CITI still positive on IVN...
Ahead of third-quarter earnings season for North American mining companies, Citi equity analyst Alexander Hacking reiterated the firm’s position as “mid-term copper bulls.”
“Current forecasts are for prices to average $9k/t for the remainder of 2024 with U.S. election uncertainty and weak manufacturing sentiment limiting near-term upside,” he said. “A modest cyclical growth rebound then drives prices to $11k/t by mid-2025 (averaging $10,250/t) and to $12k/t by 2026. We see a 2024 market surplus but a H2 deficit.
“Decarbonization demand growth continues to offset a cyclical demand contraction; copper prices and physical balances remain leveraged to an eventual rebound of the latter. Copper spec positioning and pricing are most correlated with global manufacturing sentiment (eg, PMIs), which we believe are unlikely to recover meaningfully until early 2025 – ie, lagging initial Fed cuts (priced for September), with more certainty on U.S./China policy, and following further tightening of copper physical.”
In a research report released late Tuesday, Mr. Hacking made modest forecast adjustments to companies in his coverage universe, including lowering his 2024 and 2025 EBITDA projections for First Quantum Minerals Ltd. by 20 per cent and 22 per cent, respectively, Ivanhoe Mines Ltd. by 4 per cent and 5 per cent and Teck Resources Ltd. by 7 per cent and 4 per cent “based on the latest price forecasts from Citi’s global commodity team as well as updated assumptions and production and costs.”
For Teck, Mr. Hacking raised his target to $74 from $64 after changing his valuation methodology, keeping a “neutral” rating. The average on the Street is $73.82.
“Copper equities continue to price in anywhere from $10,500-$13,000 per ton,” he said. “FCX and SCCO are relatively more expensive, while TECK and IVN are relatively cheaper. However, we note that this is mostly project upside with IVN incorporating 75 per cent on Western Forelands project and TECK incorporating 50-75 per cent on QB3, Zafranal and San Nicolas. FM remains a special situation with the Panama mine closed down.”
“We rate Teck at Neutral. Positive factors include exposure to copper, several interesting growth options, and a strong balance sheet. Negative factors include historical challenges on execution and a dual-class share structure. On balance, we see equal upside and downside at current levels.”
For First Quantum, his target remains $26 with a “buy” rating. The average is $20.41.
“We see more upside than downside from the current situation in Panama,” he said. “The stock currently discounts Panama close to zero value, in our view, with very little consideration for potential upside. Downside risks would include a protracted stalemate at Panama or lower copper prices.”
Mr. Hacking kept a $24 target and “buy” rating for Ivanhoe. The average is $24.96.
“We believe IVN offers investors the best growth profile in our global coverage,” he said.