First up, Notable Calls (italics mine):
Merrill Lynch/BAM is out with a major call upgrading Freeport-McMoRan (NYSE:FCX) to Buy from Underperform and raising their target price to $87 (prev. $49).From Mineweb:
According to the firm the upgrade is based on a material upgrade to their copper price forecasts. Freeport is the largest pure-play copper miner and provides high leverage to firm's more positive copper view. Sensitivity to copper prices: a $0.10/lb change in copper is roughly $0.50 in EPS for FCX. They are raising their 2010 EPS to $9.25/sh (was $2.85). At this level of EPS, FCX should be able to generate over $10bb EBITDA and $10/sh of FCF. Dividend reinstatement also a high probability event for 2010.
Move copper outlook to high-end of Street
Firm is incorporating new base metal forecasts into our models. Their new copper price deck is as follows: 2009-$2.15/lb (was $1.76), 2010-$3.18/lb (was $2.00), 2011-$3.03/lb (was $1.90). Gold outlook remains unchanged at $1050/oz for 2010. New copper forecast is well above consensus in the $2.00/lb range and above the forward copper price of $2.70/lb. The drivers of more positive view on copper are:
1) a tight concentrate market;
2) lack of new supply in the pipeline;
3) an end to de-stocking; and
4) improving demand in OECD/China.
Merrill Lynch sees copper as structurally one of the best positioned base metals over the long term. Firm notes their prior Underperform was predicated upon an end to Chinese stockpiling leading to higher LME inventories and a downward correction in commodity prices. However, despite a 70% YTD rise in Chinese copper imports, underlying demand appears to be recovering and should be sustainable into 2010....MORE
Fairfax positive on copper as surpluses declining on strong demand
London investment bank Fairfax is positive on the prospects for the copper price over the next two years with any possible small supply surpluses being taken up by investment demand.
London investment bank Fairfax I.S. plc has published a note outlining its supply/demand prognostications for the copper sector over the next two years and the overall view is a positive one for the copper miners. While the bank's analysts see an industrial supply 163,000 tonne surplus this year, diminishing to 110,000 tonnes next year, they feel that this - a tiny amount in relation to global refined copper consumption of around 19 million tonnes a year - could easily be taken up anyway by investment demand.Thus Fairfax reckons this could leave copper supply/demand finely balanced in 2010 before heading for a deficit in 2011.
Indeed the bank reckons that the copper concentrate market may already actually be in deficit with China soaking up demand while the Japanese smelters are being squeezed by low TC/RC rates and poor local demand....MORE
