01.13
Consolidated Thompson (CLM) – $7.79 – Announces US $100mm Bond Issue; Iron Ore Leverage Points to Further Upside
Outperform, Above Average Risk, Price Target: $7.00
CLM has entered into an agreement to issue US$100 million senior secured bonds to Marret Asset Management. The new debt financing effectively replaces an inferior US$75 million stand-by facility previously announced on May 12, 2009. CLM stated that the funds will be used for general corporate purposes, including the potential expansion at Bloom Lake. While this financing reduces CLM’s liquidity risk, it also hints at potential capex overruns. CLM’s iron ore leverage also points to further share price upside: based on forward curve iron ore prices, RBC CM states that its base case NAV per share would increase from $6.16 to $9.05. While the shares appear fully valued based on RBC CM’s current commodity price assumptions and base case NAV, they remain relatively attractive on 2011 P/CF and EV/EBITDA multiples. The company also provides investors the highest relative NAV leverage to iron ore amongst its peer group in RBC CM’s global coverage universe.
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