Scotia report highlights
Thursday, September 4, 2008
Metals & Mining: Big Plans for Small Cap Miners.
Scotia Capital
Alex Terentiew, MBA, P.Geo. - 416-863-7484
alex_terentiew@scotiacapital.com
Report highlights:
* We have launched coverage of seven companies in the small cap Metals & Mining sector, with six companies focused on copper and one focused on zinc. With the exception of Chariot Resources, which is a development-stage company, all have producing operations.
* Specifically, we have initiated coverage on Mercator Minerals Ltd. (ML-T), Sherwood Copper Corporation (SWC-V), and Capstone Mining Corp. (CS-T) with 1-Sector Outperform ratings; Quadra Mining Ltd. (QUA-T) and Chariot Resources Limited (CHD-T) with 2-Sector Perform ratings; and Breakwater Resources Ltd. (BWR-T) and Frontera Copper Corporation (FCC-T) with 3-Sector Underperform ratings. Our top pick is Mercator Minerals.
* We are anticipating significant production and cash flow growth for the majority of the companies in our coverage universe with collective production growth in 2009 of 45%. As the small cap miners trade at a discount to their larger cap peers, we believe our coverage universe provides investors with growth at discounted prices.
* With strong cash flows expected in 2009, we anticipate many companies will look to make acquisitions as a means to rapidly increase production and offset declining commodity prices. We believe that growth through M&A is the fastest and surest route to achieve this growth and, at the same time, improve market valuation multiples.
* With growth on the horizon for our 1-Sector Outperform rated companies, we believe that current prices provide an attractive opportunity for investors to acquire these names.