Miners 'compelling' despite macro meltdown
Analysts noted the "macro meltdown" with commodity
prices sharply declining recently and sentiment deteriorating on the back of
weak macro data, along with the prospect of the US Fed tapering soon.
However in an August 21 note, Christopher LaFemina said in
terms of the weaker than expected macro data, Jefferies analysts believed the
issues were transitory.
He also said the evidence of copper supply constraints had
become "abundantly clear", pointing to recent results including
Antofagasta trimming guidance due to water shortages in Chile.
The analysts recommended buying Freeport-McMoRan, First
Quantum Minerals, Glencore, and reiterated a buy rating for Antofagasta, for
leverage to the recovery.
They also reiterated a hold rating for both MMG, in light of
operational, geopolitical and M&A risks, and South32, after the miner
missed consensus.
They also noted a near-term overhang on BHP shares, which
have tumbled almost 14% in Australia in the past five days since its
transformative plans to unify the company, exit from petroleum, approve the
Jansen potash project and deliver a higher dividend than expected.
"We believe BHP will seek acquisitions over the medium
term," LaFemina said.
"These developments are mostly positive for the long
run, in our view, but the added complexity due to risk of shareholders voting
down the unification is a near-term overhang."
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