 times multiple, compared to the peer group average of 0.66 times.
In our perspective, a high debt level, continued ramp up risk at Mt. Milligan, and a possible NYSE delisting are inclined to overhang the shares in the near term. Company is rated “Sector Perform” with a downgraded target price of C$1.30 per share (from C$1.50 per share). Our updated target of C$1.30 per share is now derived from a 50/50 mix of 4.5 times our 2016 estimate Enterprise value/EBITDA (C$1.33) and 1.0 times our 8% NAV forecast (C$1.34).