Scotia Capital analysts Orest Wowkodaw and Eric Winmill expect Canadian miners to post ”relatively mixed” third-quarter financial results as “improved operating performance is likely to be largely offset by weaker commodity prices” sequentially. “However, with cost pressures stabilizing and capex spending easing, we forecast cash margins to expand,” they said. “Of concern, our estimates appear well below current consensus expectations for most companies, and we expect material negative consensus revisions over the coming weeks. In addition, we anticipate the market to focus on potential negative guidance revisions and select project ramp-up updates. The large and mid-cap producers continue to trade at relatively elevated valuations (we estimate an average implied Cu price of $5.60/lb or 26 per cent above spot), reflecting improved market sentiment on Chinese demand.”
In a research report released Tuesday, the analysts said their EBITDA estimates for mid-cap and large-cap companies now sit 17per cent below consensus.
“We forecast CIA-T, CS-T, ERO-T, HBM-T, IVN-T, LUN-T, NEXA-N, and TECK.B-T to miss consensus EBITDA expectations, CCO-T and FM-T to beat, with FCX-N in-line,” they said. “On an EPS basis, we forecast below-consensus results for all companies. We profile our quarterly EPS, EBITDA, and guidance performance vs. consensus tracker and note that CCO-T and FCX-N have the best track record of meeting EBITDA expectations over the past four and eight quarters; ERO-T and FM-T have the weakest.”
In response to the impact of a weaker Canadian dollar and “minor” commodity price changes, they made a series of target price changes:
- Altius Minerals Corp. (ALS-T, “sector perform”) to $26 from $24. The average on the Street is $26.64.
- First Quantum Minerals Ltd. (FM-T, “sector perform”) to $18.50 from $17. Average: $20.41.
- Hudbay Minerals Inc. (HBM-T, “sector outperform”) to $15 from $14.50. Average: $15.91.
- Ivanhoe Mines Ltd. (IVN-T, “sector outperform”) to $22 from $21. Average: $24.85.
- Labrador Iron Ore Royalty Corp. (LIF-T, “sector perform”) to $32 from $31. Average: $33.50.
- Teck Resources Ltd. (TECK.B-T, “sector outperform”) to $79 from $78. Average: $74.32.
“In our view, CCO-T, FCX-N, and FM-T, all appear relatively well positioned heading into Q3/24 reporting season,” they said. “Conversely, we believe CIA-T, CS-T, ERO-T, HBM-T, LUN-T, and TECK.B-T could all disappoint expectations. Looking beyond Q3, TECK.B-T, CS-T, and CCO-T remain our Top Picks. We also highly recommend ERO-T, HBM-T, IE-N, IVN-T, LUN-T, and MTAL-N for Cu exposure, along with NXE-T and DML-T for U308.”