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SECTOR WATCH: Dundee unveils its preferred base metal stocks (T.TV) (T.CS)(T.LUN)(T.FM)

Stockhouse Editorial
1 Comment| July 22, 2014


Analysts from Dundee Capital Markets have turned bullish on base metal stocks, predicting that they are poised to outperform strongly in the next 12 to 18 months.

In keeping with that view, Dundee has raised its target price for a basket of base metal stocks, including Trevali Mining Corp. (TSX: T.TV, Stock Forum), Taseko Mines Ltd.  (TSX: T.TKOStock Forum), Nevsun Resources Ltd.  (TSX: T.NSU, Stock Forum), Lundin Mining Corp. (TSX: T.LUN, Stock Forum), Ivernia Inc. (TSX: T.IVW, Stock Forum), Copper Mountain Mining Corp. (TSX: T.CUM, Stock Forum), Capstone Mining Corp. (TSX: T.CS, Stock Forum) Teck Resources Ltd. (TSX: TCK.BStock Forum) and First Quantum Minerals Ltd. (TSX: T.FM, Stock Forum).

The investment firm has also upped its price forecasts for zinc and copper, thermal coal and lead. 

For example, Dundee expects copper to average US$3.16 per pound this year, an increase of 1.2% from earlier forecasts. Zinc is expected to average 97 cents, up 4% from a previous estimate.

Dundee said base metal stocks are trading at a discount to other TSX sectors on a price to earnings and enterprise value to earnings before interest tax, depreciation and amortization (EBITDA) basis.

“This is not unusual for this highly cyclical sector. However, we believe the 3-year bear market for the base metals ended in July 2013 when the sector bottomed,” Dundee said.

From the bottom in July 2013, base metal prices are flat or up, led by nickel and zinc.

Nickel rallied on the back of new Indonesian regulations in January 2014, while zinc has been up smartly since March.

Surprisingly, after testing support below $3 per pound in March due to collateralized financing deal, copper prices have rebounded nicely.

This has occurred as inventories, led by zinc and copper have been declining on the London Metals Exchange,  while U.S. and Japanese economies are expanding again.

Dundee’s preferred equities include:

Lundin Mining Corp. (TSX: T.LUN, Stock Forum), which is trading at $6.16, leaving a market cap of $3.6 billion, based on 585.8 million shares outstanding. The 52-week range is $6.57 and $3.99.

Capstone Mining Corp. (TSX: T.CS, Stock Forum), which is trading at $3.02, leaving a market cap of $1.2 billion, based on 381.6 million shares outstanding. The 52-week range is $3.35 and $1.89.

Trevali Mining Corp. (TSX: T.TV, Stock Forum), which trades at $1.27, leaving a market cap of $352.2 million, based on 279.5 million shares outstanding. The 52-week range is $1.29 and 62 cents.

First Quantum Minerals Ltd. (TSX: T.FM, Stock Forum), which trades at $25.37, leaving a market cap of $15 billion, based on 590.8 million shares outstanding. The 52-week range is $26.77 and $15.63.



Separately Tony Popowich, a quantitative and technical analyst with GMP Securities L.P. says Trevali is incurring a major technical breakout through the neckline of a 2-year inverse head and shoulders reversal pattern at the $1.20 zone.

“The breakout continues to target further technical upside to the $1.70 to $2 zone,’’ Popowich said.



FULL DISCLOSURE: Trevali Mining is a Stochouse Publishing client.


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dutchmann64
Is this the same DunnDee that has control of wolfe / tungsten mine in Korea?
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July 22, 2014
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