Analyst upgrade on IVN... Mining analysts at Scotia Capital “markedly improved” their near-term commodity price outlook to reflect “the impact of ongoing supply-side challenges in the face of remarkably resilient global demand.”
In a research report released Thursday, they raised their targets for stocks in their coverage universe by an average of 12 per cent in response to a “significant improved” near-term copper market outlook.
“After incorporating our updated supply expectations for our combined coverage universe, which notably includes a delayed Cobre Panama restart to 2026 (vs. 2025 previously), we now forecast a tighter near-term outlook for the Cu market.
Specifically, we now forecast 2024-2026 net deficits of 172kt, 322kt, and 69kt (three-year average deficit of 188ktpa), which compares positively with our January outlook of a 171kt deficit, balance, and a 97kt deficit (three-year average deficit of 89kt), respectively.
We continue to forecast relatively large deficits in the 2027-2028 period, supporting an elevated price environment. Spot Cu TCRCs have plummeted to unprecedented negative levels, reflecting ongoing concentrate supply underperformance.
Although total global visible Cu inventories have crept slightly higher to 7 days, we forecast a theoretical inventory exhaustion ahead. While demand has been remarkably resilient to date, especially given markedly higher prices, we estimate that average global consumption growth of only 1.8 per cent per annum would be sufficient to balance the Cu market in the 2024-2026 period (including only 1.3 per cent in 2024).
All copper equities are likely to move higher if Cu prices further improve, or lower if Cu prices weaken. Valuation multiples remain somewhat elevated in the context of current spot prices; however, this is likely supported by the very constructive medium to long-term fundamental picture, the energy transition theme, and by ongoing M&A speculation. We note that margins for most producers remain solid (spot Cu of $4.70/lb vs. 2024 average AISC of $2.59/lb) although FCF generation appears muted.”
For the large-cap producer, IVN, the firm’s change is:
* Ivanhoe Mines Ltd., “sector outperform” to $23 from $19. Average: $22.45.
“IVN ranks extremely well on growth (world-class assets to boot) and has high Cu leverage. The company’s execution to date at Kamoa-Kakula (Phase 3 just completed) has been nothing short of remarkable. However, valuation (along with geopolitical risk profile) appears relatively elevated.”