Seeking Alpha: Thompson Creek Not Yet Past The Point Of Hard Decisions

This has been a pretty good year for a number of Canadian base metal miners, with First Quantum (OTCPK:FQVLF), HudBay (NYSE:HBM), Copper Mountain (OTCPK:CPPMF), and Thompson Creek (NYSE:TC) all doing pretty well since the start of the year. Thompson Creek's path to this point hasn't exactly been smooth (the shares are down about 25% over the past 12 months), and there are still quite a few uncertainties with respect to the company's plans for its molybdenum operations, as well as it how will resolve ongoing ore hardness issues at Mt. Milligan.

The company seems to be past the worst of its liquidity pressures, though, and should be free cash flow-positive from 2014 forward (unless base metal prices get very weak). Future decisions on how to proceed at the Thompson Creek mine and whether to add a second crusher to Mt. Milligan could have material impacts on the net asset value, but as things stand today, I believe the shares are still undervalued.

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Thompson Creek Not Yet Past The Point Of Hard Decisions

Seeking Alpha: Taseko Mines Far From Knocked Out

Both of the Canadian copper miners I liked in December of 2013, First Quantum (OTCPK:FQVLF)(FM.TO) and Taseko (NYSEMKT:TGB)(TKO.TO) have done all right since my initial recommendations (here and here). First Quantum is up almost 45% despite an August pull-back, while Taseko is up more than 20% even with the February rejection of its New Prosperity permit. Relative to Taseko (and the wider base metal sector), I still see meaningful upside in Taseko shares. New Prosperity is very much a long shot now, but Gibraltar is a worthwhile asset and Aley is looking better and better. Add in the potential of a value-creating acquisition and I still believe there is money to be made from Taseko shares.

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Taseko Mines Far From Knocked Out

Seeking Alpha: First Quantum Minerals Shooting For The Top

I can't complain about First Quantum's (OTCPK:FQVLF) (FM.TO) (FQM.L) performance since my Top Idea write-up in December of 2013, as the shares have risen almost 50%. First Quantum is far from the only base metal miner to do well over that stretch, as others like Hudbay Minerals (NYSE:HBM), Lundin (OTCPK:LUNMF), and Kazakhmys (OTCPK:KZMYY) have also done quite well. Even so, I love the company's ambitious plans to grow its way into the top ranks of global copper and nickel producers, as well as its demonstrated excellence in bringing mines into production on-schedule and close to budget.

I do believe that First Quantum is in a stronger position than it was eight months ago, but not nearly so strong enough to offer the same sort of bargain. I've moved my fair value estimate up a bit, but First Quantum looks more like a growth-oriented "hold" than a strong buy at this point.


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First Quantum Minerals Shooting For The Top

Seeking Alpha: Execution Helping Hudbay Minerals Get Its Due

I wrote about Hudbay Minerals (HBM) as a Top Idea almost a year ago to the day, and in that time, the stock is up 56% - not quite matching fellow Top Idea First Quantum (OTCPK:FQVLF) over that time (up 70%), but still doing pretty well amidst a better environment for copper miners (with Lundin Mining (OTCPK:LUNMF) and Freeport McMoRan (FCX) also up nicely over the past year). This performance comes without a huge improvement in copper prices and with Hudbay still facing some significant financing needs to get its growth projects up and running.

While I still like Hudbay quite a lot in terms of it being a quality mining company, I'm not as bullish given the good run in the shares. The acquisition of Augusta Resource (AZC) adds some significant long-term growth potential, but not so much to today's NAV. With a fair value around $11.50, I see less margin of error for production, operating costs, and construction projects, but still some upside remaining.

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Execution Helping Hudbay Minerals Get Its Due

Seeking Alpha: High Costs Leave Copper Mountain Mining Leveraged To Higher Prices

Costs matter in mining, but not always in the way that investors think. All things considered, it is better to have the lowest possible cost of production, but companies like Copper Mountain Mining (OTCPK:CPPMF, (CUM.TO)) with elevated costs can offer more upside when commodity prices rise. This company has done many things right, including getting its southern British Columbia mine up and running both on time and on budget, but production challenges and high costs loom as ongoing challenges. These shares aren't tremendously interesting at prevailing prices, but if copper goes on a tear, these shares should outperform the peer group.

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High Costs Leave Copper Mountain Mining Leveraged To Higher Prices

Seeking Alpha: Taseko Hoping To Offer Its Own Copper Growth Story

One of the reasons I like First Quantum (OTCPK:FQVLF) is that I believe that company is poised to deliver excellent low-cost/high-value growth from its copper mines both already operating and on the drawing board. The same could apply to Taseko (TGB), as this BC-based Canadian miner has an existing mine with expansion capacity and a potential new mining project that could offer excellent cash costs.

