Base Metal Miners Analyst Watch: September Edition

by: Itinerant

Monitoring analysts and their price targets can provide valuable data points when making investment decisions. We have been keeping an eye on analyst data published for mining stocks on for some time now and have been reporting our observations on precious metals mining stocks on a monthly basis.

Starting this month we are expanding our scope to base metal miners. Subsequent editions in our series will relate back to previous months for comparison. This first edition records the data as listed on 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, 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 Mining (NYSE:HBM), Southern Copper (NYSE:SCCO), Taseko Mines (NYSEMKT:TGB), Teck Resources (TCK) and Turquoise Hill Resources (NYSE:TRQ).

Our data for these stocks is summarized in the table below. The first three columns list the company name, ticker symbol and share price 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 number of analysts providing data to and the mean recommendation given by these analysts ranging from 1.0 (strong buy) to 5.0 (sell). This concludes the data sourced directly from

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 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 and Taseko Mines are trading more than 200% and 50% respectively below their median price targets indicating tremendous potential.

The former is exposed to significant country risk due to its engagement in Mongolia and its fate will depend on negotiations regarding the future of the world class Oyu Tolgoi mine. This article offers a suitable starting point for research into this rather risky investment proposition.

The latter is awaiting permits for a major project. Valuation will depend on the outcome of permitting, with ample upside anticipated by analysts in the event of success.

The remaining stocks are trading relatively close to their median price targets.

Divergence in analyst opinion is measured in column "high-low." The results from this column in the table above are visualized in the next diagram.

A high degree of disagreement in price targets is observed for Turquoise Hill Resources and Taseko, again reflecting different outlooks on Mongolian proceedings and permitting.

Disagreement is within ranges typically observed in the sector for the remaining companies.

The final diagram visualizes analysts' "Recommendation" ratings.

Taseko Mines is viewed most favorably and considering our interpretation of the first two diagrams this comes as no surprise.

Southern Copper brings up the rear in this ranking. We observe some contradiction here: the median price target is 52% higher than the present share price and disagreement among analysts is very limited. Yet the recommendation of 2.8 does not indicate a buy rating. A good starting point for further research for this company can be found here.

The chart below shows the share price performance of the mentioned companies since the start of 2012, and also the performance of the wider industry represented by the Global X Copper Miner ETF (NYSEARCA:COPX). Turquoise Hills Resources has underperformed COPX significantly owing to the problems with Mongolian authorities. Southern Copper on the other hand has shown the strongest performance and resilience against the downturn in metal prices.

COPX Chart

COPX data by YCharts

Our pick of the month

Analysts seem to be in agreement with regards to the high potential of Taseko Mining. This company scores very high with regard to potential - analysts are in agreement with regard to the high targets, and Taseko Mining gets the highest buy recommendation.

We will second the analysts on their call for this month, but would also like to note that all the usual caveats with regards to junior mining companies apply.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.