“All copper equities are likely to move higher if Cu prices improve,” he said. “Moreover, we believe valuation multiples could re-expand if Cu prices trade sideways given the solid margins (spot Cu of $4.00/lb vs. average AISC’s of $2.48/lb) and FCF generation of many larger producers at current prices. Moreover M&A speculation could also fuel the fire.”
“Overall, TECK is our top pick, while FM and CS remain our other preferred picks for Cu exposure; we also recommend FCX, ERO, HBM, and IVN. Among the small cap producers we prefer CMMC. Among the developers, we recommend AMC, FIL, FOM and IE. Our Sector Outperform-rated copper equities currently have an attractive 12-month average implied return of 47 per cent. GMEXICO and SCCO are rated Sector Underperform due to an unattractive risk/reward profile.”
Hudbay Minerals Inc. (sector outperform”) to $10 from $9. Average: $9.28.
Analyst: “HBM ranks very well on valuation (the cheapest on both EV/EBITDA and P/NAV), Cu price leverage, and anticipated FCF yield, but has a highly levered balance sheet and medium-term growth challenges due to the uncertainty of Copper World/Rosemont. Heightened geopolitical risk in Peru also remains a significant overhang.”