RE: GLEN31 Mar 2022 23:49
encouraging that Russia-Ukraine talks may be moving forward. (For latest on conflict see:)
From an investment perspective, however, analysts at Jefferies, including Christopher LaFemina, believe mining shares would likely underperform over the short-term if these discussions lead to a cease-fire and peace. That said, the Jefferies analysts also would consider any significant sector weakness to be short-lived as the positive outlook for mining is not war dependent. In this regard, they believe copper miners would be the least impacted.
The Jefferies analysts emphasize that the prospect of peace is more important than anything else. However, they recognize that indications the talks may lead to a cease-fire has sparked equity-market strength and relative weakness in commodities and mining shares.
LaFemina argues that copper has not been a "war commodity," noting that its price is roughly flat with where it had been last May and September, whereas prices of war commodities increased significantly. Therefore, Jefferies would expect the copper price to be most resilient in the event of peace.
"From a supply/demand perspective, copper continues to be our preferred commodity for a 3-5 year horizon due to demand growth in renewable energy, depletion of existing mines and a small pipeline of projects, especially after next year."
LaFemina makes the tortoise and hare analogy, saying other commodities are the hare, with sharp spurts followed by brief periods of rest. But the tortoise, moving slowly and steadily, wins in the end. "Copper is the tortoise."
Over the long-term, Freeport-McMoRan is Jefferies preferred copper miner. The Jefferies analysts add that First Quantum, Antofagasta and Glencore should all benefit from higher copper prices over time, although they think near-term weakness in coal, due to possible peace in the Ukraine, could be a temporary overhang on Glencore shares.
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