UBS analysts believe the medium-term outlook for Lundin Mining Corporation (TSX:LUN) (LUN) is “increasingly compelling” and the market is closer to a fundamental inflection point despite short-term risks to the copper price.
In a note to clients, they upgraded the stock to ‘Buy’ from ‘Neutral’, while increasing their 12-month target price to C$12 per share from C$10.
“In our view LUN offers leverage to copper price upside, its valuation is attractive, expectations on base production have been reset & we see positive catalysts in the next 6 to 12 months,” the analysts wrote.
The positive catalysts to which they referred is a potential sale of more than 50% of Josemaria Resources Inc (TSX:JOSE, NASDAQ OMX:JOSE, OTCQB:JOSMF), which the company acquired in 2022, which they believe would materially change Lundin's free cash flow, net debt and potential dividend profile, as well as reduce funding and execution risks.
The analysts at UBS also see the company’s recent acquisition of a 51% interest in Caserones copper mine in Chile as a “positive”, but acknowledge that it has been reflected in the about 30% outperformance in Lundin’s stock price compared with its copper peers over the last three months.
“We believe its valuation is attractive at less than 4 times EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation and amortization), it is earnings to free cash flow accretive and there are opportunities to realise synergies with Candelaria,” they added.
Shares of Lundin Mining climbed 6% to C$10.71 in late afternoon trading on Wednesday, and have gained more than 25% year to date.
Contact Sean at sean@proactiveinvestors.com