Hudbay Minerals Is Still 25% Undervalued

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About: Hudbay Minerals Inc Ordinary Sh (HBM)
by: Sven Carlin
Summary

A sum of parts calculation minus the debt shows Hudbay has a fair value of $10 with a 10% discount rate.

Hudbay is extremely leveraged to copper prices where higher prices significantly increase Hudbay's net present value.

The risk is mitigated by the extremely low cost operations, high cash flows. However, there is still the water permit for Rosemont.

Hudbay Minerals (NYSE: HBM) is a very interesting copper play. In the below video I analyze the present values of all of HBM's mines and projects and give a good overview of HBM's fair value.

I also analyze the copper environment that shows a large supply gap forming which is an extreme positive for HBM. For example, just a $0.5 increase in copper prices, increases the NPV of the Rosemont project, which could supply 10% of U.S. copper, by $500 million at a 10% discount rate, or $2 per share.

HBM's operating cash flows in Q2 2017 were $124 million and show that there won't be any issues with debt servicing and perhaps even complete debt repayment, especially if copper and zinc prices continue to increase.

Enjoy the video and I am looking forward to your comments and insights.

Disclosure: I am/we are long NSU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.