The third quarter will be critical for base metal miners as many companies need to catch up to achieve their annual production guidance, offsetting a weaker start to 2023, analysts at Stifel believe.
Following the release of second quarter earnings by eight miners under their coverage, the analysts noted several themes from the quarter, including that production guidance was generally weighted toward the second half of 2023, with most companies producing less than half of their annual guidance in 1H 2023.
They also highlighted that all-in costs were overall higher than their expectations, but that they can see some relief in 2H on softening consumable prices.
Earnings before interest, taxes, depreciation and amortization (EBITDA) also missed their estimates for most companies and reductions to production guidance from other miners continue to remove copper supply, helping to support prices, the analysts noted.
“On a cumulative basis, miners under our coverage delivered inline copper equivalent production, higher cash costs ($/per pound of copper), 7% higher all-in-costs ($/per pound of copper equivalent), an 8% miss in EBITDA, and a beat in cash flow per share,” they wrote.
The Stifel analysts also changed their rating on Toronto-based First Quantum Minerals (TSX:FQM) from ‘Buy to ‘Hold’ on its recent relative share price outperformance, up 11% in the year-to-date while most peers are down about 10%. They awarded it a C$39 price target.
First Quantum shares traded at $33.94 on Tuesday afternoon.
“We continue to view First Quantum as a premier company in the sector with a strong management team and moderate growth profile,” the analysts wrote.
They have ‘Buy’ ratings on Capstone Mining Corp (TSX:CS), HudBay Minerals Inc. (TSX:HBM), Lundin Mining Corporation (TSX:LUN), Taseko Mines Ltd (TSX:TKO) and Teck Resources Ltd (TSX:TECK.B) and a ‘Hold’ rating on Ero Copper.
“Capstone remains our preferred name owing to the transformational and catalyst rich next 12 months,” they wrote.
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