HBM : TSX : C$8.81
HudBay Minerals is an integrated Canadian zinc and copper producer with operating assets in Manitoba, and development or exploration properties elsewhere in Canada, in the U.S., and in Peru.
All amounts in C$ unless otherwise noted.
Metals and Mining — Base Metals and Minerals
2013 PRODUCTION A LITTLE WEAK, BUT 2014 GUIDANCE IN LINE AND CONSTANCIA ON TRACK
HBM on January 8 released 2013 production and 2014 guidance. 2013 copper production’s miss against guidance is the aberration. 2014 production guidance is consistent with our forecasts. HBM confirmed Constancia’s budget and schedule, and provided surprisingly high 2014 production guidance (pre-commercial production) of 5,000-10,000 tonnes.
Our revised 2013-15E EBITDA forecasts are C$23 million, C$129 million, and C$485 million, which compare to our previous forecasts of C$32 million, C$129 million, and C$485 million. Our revised 2013-15E adj. dil. EPS forecasts are C$0.03, C$0.16, and C$1.08, from previous forecasts of C$0.07, C$0.15, and C$1.08.
Action and valuation
We are maintaining our BUY recommendation and our 12-month target of C$12.00, which is based on the average of: i) 5x our 2015E EV/EBITDA, which would imply a share price of C$11.97; and ii) our NPV10 estimate of C$11.62, (which includes C$7.79 for Constancia).
Next potential catalyst and investment risks
We are forecasting Q4/13 adjusted diluted EPS of negative (C$0.02) based on: i) payable zinc and copper sales of 24,400 tonnes and 7,800 tonnes, ii) realized zinc and copper prices of US$0.93/lb and US$3.31/lb (before treatment and refining charges, but after provisional pricing adjustments), and iii) after by-product credit costs of +US$1.41/lb of copper.
Posted by Jack A. Bass on January 10, 2014
Protesters target Rio Tinto AGM (Photo credit: Eyes on Rights)
Rio Tinto (RIO : NYSE : US$55.89)
Turquoise Hill Resources* (TRQ : TSX : $7.87)
According to Bloomberg, Rio Tinto is considering a temporary halt to construction work at the Oyu Tolgoi project, the world‟s biggest copper project under construction, in Mongolia, to protest the government’s demands for a larger stake in the project and new mining royalty rates.
In October, RIO rejected a second move by Mongolia to renegotiate a 2009 investment agreement for the development of Oyu Tolgoi, which is currently the world‟s biggest copper project under construction. RIO has a 66% stake in Oyu Tolgoi through its 51% interest in Turquoise Hill. The
Government of Mongolia has a 34% stake in Oyu Tolgoi.
The project was expected to process first ore through the concentrator by year of 2012, with first concentrate production to follow in January 2013. The commencement of commercial production is expected three to five months thereafter (April and June). Completion of a feasibility study on the underground Oyu Tolgoi Phase 2 expansion is expected by June. At ~US$6 billion, Oyu Tolgoi is the largest single investment in the history of Mongolia
Posted by Jack A. Bass on February 1, 2013
First Quantum Minerals (Photo credit: Wikipedia)
First Quantum Minerals
(FM : TSX : $20.92)
First Quantum Minerals announced its Q4/12 production and introduced the market to its 2013 production guidance. For Q4/12, copper production increased by 26% q/q to 84,918 tonnes and gold production increased by 48% q/q to 64,383 ounces.
Higher grades from Kansanshi, increased production from Guelb Moghrein and first production from Kevitsa were the reasons for the solid quarter. On the nickel front, the company produced 10,096 tonnes from its Ravensthorpe and Kevitsa mines. The company’s new Kevitsa mine in Finland also increased FM’s platinum and palladium production to 6,123 ounces.
For 2013 the company issued operating guidance for copper in a range 302-330,000 tonnes, for gold in a range of 190,000-215,000 ounces and for nickel in a range of 40,000-45,000 tonnes. The company also announced 2013 cash cost guidance for copper of US$1.50-1.60 per pound. Along with working on increasing production, FM is also in a pitched battle for takeover Inmet Mining (IMN), whose board today advised its shareholder to reject FM hostile bid .
Posted by Jack A. Bass on January 24, 2013