For quite a few months now, we have been maintaining a database of analyst price targets for mining companies available from Yahoo.com. Using this database, we have been providing monthly updates for gold miners, silver miners, metal streamers, and uranium miners. In September, we published our inaugural analyst-watch-article for base metal miners. We would now like to follow up with an October edition for selected base metal miners providing updates to price targets as published at the time of writing.
Most companies mentioned in this article have more analysts following their progress than considered in our database. This difference is due to the fact that not all analysts release their predictions to Yahoo.com, which is the source of the presented data.
For this initial installment, we are considering the following companies in alphabetical order: Freeport-McMoRan (NYSE:FCX), Hudbay Minerals (NYSE:HBM), Southern Copper (NYSE:SCCO), Taseko Mines (NYSEMKT:TGB), Teck Resources (NYSE:TCK), Turquoise Hill Resources (NYSE:TRQ). On popular demand, we have added Thompson Creek Metals (NYSE:TC) to our database.
Our data for these stocks is summarized in the table below. The first three columns list the company names, ticker symbols and share prices at the time of writing. Price targets (low, median and high) are listed in the following three columns. These targets are followed by a column giving the numbers of analysts providing data to Yahoo.com and the mean recommendations given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from Yahoo.com.
The following columns are colored in light green and contain data derived from our source data. These data points are given in percentages related to the share price at the time of writing. The column titled "median-price" gives the difference between the share price and the median target price. The column titled "high-low" gives the difference between the high and the low target. The last four columns titled "target change" document the changes in price targets since the September report with the last columns giving the average change over the low, median and high price targets.
(click to enlarge)
The difference between the current share price and the median price target is listed in column "median-price" and visualized in the diagram below. Under normal circumstances, we would view a large value in this column as an indicator for the potential of disproportionate gains over the coming year.
Turquoise Hill Resources is trading 156% below the median target. The company is involved with the awesome Oyu Tolgoi mine in Mongolia. Political risk continues to plague this project, which is obviously priced in at the present point in time. Taseko Mines is trading 67% below the median price target for similar reasons in principle, although comparing Mongolia with British Colombia is a somewhat long shot.
The larger miners in our list are trading comparatively close to the respective median price targets. However, data for Thompson Creek Metals and Hudbay Minerals still indicates just over 20% potential over the next 12 months.
Column "high-low" measures the divergence in analyst opinions. The results from this column in the table at the top of this article are visualized in the next diagram.
Turquoise Hill Resources and Taseko Mines also take the lead in this category. Presumably, analysts estimate the degree of risk associated with the aforementioned projects differently.
The highest degree of agreement in price targets is observed for Thompson Creek Metals, closely followed by Freeport-McMoRan and Hudbay Minerals.
Monthly changes in price targets are visualized in the diagram below. On average price targets were cut by 3.3% since the September edition of our article series. Freeport-McMoRan enjoyed the highest target upgrades (2.5% of the current share price on average) while Turquoise Hill Resources (-18.7%) and Taseko Mines (-3.7%) received the largest cuts.
The final diagram visualizes analysts' recommendation ratings. Taseko Mines is still viewed most favorably by analysts and Thompson Creek Metals brings up the rear in this ranking. The little red bars indicate changes in this recommendation since last month.
Analysts seem to have turned a tad bearish on Turquoise Hill Resources and a tad bullish on Southern Copper since our last edition.
Our pick of the month
Analysts seem to continue to favor Taseko Mines and we would like to concur. The risk associated with permitting the New Prosperity mine is considerable but so are potential rewards.