Iron ore price, page-433

Buy the ‘dips’ in miner play: CLSA

CLSA has upgraded BHP, RIO, AWC, FMG and S32 after lifting its commodity forecasts.

BHP, RIO and Alumina are rated Buy vs. Outperform, Fortescue gets an Outperform vs. Sell, and S32 is rated Underperform vs. Sell.


Strap the hard hat on, take commodity prices on the chin and buy the dips in the big miners: CLSA
CLSA increased its base metal (ex-nickel) forecasts an average of 11 per cent in 2017 and 18 per cent in 2018, while its iron ore forecasts rose 25 per cent for 2017 and 10 per cent for 2018. Thermal coal price forecasts rose 18 per cent and 7 per cent for the same periods.

That saw its Australian mining sector earnings forecasts revised up 11 per cent on average and price targets raised 5 per cent.

“We are mindful of the argument that mining equities are considered a beta play on the underlying commodity, and see commodity price normalisation as a risk,” the broker says.

“However, total shareholder return is more than a function of commodity price movements.

“With higher free-cash-flow yields, capital management upside, operational catalysts, production growth, productivity and cost out benefits, we believe select equities will outperform underlying commodities. We advocate ‘buying the dips’ in quality names.”