Copper stocks set to gain significantly over the next year
Great opportunity for copper equities to rise significantly over the next year exists as rising near term copper prices increasingly influence equity valuations.
Author: Tessa Kruger
Posted: Thursday , 18 Oct 2007
JOHANNESBURG -
Canadian broker/analysts Raymond James notes in a recent Equity Research report that copper equities covered by the investment dealer will soon trade above its long-term price estimate of $1.90/lb. This comes as "above-average", near-term copper prices fuel growth in producer earnings and contribute to shorter paybacks for projects owned by development companies.
The rising cash balances and quicker project paybacks will be the main drivers of share price outperformance in the coming months, said analysts Tom Meyer and Miroslav Vukomanovic.
The analysts estimate that copper equity valuations are implying a flat-forward long term copper price of $1.80/lb, at a real discount rate of 8%. "This compares with our previous calculation of $1.59/lb in early September this year. "This was based on a spot copper price of $3.34/lb and a 27-month forward price of $2.83/lb."
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