Copper prices could soon rebound after recently touching a 5-year low, and Macquarie Group says snapping up Lundin Mining is a good way to play the red metal.
Analyst Daniel Greenspan says Lundin Mining
1.87%) is a strong buy, being the only base metal name that has less debt than their estimated EBITDA of $994 million.
With costs at the company’s Candelaria and Eagle mines coming in better than forecast, Lundin overall has a clean balance sheet.
Macquarie sees copper bouncing off the bottom, passing 2.90USD/lb in the fourth quarter of 2015 and eventually hitting 3.74USD/lb in 2018.
The Eurozone could boost the metal’s growth, with potential economic growth translating into higher than anticipated demand for base metals.
Further copper stimulus could come from Chinese infrastructure spending, says Macquarie’s China economist Larry Hu. With Chinese metals demand usually increasing after the Lunar New Year, when industrial activity typically ramps up, that could mean an increase in the copper price soon.
While focus is on Europe and China, production rates of copper mines around the world are expected to rise, meaning more demand globally.
With global mine production in 2012 coming in at 17 million tonnes, Macquarie says they’re expecting global production to hit 21 million tonnes next year.
Consumption is also expected to rise from 20 million tonnes in 2012, to 25 million tonnes in 2017.
Macquarie also recommends investing in base metals in general, including nickel and zinc. Though, according to Macquarie, “modest appreciation is likely for precious metals.”
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These positive copper stories are popping up everywhere now. One needs to scour the internet to find a negative copper story tick tick tick....................
AVB Price at posting:
7.6¢ Sentiment: Hold Disclosure: Held
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