Inmet Mining Corp. (IEMMF.PK) is one fine company but investors are paying too much to get a piece of it, says Scotia Capital analyst Lawrence Smith.
In a note to clients, Mr. Smith downgraded the stock from "sector perform" to "sector underperform" based on relative valuation. He also increased his price target from C$26.75 to C$33 after revising his net asset value for Inmet higher to better reflect the company's debt burden related to the Las Cruces project.
The analyst said:
Inmet continues to have a strong balance sheet, solid and diverse operating assets, and a good management team. However, we note that Inmet is currently trading at a premium relative to its mid-tier mining peer group on both a P/NAV and EV/EBITDA basis.
He said Inmet is trading at 0.8x its price to net asset value and 6.8x its enterprise value-to earnings before interest, taxes, depreciation and amortization. In comparison, Inmet's peer group is trading at 0.6x and 4.6x, respectively. Included in that peer group are First Quantum Minerals Ltd. (FQVLF.PK), trading a 0.6x P/NAV and 5.2x EV/EBITDA, Hudbay Minerals Inc. (HBMFF.PK) trading at 0.6x and 6.5x and Quadra Mining Ltd. (QADMF.PK), trading at 0.5x and 2.1x.