##{"id":63849,"date":"2014-07-10T15:18:00","date_gmt":"2014-07-10T05:18:00","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2014\/07\/10\/oz-miners-brokers-anticipate-quarterly-reporting-season-winners-and-losers\/"},"modified":"2014-07-10T15:18:00","modified_gmt":"2014-07-10T05:18:00","slug":"oz-miners-brokers-anticipate-quarterly-reporting-season-winners-and-losers","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2014\/07\/10\/oz-miners-brokers-anticipate-quarterly-reporting-season-winners-and-losers\/","title":{"rendered":"Oz Miners: Brokers Anticipate Quarterly Reporting Season Winners And Losers"},"content":{"rendered":"

– Nickel has seen a big price increase
\n– Iron ore has seen a big price fall
\n– Costs as important as volumes
\n– Operating issues considered<\/strong><\/p>\n

\nBy Greg Peel<\/p>\n

Each quarter Australia’s resources sector companies publish production and sales reports, and the June quarter season kicks off this week with Energy Resources of Australia ((ERA)) today, notwithstanding Alumina Ltd’s ((AWC)) disclosure via the Alcoa report earlier in the week. The season will run through the month of July.<\/p>\n

Mining analysts have been assessing the outlook for stocks under coverage in the copper, nickel, gold and iron ore spaces, with reference to metal price expectations and production volume and cost assumptions. Deutsche Bank notes the benchmark copper price averaged US$3.08\/lb in the June, down from US$3.19 in the March quarter (current spot US$3.23). Gold averaged US$1289\/oz, little changed from March’s US$1292\/oz (current US$1328) while the average nickel price rose 26% from March to US$8.50\/lb (current US$8.78), reflecting the impact of Indonesian export bans.<\/p>\n

The spot iron ore price fell 18% from end-March to end-June.<\/p>\n

Morgan Stanley has previewed the season in combination with a regular quarterly update of commodity price forecasts, and is maintaining its above-consensus view on the copper price. The broker expects the supply-side to continue to underperform ahead and demand to remain supported. Nickel price upgrades of 8-13% over the medium term reflect expectations of no change to Indonesian-led supply tightness, and while the broker’s longer term view on gold remains one of expected price decline, the next three years should see price support, the broker believes, through geopolitical tensions and US interest rate rises.<\/p>\n

In the copper space, Morgan Stanley suggests OZ Minerals<\/u><\/strong> ((OZL)) offers the greatest leverage to price strength, while Carrapateena may attract corporate interest and management change is a positive, the broker believes. OZL is the broker’s preferred choice, followed by Sandfire Resources<\/u><\/strong> ((SFR)), which also receives an Overweight rating.<\/p>\n

Further upgrades to the broker’s nickel price forecasts have had a substantial impact on target prices for Western Areas<\/u><\/strong> ((WSA)), up 11%, and Panoramic Resources<\/u><\/strong> ((PAN)), up 55%. But the broker is only catching up with the market, hence Equal Weight ratings are retained.<\/p>\n

Despite the broker’s shorter term positive view on the gold price, gold miner share prices have run ahead of valuations hence Morgan Stanley has Underweight ratings on Resolute Mining<\/u><\/strong> ((RSG)) and Perseus Mining<\/u><\/strong> ((PRU)) but Regis Resources’<\/u><\/strong> ((RRL)) share price has gone the other way on market concerns over floods and grade reconciliation, which the broker feels are overdone. Resolute is thus afforded an Overweight rating.<\/p>\n

Not a lot of iron ore is sold at spot pricing, and grade discounts fluctuate, so it’s a bit difficult for brokers to forecast average prices miners will have actually realised for their shipments over the quarter. UBS suggests realised price results will thus be watched carefully by the market, as will net costs. The broker notes the March quarter is seasonally the wet quarter so shipment volumes should rebound in June, but some of the juniors would still have made little in the way of free cash flow in the quarter given price reductions, the broker suspects, in particular Grange Resources<\/u><\/strong> ((GRR)) and Atlas Iron<\/u><\/strong> ((AGO)).<\/p>\n

Forecasting realised iron ore prices is just as much a guess in relation to BHP Billiton<\/u><\/strong> ((BHP)) and Rio Tinto<\/u><\/strong> ((RIO)), UBS points out, but both could surprise to the upside on volumes. Fortescue Metals<\/u><\/strong> ((FMG)) appears to have shipped 124mt in FY14 against 127mt guidance, but everyone thought guidance was ambitious anyway, the broker notes.<\/p>\n

UBS concurs with Morgan Stanley’s positive view on OZ Minerals in the copper space and also singles out PanAust<\/u><\/strong> ((PNA)) as a contender for a “beat”. The broker warns Tiger Resources<\/u><\/strong> ((TGS)) is likely to report lower than expected output.<\/p>\n

In the gold sector, UBS singles out Alacer Gold<\/u><\/strong> ((AQG)), Endeavour Mining<\/u><\/strong> ((EVR)) and Silver Lake Resources<\/u><\/strong> ((SLR)) as contenders to report lower than expected costs.<\/p>\n

Deutsche Bank sees no reason why Alacer’s strong March quarter Copler gold production won’t have continued into the June quarter, while the broker expects Newcrest Mining<\/u><\/strong> ((NCM)) to report strong production. Gold juniors Regis Resources<\/u><\/strong> ((RRL)), Beadell Resources<\/u><\/strong> ((BDR)) and St Barbara<\/u><\/strong> ((SBM)) all flagged operating issues during the quarter so results are expected to be weaker.<\/p>\n

Deutsche is another waving a flag for OZ Minerals in copper, and is also positive on Sandfire Resources given improving grades should offset the scheduled mill shutdown in the period. Improving recoveries at Phu Kham should be supportive of PanAust despite its own scheduled shutdown, the broker suggests. In nickel, Deutsche is looking for a strong production results from Western Areas and Independence Group<\/u><\/strong> ((IGO)).
\n <\/p>\n

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