Many companies are currently referencing raw material price increases and market commentators have speculated that the global economy is entering a commodities ‘supercycle’.
While macro-economic narratives are prone to change, what are perhaps more concrete are the established supply and demand drivers of copper as an essential industrial metal for the world going forward. We need it for electric vehicles and energy storage, while the rapidly growing middle class demand everyday appliances taken for granted in more developed economies.
Copper, as the non-precious metal conductor of choice, is required for all of the above. But structural underinvestment in newer assets and increasingly mature existing assets mean that supply could quite possibly lag demand.
With these thoughts in mind, Atalaya Mining (LON:ATYM) was pitched to the Stockopedia Investment Club on Tuesday the 1st of June 2021, when shares were 357p.
On a forecast rolling PE ratio of just 5.9x, there’s no denying the stock looks cheap at current levels - but is today’s copper price truly sustainable or would the Club be buying deceptively close to the top of a cycle?
Summary
Bull points: copper price is rising and is supported by attractive demand drivers; ATYM is the foremost pure-play copper producer in Europe with a 15 Mtpa (million ton per annum) mill and a long mine life; high cash flow generation at current copper prices; net cash position; good organic growth options; undemanding valuation and trades at a discount to peers; safe jurisdiction and experienced management team.
Bear points: Environmental permitting issues surrounding Proyecto Touro; increasing ESG and permitting complexity; Limited near-term production growth; relatively high all in sustaining costs compared to peers; input price risks - copper can fall, and miners can look ‘cheap’ when in reality they are at their most expensive due to unsustainable commodity prices.
Profile
About the stock:
Atalaya Mining (LON:ATYM) is a copper producer that trades on the Aim Market and has two assets located in Spain.
It operates in the Basic Materials sector, under the Metals & Mining industry group. The share price is currently 315.26p, the market cap is £435.7m, and the EMS is 3k.
The StockRank is 98, made up of:
- A Quality Rank of 86 (+12 over the past 30 days)
- A Value Rank of 89 (+21 over the past 30 days), and
- A Momentum Rank…
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