Of course there is a "but", and with Taseko it's a triple-but. The first "but" is that a lot of copper mining projects are on the books now and it is going to take a real recovery in global demand to maintain prices in the face of that supply. The second "but" is that the company's current copper mine is on the high end of cash costs. The final "but" is that the company's biggest near-term expansion possibility may be derailed by wrangling over environmental and cultural issues.

Even though Taseko is in solid financial shape, the stock has gotten pummeled like most other mining companies. With that, I see significant potential opportunity here. I believe Taseko could rise 30% just on the basis of its existing mine if copper prices stay at $3/lb, and the upside could be into the $4 range (100%-plus potential) if the expansion, cost, and pricing scenarios all work out.

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Taseko Hoping To Offer Its Own Copper Growth Story

Seeking Alpha: Execution And Commodity Risks Have First Quantum At An Appealing Price

Mining stocks have generally been varying shades of horrible this year, with major producers like BHP Billiton (BHP), Rio Tinto (RIO), Vale (VALE), Glencore Xstrata, and Vedanta all in the red for the last 12 months. The reasons aren't all that hard to uncover, as commodity prices have softened on weaker Chinese demand and new projects adding supply to the market. So too with First Quantum (OTCPK:FQVLF) (FM.TO), as this growing copper miner has seen its shares retreat as copper prices have fallen more than 10% in the past year.

It's not just falling copper prices hurting First Quantum. The company is looking to deliver copper production growth greater than any other major miner over the next four years, but investors are rightly concerned about the prospect of the company taking on billions more in debt to fund the development of its crown jewel Cobre Panama project. I believe that the market is undervaluing First Quantum's demonstrated ability to deliver on mining projects, and while I cannot and will not wave off the risk of further copper price erosion, I believe investors are getting enough compensation in the stock's valuation today.

For those investors looking to investigate First Quantum more thoroughly, I'd suggest doing so under the Canadian and British tickers (FM.TO and FQM.L, respectively), as the company's U.S. ADRs are of the dreaded "F" variety.

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Execution And Commodity Risks Have First Quantum At An Appealing Price

Seeking Alpha: Delays And Soft Guidance Dent HudBay, But There's Still Value Here

I wrote about HudBay (HBM) as an Alpha-Rich investment candidate back in July of this year, and with the stock up more than 20% (against 8% for the S&P 500), it has been a decent call. To be fair, though, picking a beaten-down mining stock in the summer of this year was a good move in general and investors in companies like Teck (TCK), Freeport McMoRan (FCX), and Rio Tinto (RIO) have also done pretty well over that same period.

I continue to believe that HudBay is a well-run and substantially undervalued mining company with high-value assets like Constancia (CP) and Lalor Lake (Lalor) likely to significantly increase production, revenue, and profits in the coming years. Unfortunately, while the stock has worked reasonably well, the company has seen some of the construction and development setbacks that are common to the industry. Higher costs at Lalor, cost overruns at CP, and some shuffling around of capex priorities do lead me to trim my NAV estimate for the stock, but I still believe this is a significantly undervalued stock.

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Delays And Soft Guidance Dent HudBay, But There's Still Value Here

Seeking Alpha: HudBay Minerals Almost Washed Out ... And Looking Like A Bargain

The list of mining stocks doing well over the past year is quite short, and HudBay Minerals (HBM) isn't on it. Thumped by a large-scale move of investor funds out of mining and declines in commodity metal prices, HudBay has further worried investors with its upcoming capital needs, the possibility of a dividend cut, and more general product/cost issues.

On the other hand, tough times don't last but tough companies do. Very few mining companies are looking at the sort of production growth potential that HudBay has over the next three to five years. What's more, while I don't think investors can sleep on the risk that the bottomless pit that once was China's appetite for basic materials has, in fact, found a bottom (meaning that the "super-cycle" is over), no analyst is currently projecting a long-term copper price whereat HudBay can't make money.

The valuation process for mining companies is slippery and inexact. That said, even using relatively low multiples on EBITDA, low price inputs into a NAV calculation, and the company's tangible book value suggest that these shares are undervalued. Unless you believe HudBay will actively destroy value by staying in business, these shares look at least 30% undervalued and may in fact be worth 70% to 100% more than today's price.

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HudBay Minerals Almost Washed Out ... And Looking Like A Bargain

Investopedia: Is Another Copper Star On The Rise?

It's not all that often that the Street seems to agree on something, but there is widespread agreement among analysts and investors that Freeport McMoRan's (NYSE:FCX) bids for Plains Exploration (NYSE:PXP) and McMoRan Exploration (NYSE:MMR) are both bad ideas. Assuming they go through, then, Freeport McMoRan may find its luster as a copper play dulled. Lucky for investors, then, a new option may be on the rise.

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http://www.investopedia.com/stock-analysis/2012/Is-Another-Copper-Star-On-The-Rise-FCX-SCCO-TCK-PXP1217.aspx

Investopedia: Western Digital Doubles Up On Storage

Consolidation is not uncommon in mature industries, and hard computer disk drives are definitely a mature product nowadays. But even though many pundits believe that flash memory will relegate hard drives to the scrapheap of history, Western Digital (NYSE:WDC) seems to think that day is still a ways off. If you want to make a bet on this company, it'll be up to you to decide whether the company is right about its key product's prospects or not. Let's take a look at some of the data.

