More near-term pain for copper companies despite strong fundamentals, analysts warn

According to Mining News Pro - Against a testing backdrop for base metals equities, analysts will be hawkeyed during the upcoming third-quarter earnings reporting, looking for key metrics such as cash flow and cash on hand amid an unforgiving funding environment.

According to Haywood Capital Markets analyst Pierre Vaillancourt, considering the economic prospects and pressure on the equities in its coverage universe, Haywood remains cautious about the sector.

“Following our metals price revisions, we have adjusted our earnings and cash flow estimates lower, impacted by higher costs and lower realized prices,” the analyst wrote in a note to clients on Tuesday.

Haywood expects results to reflect weakening metals price trends, with earnings impacted by further negative provisional price adjustments, as was generally seen in the June-quarter earnings reports.

During the September quarter, base metals equities continued to fall, as reflected in the Global X Copper Miners ETF retracting 7% quarter-on-quarter, and the S&P/TSX Global Metals index falling 2.2%, compared with the S&P 500, which fell 5.3% over the same period. The S&P/TSX 500 composite index dropped 2.2%.

Inflation will also impact results, which continued at an annualized 8.2% rate for the quarter, resulting in increased operating mine costs.

“On the other hand, we note that operating conditions and mine sequencing were more favourable for some companies, which will help mitigate the impact of inflation and declining metals prices,” Vaillancourt said.

Base metals prices have eased considerably in 2022, as demand has weakened while the dollar has strengthened.