Broker snap: Goldman cuts target prices across mining sector

10th Jul 2013 09:07

Goldman Sachs has singled out Vedanta Resources and First Quantum Minerals (FQM) as 'buys', but has retained its cautious stance on the mining sector as a whole, cutting its target prices for most stocks under its coverage.In spite a potential buying opportunity caused by the steep sell-off so far this year - the STOXX Europe 600 Basic Resources index has fallen 31% year-to-date - Goldman said that its outlook remains unchanged: "negative earnings momentum and limited free cashflow (FCF) continue to take the shine off the sector"."Without a strong catalyst to improve overall sector performance, we focus on single-stock attributes with a preference for funded growth, strong FCF, or valuation opportunities," the broker said.Both Vedanta and FQM have both been upgraded from 'neutral' to 'buy' on stock-specific catalysts: "leading growth and returns for FQM and rapid deleveraging on revised corporate structure for Vedanta."However, 'sell' ratings have been maintained for Rio Tinto, Anglo American and Kazakhmys who have negative earnings outlooks for 2013-15 and negative (or falling) FCF. "'Self help' from selling assets and cost cutting are unlikely to be enough to compensate for the underlying performance".Goldman has made the following rating/target price changes to the following UK-listed miners:Anglo American ('sell'): target cut from 1,400p to 1,100p;Antofagasta ('neutral'): target cut from 935p to 810p;BHP Billiton ('neutral'): target cut from 2,150p to 2,050p;First Quantum Minerals (upgraded from 'neutral' to 'buy'): target raised from 1,225p to 1,300p;Glencore Xstrata ('neutral'): target cut from 370p to 260p;Kazakhmys ('sell'): target cut from 330p to 160p.Rio Tinto ('sell'): target cut from 2,715p to 2,500p;Vedanta Resources (upgraded from 'neutral' to 'buy'): target cut from 1,415p to 1,400p;