Watch Freeport-McMoRan And Teck After Deutsche Bank Analysis

According to Deutsche Bank’s Chris Terry, “Upstream mining equities continue to make strong free cash flow with commodity price momentum, low capex and the benefits of cost improvements.”

The analyst upgraded the rating on Freeport-McMoRan Inc FCX from Sell to Hold, while raising the price target from $12.50 to $14.00.

Terry also upgraded the rating on Teck Resources Ltd (USA) TECK from Hold to Buy, while raising the price target from $24 to $25.

No. 2 Copper Producer

The analyst mentioned that Freeport-McMoRan was the No. 2 copper producer in the world, with 10 percent market share and meaningful exposure to gold and molybdenum.

Terry expects the company to produce 4 billion pounds of copper in the coming years, following asset sales.

“After Oil & Gas acquisitions in 2007 and 2012, Freeport has now divested the majority of its energy exposure by selling Gulf of Mexico assets for $2 billion in September 2016 and Californian onshore assets for $740 million in October 2016, in an effort to reduce financial leverage,” the analyst went on to say.

In addition, while the declining copper and oil & gas prices have strained Freeport-McMoRan’s balance sheet, recent initiatives by management have helped to bridge funding gaps, including a $2 billion equity issuance and year to date asset sales of $6.6 billion, along with cost and caped cuts.

Largest Diversified Mining Company

“Teck Resources is Canada's largest diversified mining company, with operations throughout the Americas, including Canada, the US, Chile and Peru,” Terry explained.

The company is the second largest exporter in the world of seaborne traded metallurgical coal, while being the largest producer of met coal in North America.

Teck Resources is also among the top three largest zinc miners worldwide, along with being a significant copper producer.

“Near-term copper output of ~300kt/yr could decline until start-up of delayed Quebrada Blanca 2 and longer-term, Relincho are built,” the analyst noted, while adding, “Oil sands projects in Northern Alberta should provide oil exposure over the longer term and add meaningful growth but development and commissioning risks remain.”

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