Contrarians at the Gate: BB&T Capital Markets Vice President Says Gold Pullback Presents Entry Opportunity as Fundamentals Remain Unchanged for this Mining Sector

Wall Street Transcript

67 WALL STREET, New York - April 22, 2013 - The Wall Street Transcript has just published its Metals and Mining Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Precious Metals, Global Iron Ore Production, Emerging Market Infrastructure Construction, Midcap and Small-Cap Consolidation Activity

Companies include: Companhia Vale do Rio Doce (VALE), Cliffs Natural Resources Inc. (CLF), Freeport-McMoRan Copper & Gold (FCX), Newmont Mining Corp. (NEM), Royal Gold, Inc. (RGLD), Teck Resources Limited (TCK), Thompson Creek Metals Company (TC), Plains Exploration & Productio (PXP), McMoRan Exploration Co. (MMR), Barrick Gold Corporation (ABX) and many others.

In the following excerpt from the Metals and Mining Report, an experienced analyst discusses the outlook for the sector for investors:

TWST: What do you think are the most meaningful metrics that investors can use to evaluate mining stocks?

Mr. Nelson: We tend to base our price targets on conventional either EV/EBITDA or p/e ratios, which we've found helpful in making recommendations and setting price targets. Many mining companies have extraordinary earnings leverage, to very small changes in commodity prices, and by basing our price targets on those metrics they tend to reflect that. The most important thing to understand with this group is that, obviously, equity price correlations with underlying commodity prices are very high, so we spend as much time studying supply/demand, import/export data, inventory levels, etc., of each commodity as we do with the individual stocks. So it's really two full-time jobs in one: Covering the commodities and covering the equities.

Discounted cash flow net asset value and reserve analysis are probably the most important methodologies for valuing development-stage companies. It can also be an important valuation check for all companies, particularly during the peaks and troughs of the commodity cycle. Most importantly at BB&T, we want our clients to understand the risk/reward potential of each name we cover, given the volatility of commodity prices and wide range of earnings and valuation scenarios based on different commodity prices, so our job is really to give clients all the information they need to help make the best possible investment decision.

TWST: What's going on in the regulatory environment for your group? What outstanding issues are highest on your radar right now?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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