Many copper stocks are trading at attractive valuations as the
sector has generally underperformed the price of the metal this
year, says RBC Dominion Securities analyst Fraser Phillips.
While copper has been virtually flat this year, rising 15% in
January and February followed by a persistent slide, copper
equities in Fraser's coverage universe has mostly been down
anywhere from 5% to 40% during the same period.
The only stock that has outperformed the metal is Lundin Mining
Corp. (LUN.TO), up about 12% this year.
âCopper equities have mostly underperformed the metal, as we
think investors are pricing in fears of a broader market downturn,
mainly due to European debt concerns and the effect on global
demand,â the Financial Post quoted him as saying in a research
Also, investors may be looking for companies with more stable
free cash flow. Many miners are committing to major investments in
new projects over the next five years.
Based on current equity prices, it appears copper stocks are
factoring in very low long-term copper prices, in many cases below
US$2.30 a pound, he said.
Overall, Phillips considers Freeport-McMoRan Copper & Gold
), First Quantum Minerals Ltd. (FM.TO) and Inmet Mining Corp.
(IMN.TO) to have the best mix of value, production growth and
stability to leverage copper.
All three stocks are up between 1% and 3% today.
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