Canadian miners to continue strong cash flows- UBS17 December...

Canadian miners to continue strong cash flows- UBS

17 December 2007

Source: Reuters News

TORONTO, Dec 17 (Reuters) - Despite expectations that base metal prices are set to decline, several Canadian miners should continue to generate strong cash positions over the next two years, UBS Investment Research said on Monday.

Copper and zinc producers such as HudBay Minerals , Breakwater Resources , Anvil Mining , Inmet Mining , and Frontera Copper should all see cash positions by 2009 that amount to more than one-third of their current market capitalizations, UBS estimates.

"Our analysis indicates that base metal producers should realize significant cash flow generation over the next two years even under our prevailing UBS scenario of falling metal prices through 2008 and 2009," UBS analysts said in a note.

The sector has been hard-hit of late as economic worries have softened the commodity outlook.

The S&P/TSX mining index, which includes Canadian base metal miners, has fallen 23.5 percent percent since hitting a record high on Oct. 10, compared with a 5.1 percent drop for the broader composite during that time.

Other copper and zinc players, Katanga Mining and Lundin Mining , should also have 2009 net cash worth more than 30 percent of market capitalization, while the top pick among domestic nickel players is FNX Mining , with estimated net cash/market cap of 22 percent, UBS said.

Base metals began their most recent rising cycle in 2002, but the rally has run out of steam.

Both zinc and copper prices have failed to recapture their 2006 highs, while nickel has fallen more than 50 percent since peaking in May.