RBC Says Copper Stocks Trading at Attractive Valuations; Prefers Freeport, First Quantum, Inmet


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.

“Copper 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,” the Financial Post quoted him as saying in a research note.

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 Inc. ( FCX ), 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright (C) 2014 MTNewswires.com. All rights reserved. Unauthorized reproduction is strictly prohibited.

This article appears in: Investing , Commodities

Referenced Stocks: FCX

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