Scotia Capital Scotia Capital analysts Orest Wowkodaw and Eric Winmill anticipate most miners to post stronger second-quarter financial results “driven by improved operating performance and markedly higher commodity prices.”
“With cost pressures stabilizing and capex spending easing, we forecast cash margins to expand,” he said. “Overall, our estimates appear mixed relative to current consensus expectations. With material guidance changes seemingly unlikely, we expect the market to largely focus on select project updates. Although the large and mid-cap producers continue to trade at relatively elevated valuations (we estimate an average implied Cu price of $5.60 per pound or 27 per cent above spot), we do not anticipate Q2 results to meaningfully disrupt sector momentum.”
In a report released Monday, the analysts said they expect quarterly results to “meaningfully improve” from both the last quarter and a year-over-year basis “driven by a slightly better operating performance and markedly improved commodity prices.”
“We forecast CCO-T, CS-T, ERO-T, HBM-T, and IVN-T to miss consensus EBITDA expectations,” they said. “We forecast relatively in-line results for CIA-T, FCX-N, FM-T, and TECK.B-T. We expect ANTO-L, LUN-T, and NEXA-N to beat. On an EPS basis, we forecast below-consensus results for all companies except for CIA-T, IVN-T, LUN-T, and TECK.B-T.”
“Preferred equity exposure. In our view, CIA-T, LUN-T, and TECK.B-T all appear relatively well positioned heading into the Q2 reporting season. Despite some potential near-term concerns, TECK.B-T, CS-T, and CCO-T remain our Top Picks. We also highly recommend ERO-T, FCX-N, HBM-T, IE-N, IVN-T, and MTAL-N for Cu exposure, along with NXE-T and DML-T for U308.”
The analysts upgraded their forecasts to reflect quarterly commodity prices change and foreign exchange considerations. That led to a group of target price changes:
- Cameco Corp. ( “sector outperform”) to $85 from $83. The average is $77.01.
- Capstone Copper Corp. ( “sector outperform”) to $13 from $12.50. Average: $13.43.
- Champion Iron Ltd. ( “sector perform”) to $7.25 from $7. Average: $8.11.
- Labrador Iron Ore Royalty Corp. ( “sector perform”) to $33 from $32. Average: $33.50.
- Lundin Mining Corp. (LUN-T, “sector perform”) to $18.50 from $18. Average: $19.13.
- Teck Resources Ltd. (“sector outperform”) to $85 from $83. Average: $75.22.