Base metal stocks have been battered in recent months as commodity prices declined, regardless of their quality. Buying them after a sell-off is a risky proposition, so Raymond James analyst Alex Terentiew waded through the muck to determine which ones have been punished unfairly.
He evaluated the stocks from a number of angles, including a sensitivity test to see how they would withstand a prolonged period of weak metal prices. The winner of the sensitivity test was Capstone Mining Corp., due to its “strong operating asset base and robust cost profile.” Mr. Terentiew also noted that the “prospective acquirer” overhang should be removed from Capstone now that the company has announced an acquisition.
First Quantum Minerals Ltd. also got a strong vote of approval from Mr. Terentiew. While it did not score as well in the rankings as Capstone, he pointed to its low costs, strong liquidity and proven management team.
He was much more cautious on other companies. He wrote that HudBay Minerals Inc. has little operational flexibility and “will likely need” to raise capital next year to finish its development projects. In the case of Teck Resources Ltd., he noted that the company has a strong balance sheet right now, but that could change if it moves forward with its long-term copper and oil sands projects. And while he praised Lundin Mining Corp.’s asset base, he does not see catalysts to break the stock out of its current trading range.