Lundin Mining: Canaccord Lifts Target To $15 After Earnings

On April 27, Lundin Mining Corporation (TSX: LUN) reported its first quarter financial results. The company announced revenues of $991.1 million, up 45% year over year, while the company saw its gross profit rise almost 90% to $478.8 million. Expenses for the first quarter came in roughly 17% higher at $532.1 million, and operating profit was $458.9 million, up 102% year over year.

Additionally, the company reported net earnings of $378.1 million, or earnings per share of $0.47, and an adjusted EBITDA of $587.8 million. The company reported a jump in free cash flow, going from $56 million for the same period last year, to $186.5 million.

On the production results, Lundin Mining reported copper production of 65,081 tonnes, zinc production of 32,391 tonnes, 34,000 ounces of gold, and 4,281 tonnes of Nickel.

Lastly, the company reported cash and cash equivalents of $733.9 million as of March 31, which doesn’t include the $115 million cash dividend issued in April.

Several analysts raised their 12-month price target after the results, bringing the average 12-month price target to C$14, which represents an almost 20% upside to the stock. Lundin currently has 21 analysts covering the stock, with 3 having strong buy ratings, 7 have buys, 10 have hold ratings and a single analyst has a sell rating on Lundin Mining. The street high sits at C$19, which is a 60% upside to the current stock price.

In Canaccord Genuity’s note on the earnings, they raise their rating from hold to buy and bump their 12-month price target to C$15.00 from C$13.50, saying that they like the company based on its commodity diversity, the value of each of their mines, and robust balance sheet. Canaccord also comments that they see a number of catalysts that should crystalize during the second half of this year.

On the results, Canaccord says that their takeaway is mostly positive, as Lundin beat all their financial estimates which were mainly attributable to higher base metal prices. Their production results were hit or miss, copper and nickel came in line with expectations while gold and zinc production missed estimates.

Canaccord notes that the Chapada expansion remains on track for release in the second half of 2022, while they say that it’s unclear if the new Sauva discovery will be incorporated in some form. So they say they believe there is a scenario where the Chapada expansion study is only focused on the existing deposit while there is a separate standalone study for Sauva/Formiga in the future.

Additionally, Canaccord remains bullish on the Josemaria acquisition and integration, for which they are currently estimating a $4.3 billion capital cost for the entire project and are hopeful that Lundin can announce an agreement with the Argentina government ahead of the project sanction.

Information for this briefing was found via Sedar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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