Western Digital Buys Global Storage Technologies 

On Monday morning, Western Digital announced that it will acquire Hitachi's (NYSE:HIT) Global Storage Technologies unit for $4.3 billion. Western Digital will pay $3.5 billion in cash (which will be funded at least in part by debt) and 25 million shares. That, in turn, will mean that Hitachi will own approximately 10% of the company. The deal also calls for Western Digital to add two Hitachi reps to its board of directors once the deal closes.

Global Storage Technologies is a relatively small part of a huge enterprise and there is not a wealth of financial data available. That said, Hitachi's HDD business has a revenue run rate right now of about $1.5 billion, so Western Digital is paying a little less than three times sales for the deal.

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http://stocks.investopedia.com/stock-analysis/2011/Western-Digital-Doubles-Up-On-Storage-WDC-HIT-STX-STEC-QTM-MRVL0309.aspx

Copper ... It's Back

Gold gets all the attention, but copper has staged a pretty remarkable recovery from its early summer lows. After bottoming out below $2.80 a pound, the December contract is near $3.70 and the highs of 2008 are in sight. Considering just how useful copper is in so many industrial, construction and communications applications, an ongoing global economic recovery should be a solid demand driver.

Most of the major copper producers have already run up in concert with the price of the metal, but investors may want a refresher course on the major players with an eye toward buying the inevitable dips.

Freeport-McMoRan (NYSE: FCX)
These are the fat times for Freeport-McMoRan, as this company is not only a major copper producer, but a major gold miner as well. At current prices, the 83 billion pounds of copper and nearly 34 million ounces of gold in Freeport's reserves are worth over $800 per share. Of course, that does not include the costs of extracting those resources (nor the risk of lower future prices), but it should give investors a sense of the magnitude of Freeport's resources. Freeport has long since diversified its reliance upon its Indonesia mine to a tolerable level, and the company produces more than 10% of the world's annual copper output. (For more, see Taking A Shine To Copper.)

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http://stocks.investopedia.com/stock-analysis/2010/Copper---Its-Back-FCX-SCCO-TGB-TCK-RTP-BHP1011.aspx

FinancialEdge: 5 Warnings Signs For Bad PR Stocks

Not all bad news is created equal. Patient and savvy long-term investors can leverage short-term setbacks into long-term winnings by realizing that the most likely outcome of a so-called disaster is not nearly as bad as the market assumes. However, some kinds of bad news are so toxic that prudent investors simply stay away entirely. How then should investors separate the "bad news in wolf's clothing" from the real bad news? Here are five key factors that may indicate when bad PR is too serious to ignore.

When the Company Causes Death
When a company's missteps result in actual deaths, there is a virtually inevitable spiral of events - none of which are positive. Not only will the news likely be full of warnings about the dangerous product/service, but follow-up stories detailing the aftermath and fallout will keep the mistake (and its perpetrators) in people's consciousness. Afterwards, there are expensive lawsuits and settlements, recovery and mitigation efforts, and press campaigns designed to make consumers forget about the incident.

Indevus Pharmaceuticals (known at the time as Interneuron) thought it had a blockbuster with the weight-loss drug Redux - that was until severe side-effects led to numerous product liability suits and the FDA ordered withdrawal from the market. All told, Wyeth, which licensed the drug from Indevus, paid out more than $20 billion in legal settlements to those who took Redux or Pondimin (another Wyeth weight loss drug), while revenue of the two drugs topped out at about $300 million in 1996.


http://financialedge.investopedia.com/financial-edge/0810/5-Warning-Signs-For-Bad-PR-Stocks.aspx

A Mess In Africa Highlights A Challenge To Resource Companies

Half a world away, a messy situation in a resource-rich land is offering up a lesson in caution to investors who seek out smaller mining companies. Canadian miner First Quantum once thought it had a valuable resource and a valid contract in its Kolwezi copper project in the Democratic Republic of Congo. Since then the company has seen the government of the RDC seize the project, sell it to another party, and now has seen the asset sold yet again - this time to mining company Eurasian Natural Resources. All the while, international law has more or less stood behind First Quantum. 

Investors in natural resource stocks have always contended with a higher level of risk and volatility relative to broader stock market indices, and those who invest in small miners (also called "juniors") take on even greater risks. In addition to the uncontrollable commodity price cycles, there are a host of production issues and dangers, as well as the risk that a project does not contain as much mineral wealth as the company hoped. 


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http://stocks.investopedia.com/stock-analysis/2010/A-Mess-In-Africa-Highlights-A-Challenge-To-Resource-Companies-OXY-FCX-AU-CX-XOM0825.aspx