Proactive Investors - Analysts at RBC (TSX:RY) Capital Markets are bullish on copper, gold and uranium heading into the fourth quarter of 2024.
Analysts see copper prices recovering in the second half of the year, driven by cyclicality, economic stimulus in China, and rate cuts in the Western world.
They added that they are constructive on copper equities due to supply constraints from the declining availability of high-quality copper and limited inventory as well as increasing demand from the energy transition and new demand layers such as future data center requirements.
“The current supply-demand imbalance is exacerbated by a lack of new supply committed to come online post-2025, and the increased difficulty of building new mines due to rising costs and social issues,” the analysts wrote in a note to clients.
“While prices have recently rallied on the back of improved China sentiment and the Fed rate cut, we think this remains an attractive entry point for copper equities ahead of a positive multi-year story for copper with reasonable valuations at spot prices.”
Copper is projected to reach $4.17 per pound in 2024, rising to $4.50 per pound in 2025 and $5 per pound in 2026 to 2028. The analysts noted that their 2026 to 2028 estimate could be conservative if demand accelerates, and the mining industry struggles to build new supply.
On gold, the bank’s analysts expect a stepwise improvement in upcoming Q3 financial results supported by margin expansion and seasonal volume improvements.
“This outlook, plus gold equity valuations that can be viewed as attractive today, support our constructive view,” they wrote.
There is the potential for downside risk in Q4 as gold has recently outperformed the analysts’ model expectations.
“Nonetheless, we forecast that gold prices are well-supported into 2025 and are not reflected within equity valuations,” they wrote.
The uranium market, meanwhile, is expected to remain tight with analysts seeing upside to prices.
Strong demand is set to be supported by a renewed international commitment to nuclear energy, which should underpin a steady long-term rise in nuclear generating capacity.
Analysts also see the uranium market as sensitive to any supply-side disruptions, with a supply response may take time given only the moderate capacity available to restart operations in the near term.
“We forecast a moderate deficit through the late-2020s and a more severe deficit beginning in the early 2030s that will likely require elevated prices to incentivize supply,” they wrote.
Global Mining Best Ideas for Q4
The analysts maintained their sector weightings, including their ‘Overweight’ rating for Base Metals, Precious Metals, Diversifieds, and Uranium.
RBC added two precious metals companies – Northern Star Resources Ltd (ASX:NST) and Bellevue Gold Ltd (ASX:BGL) – to its Global Mining Best Ideas portfolio summary, joining the likes of Agnico Eagle Mines Ltd (TSX:TSX:AEM), G Mining Ventures Corp (TSX-V:GMIN, OTCQX:GMINF), Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF) and Osisko Gold Royalties (TSX:TSX:OR).
In terms of Diversifieds, it added Vale, which joins Glencore PLC (LSE:LON:GLEN), Teck Resources (TSX:TECKa) Ltd (TSX:TECK.B) and Champion Iron Ltd (ASX:CIA).
Removed from the list were Anglo American PLC (LSE:LON:AAL)and De Grey Mining Limited (ASX:DEG).
“We remove Anglo American as a result of our downgrade in July given the fire at Grosvenor and uncertainty related the company’s divestment processes,” analysts explained. “We remove De Grey in favour of alternative ideas, while maintaining our ‘Outperform’ rating.”
The analysts noted that their 3Q 2024 Best Ideas portfolio increased by 11.9% in the quarter. Notably, it outperformed the MSCI World Mining Benchmark, which was up 8.3%.
The precious metals companies on their Best Ideas List were the standout performers, delivering a return of 19.1% during Q3.
In the year-to-date, RBC's Best Ideas performance is up 25.5%, outperforming the MSCI World Mining Benchmark, up 4.4%.