Globe editors have posted this research report with permission of Dundee Capital Markets. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
After a couple of years of declining production, we believe HudBay Minerals Inc. will turn the corner with Lalor Lake and Reed Lake mines opening this year and ramping up in 2014, together with Constancia which is still expected to begin production in 2015 and will transform the company into a major copper producer (with zinc upside).
But while we like the long term production profile for HudBay, we believe that in the short term the catalysts to own the shares are not apparent and construction and liquidity risks remain, especially at Constancia which recently saw its capex increase by 15 per cent. Risks include the need for additional financing/liquidity to complete Constancia (which could still see its capex increase further).
We are reiterating our Neutral rating and our 12-month target of $8.50 a share using a 6.5x EV/EBITDA multiple to our 2014 EBTIDA estimate of $246-million (no changes).
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