National Bank National Bank analysts Shane Nagle and Don DeMarco expecting few surprises from the fourth-quarter financial results of base metals producers given their production and 2022 guidance have largely already been released.
However, they expect logistical challenges and the impact from rising inflation to “feature prominently” in the coming weeks.
“Flooding in B.C. (impacting TECK/B, TKO and to a lesser extent CMMC) as well as additional shipping constraints and general inflationary pressures are expected to impact operational results in Q4,” the analyst said. “Looking forward, companies that have provided capital/operating cost budgets for 2022 suggest a 10-per-cent increase year-over-year.”
“Q4 production results remain outstanding for: CMMC, HBM and TECK/B, while guidance is outstanding for CMMC, HBM, TECK/B and TKO. NBF Q4/21 and 2022 estimates are more conservative than consensus as a result of more conservative operating cost assumptions.”
Mr. Nagle made minor target price reductions to these stocks:
* Copper Mountain Mining Corp. ( “outperform”) to $4.50 from $4.75. Average: $5.18.
“Q4/21 operating results are likely to be impacted by lower grades and ramp-up of the 45,000 tpd mill expansion,” he said. “As a result, our Q4/21 EBITDA estimates are 11 per cent lower than consensus and 2022 production estimates are modestly lower. Despite this, the balance sheet continues to improve and the company is expected to benefit from ongoing exploration efforts showcasing longer-term optionality of the portfolio.”
* Teck Resources Ltd. (“outperform”) to $52.50 from $55. Average: $46.31.
“With lower sales, elevated coal costs and general 2022 capital guidance pre-released, Q4/21 results contain few negative surprises,” he said. “Our operating assumptions are largely in line with consensus for 2022, except for our more conservative startup assumptions at QB2. Despite logistical challenges from heavy rainfall in B.C. to start the year, strong FCF from the coal division and completion of QB2 will drive near-term FCF growth leading to increased shareholder returns.”
He maintained his targets for First Quantum Minerals Ltd. ( “outperform” and $40), Hudbay Minerals Inc. (“outperform” and $12.50) and Lundin Mining Corp. ( “sector perform” and $12.50). The averages on the Street are $36.44, $12.94 and $12.24, respectively.