Commodities & Metals

Deutsche Bank Wins Metals and Mining Analyst Scorecard

Almost every trading day 24/7 Wall St. covers research reports for analyst upgrades, analyst downgrades, and for new analyst coverage. We also cover specific sector calls that stand out above and beyond many of the traditional research calls. After reviewing some of these on a quiet week, it turns out that Deutsche Bank really nailed a research call on the metals and mining stocks early on in July which may have marked the formal bottom in many of these key companies.

By now you have likely noticed that silver and gold and other metals have recovered handily from the recent drop that to some felt like a death plunge. These metals are volatile and may trade in a myriad of directions before settling higher or lower from here. The wild card comes into play with the broader mining and metals stocks, where volatility around metals pricing can be more than extreme compared to the metals themselves.

So what happened in July for Deutsche Bank to get such a positive review this far after the fact? The long and short is the metals and mining research team at Deutsche Bank basically nailed the bottom and investors who listened have profited handily since. Their view was that large cap miners viewed credit markets as still open for multi-billion dollar fundings with a disconnect between equity performance and business fundamentals.

These were the contrarian stocks we covered back on July 1, 2013. We would note that consensus price targets have changed since then as well.

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) was shown by Deutsche Bank with a $40 price target and the Thomson/First call estimate was at $38. that 4.5% dividend stood out at the time. At the time its stock was at $27.30 and shares are up 13% now that the stock is up at $30.85. The stock’s 52-week range is $26.37 to $43.65 and the current consensus price target is $36.06 rather than $38 when Deutsche bank nailed it.

Thompson Creek Metals Co. Inc. (NYSE: TC) was at 54% discount to its book value of $8.30 per share at the time, and the stock price of $3.90 is up from $3.03 Deutsche Bank’s team nailed upside of more than 28% here. Its price target was $4 at the time versus a consensus target of $4.50 at the time. The 52-week range here is $2.42 to $4.55, but we would point out that the consensus price target is $3.93.

Vale S.A. (NYSE: VALE) is the world’s largest producer of iron ore and pellets and has extensive China and emerging market exposure as a result. Despite the slowing emerging market story, Vale’s $14.90 share price now versus $13.15 at the time has brought gains of over 13%. Deutsche Bank target price was $22 and the consensus target was closer to $21.40 on July 1. Now the consensus price target is down to $20.16, but that is still much higher then the current price. A yield of almost 5% also stands out with a 52-week range of $12.39 to $21.88.

Coeur Mining Inc. (NYSE: CDE) was trading at $13.30 when we reviewed the Deutsche Bank call, and that was after a gain of almost 10% right before this review on July 1. At the time, Deutsche Bank had an $18 price target and the consensus price was higher at $19. With shares now up at about $16.00, Coeur is up over 20%. Coeur’s 52-week range is $11.29 to $31.97 and the consensus price target is now lower than the current share price down at $15.12.

So how does all this add up for gains? Freeport-McMoRan is still up 13%, Thompson Creek Metals is up 28%, Vale is up over 13%, and Coeur Mining is up over 20%. Those are handy gains considering that the S&P500 is still up by only about 2.4% over the same period.

The effort here is not to tell you to keep chasing the mining stocks. Some may have more room to rise, but we cannot help but notice how the appreciation and the lowering of estimates ahead has taken share prices back up to where some of these are too close to a consensus value. The real point is that we will be paying attention very closely to the next series of upgrades or downgrades in the metals and mining stocks from Deutsche Bank.

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