Broker snap: Nomura favours copper miners First Quantum and Antofagasta

19th Mar 2012 10:26

Nomura has named First Quantum Minerals (FQM) as its top pick among the European copper miners but also highlighted Antofagasta as a core holding.The broker notes that copper prices have outperformed copper equities by around 16% in the year-to-date following a risk-off period and a disappointing earnings season. Higher costs and worse-than-expected output guidance - along with the lowering of its 2012-13 copper price forecasts by 5% - have cut Nomura's near-term earnings estimates by around 20%."Implied prices have now been falling even as the copper price has remained strong. This disconnect between commodity and equity markets could now offer a greater value opportunity for copper equities, in our view," analysts said.Nomura says that copper markets remain tight, with short-term indicators mixed as global demand appears strong and operational disruptions likely to continue.FQM (buy) remains the broker's top pick given its organic growth profile and lowest capital costs. "We believe that the key catalyst over the next several months is the attainment of power tariffs with Zesco for Sentinel, where management indicates all parties are now fully engaged in negotiations, and it expects construction to start in Q2."Antofagasta is also given a buy rating and remains a core holding for its relatively high yield and long-term growth potential. Nomura says that now is a good entry point for investors with disappointments from results now in the price.Meanwhile, Kazakhmys is given a neutral rating as it remains a more 'high-risk, high-reward' stock. The broker says that the capital expenditure budgets for key projects Bozshakol and Aktogay were not revised at full-year earnings and remain a risk as the projects enter construction phase.BC