TORONTO (ResourceInvestor.com) -- Thirteen months ago we wrote up Blue Pearl when it was trading at $6 and said that at $20 moly the stock should be trading well north of $10 per share. As it turns out moly has done better than that, and Blue Pearl, now called Thompson Creek has fared better as well.

Thompson Creek [TSX:TCM] closed today at C$24 off from a recent high of C$25.35. It would appear that after the initial buoyancy resulting from the Sprott Moly fund, and the subsequent decline in moly names, interest is returning to the sector.

The key with the moly plays as prices maintain their range is multiple expansion. As we said in the September 2006 article, “Considering that Thompson Creek has US$150 million in the bank, and that the company generated US$456 million in cash flow last year, and will produce over US$400 million in cash flow this year, even at US$20 moly, this acquisition took place at 1X cash flow (even factoring in extra payments described in the press release).”

“What does this mean for other listed moly producers and the valuations that they can achieve in terms of cash flow multiple, when the latest benchmark for a major moly takeout occurred at 1X cash flow based on a discounted moly price of US$20? Do people really not believe in the future moly price to that extent?”

“Did the Thompson Creek people simply decide that this was enough money and that it was time to go on an extended vacation with their centi-millions?”

“Even at US$15 moly, this acquisition took place at only 2X cash flow, and that makes me believe that the other listed moly producers coming to production soon which all and sundry appear to be enamored of, are fully valued now. This most likely also applies to producers of other metals like tungsten with extremely opaque markets.”

Dividends and Sustained Prices

As we said last September, “In one years time with all debt repaid, Blue Pearl can still cash flow $4+ per fully diluted share if you believe that moly will stay at US$20 per pound. That means that BLE could practically dividend almost that amount to shareholders, and that fact alone should see the company’s share price well over $10 – especially if investors start to believe in the price of the metal, and think that that level of dividend payment can continue.”

There are a number of companies at the development stage across the various metals that could shortly be in a similarly exceptional position and are currently trading at levels that give them what could be unbelievable dividend yields.

Names like Roca Mines [TSX-V:ROK] are a perfect example of this.

Expanding Multiples

Now that moly has held its ground what we are seeing is a multiple expansion closer to 4X cash flow from 2X cash flow for moly plays. It is unclear whether this will endure but it would appear so - and certainly with interest coming back to the sector as evidenced by the Sprott Moly Fund’s rise off of the C$3.40 low back to C$5.40 - the eyeballs on this space continue to multiply.