May 13, 2009 / 10:24 PM / 9 years ago

BUY OR SELL-Quadra tops view, but is there value left to mine?

* Quadra shares up more than 160 pct year-to-date

* Bears see shares to levered to copper price

* Bulls see growth potential, limited geopolitical risk

By Euan Rocha

TORONTO, May 13 (Reuters) - Quadra Mining Ltd QUA.TO, which posted better-than-expected first quarter results on Tuesday, has seen its shares rise more than 160 percent year-to-date, while the S&P/TSX composite index .GSPTSE has gained just 8 percent over the same period.

Quadra’s fortunes have been closely tied to the vagaries of the price of copper. Its shares have rallied along with copper through the first half of this year, but a 3.3 percent dip by copper prices on Wednesday led to a 7.7 percent decline by Quadra’s shares on the day.

But, have Quadra’s shares peaked for now, or is there more value to be extracted from investing in the mid-tier Canadian copper miner?


RBC Capital Markets analyst Fraser Phillips thinks Quadra shares are unlikely to see any major gains in the near term.

“The shares have responded positively to the rally in copper prices and currently appear fully valued, trading at their NAV (net asset value). We are maintaining our ‘underperform’ recommendation as a result,” Phillips said in a note to clients.

Paradigm Capital analyst David Davidson, cut his rating on Quadra to ‘hold’ from ‘buy,’ citing the sharp spike in valuation.

“The stock has appreciated pretty significantly and met our target price,” Davidson said in an interview with Reuters.

Furthermore, Davidson thinks the year-to-date surge in copper prices is a bit of a ‘Goldilocks rally.’

“I certainly see recovery on the horizon, but most of this (spike) has been driven by fairly significant short-covering and fast money coming in from Chinese buyers.”

“The day the Chinese decide $2.10, or $2.15 copper is too much to pay, you are going to see a bit of nervousness in the market.”

“I do expect to see some weakness in copper prices, maybe down to $1.75 to $1.85 per pound, with prices consolidating there through the summer and then moving higher through the latter part of the year.”


GMP Securities analyst David Charles see bright prospects ahead for Quadra.

“We reiterate our buy recommendation, and we are raising our target (price) to C$14.00 per share, up from C$11.50 per share,” Charles said in a note to clients.

Charles noted that the better-than-expected first-quarter results were largely driven by lower costs at the company’s Robinson mine in the United States.

“We believe that the perceived risk on Quadra has been diminished as the company moves from one to three operations in stable jurisdictions,” said Charles.

Cormark Securities analyst Justin Reid notes that Quadra continues to offer investors immediate exposure to copper production, with good growth potential and limited geopolitical risk.

Reid, in a note to clients, increased his target price on Quadra to C$11.00, from C$6.60 and reiterated his ‘buy’ recommendation on the company’s shares.

“Quadra has demonstrated its ability to bring operations into production and improve performance while overcoming challenges,” said Reid. “The company has a strong pipeline of projects and a mandate to continue to grow through accretive acquisitions.”

$1=$1.17 Canadian Reporting by Euan Rocha

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