Inmet Mining: Strong, But Overpriced - Scotia Capital

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Includes: FQVLF, HBM, IEMMF, QADMF
by: FP Trading Desk

Inmet Mining Corp. (OTC:IEMMF) 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. (OTCPK:FQVLF), 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. (OTC:QADMF), trading at 0.5x and 2.1x.