The performance of equities in the copper producer universe have underperformed the underlying commodity during the past few weeks, says Raymond James analyst Tom Meyer, pointing out in a research note the overall Price/Net Asset Value multiple of .7x was lower Wednesday than it was on May 30, when it stood at 0.78. Over the same period, the average copper price increased to $3.50 pound from $3.41 per pound.
The result, he says, is that, except for African Copper plc and Ivanhoe Mines Ltd. (IVN), almost all copper equities in his coverage universe are inexpensive. However, he highlights Quadra Mining Ltd. (OTC:QADMF) and Inmet Mining Corp. (OTC:IEMMF) as the “easier” names to own in the current environment of heightened uncertainty over deflation/inflation risks and concerns about global growth. “In our opinion, both companies offer value, longer dated project pipelines and favorable political risk profiles.”
Quadra and Inmet aside, Mr. Meyer suggests the bigger return potential comes from names that for one reason or another (Africa risk, acid supply issues) have suffered disproportionately relative to their peers. He suggests First Quantum Minerals Ltd. (FQLVF.PK), Anvil Mining Ltd. (OTC:AVMNF), and Frontera Copper Corp. (OTC:FRCPF) as equities “that offer the highest returns to target in our produce universe in the next 6-12 months.”