While Mining fundamentals have “clearly improved,” some miners like BHP Billiton Limited (ADR) BHP are also benefiting from company-specific factors, Jefferies’ Christopher LaFemina said in a report. He upgraded the rating on the company from Hold to Buy, while raising the price target from $28 to $33.
The mining fundamentals have improved with demand stabilizing, a decline in supply, strengthening of balance sheets backed by FCF and asset sales, and inexpensive valuations, analyst LaFemina noted. He added that the market tightness has been primarily on account of a decline in supply, with mining capex having fallen by 70 percent from the 2012 peak.
Prospects Of BHP
China’s economic growth continues to decelerate, which the region becomes even less metals intensive, LaFemina said.
“BHP is a low cost producer with low geopolitical and operational risk and a relatively strong balance sheet. BHP is well positioned relative to most other miners,” the analyst commented.
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