MARKETS SPECTATOR: Sandfire warmth
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UBS upgraded the stock to buy from neutral based on underlying valuation support of around $7.60 per share. "While DeGrussa has experienced minor ramp-up issues, we believe the underground mine and plant will both be running at nameplate by mid year," UBS said in a note to clients.
"We expected DeGrussa to produce circa 75ktpa for the first three years before reducing to 60-65kt for the remaining four to five years. However, we believe that recent exploration results will lift existing underground resources and also provide vectors for potential new mineralised areas.”
Deutsche Bank has also upgraded the gold and copper miner to buy from neutral, with a 12-month price target of $8.30 per share.
It notes that although its net present value and price target are unchanged, it believes the worst of the commissioning issues are now behind it as plant performance is on the improve and production rates remain on-schedule for calendar 2013.
Elsewhere, JP Morgan upgraded the stock to neutral from underweight, saying following a significant de-rating in the stock, partly attributable to ramp-up issues, it has upgraded the stock given improving operating trends and unstretched valuation based on JP Morgan's copper price forecasts.
Source: Paritech Pulse
The chart above of Sandfire Resources looks very encouraging indeed. Firstly, the stock has been sold down by more than 30 per cent this year versus an underlying move in the benchmark index of at least 6 per cent. The increasing volume to the downside looks to have been climactic when viewed in the context of yesterday's strong report.
We've seen a big reversal in price off of a major support level with much of the broking community caught behind the eight ball, or underweight the stock, as evidenced by the number of upgrades. From here, I see tremendous upside in the stock as the investment community realises it got too bearish and things are nowhere near as bad as they priced them to be.
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