A Positive Look at 3 Key Players in Metals & Mining Industries
$CS, $AEM, $SLW, $TECK
A new Credit Suisse report takes a positive stance on some Key players in the metal and mining industries.
Overall the CS analysts see improving apparent demand trends, accelerating global growth, positive earnings revisions and debt reduction as Key drivers.
The new Trump Administration has been positive for industrials, so I expect to see some continued upside with Credit Suisse’s picks.
Y 2016 was a year of demand recovery, and Y 2017 should be a year when miners begin to repay investors for 5 tough years of under-performance through higher cash returns and ongoing capital discipline.
At the end of last year Credit Suisse raised its Steel demand estimates and lifted its Y 2017 Iron Ore forecast from $45/tonne to $55/tonne.
For Y 2017, the Iron Ore market looks balanced, but in Y 2018 that market could head into surplus once again.
In Coal, CS expects price parity between seaborne thermal and the spot price in China.
In base metals, Credit Suisse continues to like the outlook for Zinc and forecast a deficit market in Y’s 2017 and 2018. The firm remains constructive on Gold and forecast an average of $1,338/oz in Y 2017.
Now for some Key picks, as follows;
Agnico Eagle Mines Ltd. (NYSE:AEM) has an implied 41% upside to Credit Suisse’s 65 price target. This company is a top pick for its strong exploration and project pipeline, and strong balance sheet and operating track record, which makes it less leveraged to Gold price moves than peers. The valuation now looks more attractive on a spot pricing basis following recent currency moves as Agnico has cost exposure to the Canadian Dollar, Mexican Peso and the Euro. The stock trades at an 8% discount to senior Gold producer peers, while Credit Suisse’s analysts believe it should trade at a premium. The stock has a consensus analyst price target of 52.21 and a 52-wk trading range of 26.10 – 60.10.
|NYSE:AEM||46.49||17 January 2017||0.44||47.91||48.16||46.47||1,972,200|
|HeffX-LTN Analysis for AEM:||Overall||Short||Intermediate||Long|
|Neutral (0.14)||Bullish (0.40)||Neutral (0.21)||Neutral (-0.18)|
Silver Wheaton Corp. (NYSE:SLW) has 30% in implied upside to its Canadian stock price. The CS likes Silver Wheaton for its streaming business model that provides investors with leverage to the Silver and Gold price, while maintaining a low and relatively fixed unit cost basis. The company offers investors a levered play on precious metals prices that should command a multiple in line with royalty valuations and a premium to precious metals miners based on its tax-efficient leverage to underlying prices, free cash flow and strong balance sheet.
The consensus price target for SLW is 29.85, and the 52-wk trading range is 10.04 – 31.35.
|NYSE:SLW||20.78||17 January 2017||0.31||21.06||21.15||20.54||4,639,700|
|HeffX-LTN Analysis for SLW:||Overall||Short||Intermediate||Long|
|Neutral (0.08)||Bullish (0.25)||Neutral (0.08)||Neutral (-0.08|
Teck Resources Ltd. (NYSE:TECK) has an implied value to its Canadian Price target of 33%, if Credit Suisse’s target is right. While Teck shares are not immune to falling spot coking Coal prices, the firm sees compelling valuation support for Teck in a tight coking Coal market in Y 2017, a constrained supply-side response, reflation of the Steel making cost curve and equity scarcity among global coking Coal plays. With an estimated free cash flow generation of C$1.8-B over Q- of Y 2016 to Q-1 of Y 2017, Teck is well positioned for balance sheet deleveraging and remains on the path toward investment grade as a priority. Teck shares trade in a 52-wk range of 3.10 – 26.60.
|NYSE:TECK||23.61||17 January 2017||-1.08||24.52||24.53||23.61||5,939,100|
|HeffX-LTN Analysis for TECK:||Overall||Short||Intermediate||Long|
|Very Bullish (0.51)||Very Bullish (0.52)||Very Bullish (0.52)||Very Bullish (0.50)|