First Quantum Minerals (FM.TO)

It is back to the crisis low. It is a victim of tax loss selling this year and then next month you will get a bounce.

Materials in general have been a brutal place to be. It broke the old 4-5 years of support level. Right now the picture is ugly for materials in general and for this stock particularly. The trend is down for copper, and he doesn’t have much faith in materials at this time. There might be some short-term upside where you could get out of it.

Most of its assets are in Africa and more risky type economies. As an investor, he goes to the safer places first, and then later in the cycle moves to the riskier places.

Building out some big projects. More of a pure copper play than Tech Resources (TCK.B-T). Smaller and a little bit more stretched in the balance sheet. This is a name he has Shorted on many occasions. Commodities have been abysmal. Copper hit recent lows in the last couple of days.

2 things you have to consider, very soft copper prices and a balance sheet that is stretched with debt. First-class assets with a great management team. It could be 1.5-2 years before copper prices change. The company has to deal with soft copper prices in the face of an aggressive balance sheet for the next 18-24 months.

As long as China is slowing, the case for base metals like copper is not good. You are not seeing any strong evidence of a bottom. It is a tough call. You could trade it on a trading rally, but it is not time to invest in it.

Has very little in the mining side. You have to let the commodity side turn a bit. If you are in this and are thinking of averaging down, you could start to pick away. If you don’t own, give it a bit of room to show you that it is going to go up.

Copper prices today are much lower than they have been in a long time. Longer-term he thinks $3 copper price makes a lot of sense and that is probably the price that is going to be needed to build new mines. With $3 copper, this company can do quite well. You are seeing all the base metal inventories roll back down to the negative side. This company has mines where there are geopolitical concerns. A great name to own with lots of leverage to the upside. He has other copper plays that he prefers. (See Top Picks.)

Commodities are now in a 10 year secular bear market. They can only have short term sharp rallies. He does not know what level they will bounce from next. You probably want to sell commodity stocks on strength.

He likes the people a lot. High quality assets. They will be constrained by a tough copper price. How low it can go is a function of global demand.

A preeminent copper company. To buy, you have to have a good copper price. Copper has been beaten up and could go lower still in the short term. They have some unique issues with their smelter and copper mines in Africa. Some issues with power and some issues with government. He prefers others in this environment. A great name if you think copper prices will go up.

Has just broken a key support level. It has recently been under some downside pressure, underperforming the market, and below its 20 day moving average. Seasonally this normally does quite well from around the middle of October right through until April of each year. On a seasonal basis, this is not a clear-cut situation as some of the other base metals stocks. You might want to wait until the middle of October when copper prices start to recover along with the stock price.

This scores poorly on a valuation basis. They have grown through acquisition and through debt, so they have a strained balance sheet which can be great in a rising commodity market, but is particularly bad in a declining market. Too early. He has a Short on this.

The big problem they were having was tax rates and the royalty rate structure in Zambia. That just got reversed to a certain extent. It continues to be one of the premier growth copper producers globally. Expects that over the coming few years, we will have global recovery, and commodity prices will be recovering. He feels Hudbay (HBM-T) is a little better positioned as it has greater exposure to zinc, which he thinks is looking better over the next 12-24 months.

The big picture cycle for commodities is relatively negative. However, there are countertrend things you can play. Chart shows this had a long downtrend from October/14, but now looks like it may be trying to base. If this breaks out around $17 with some volume and lasts for more than just a few days, it could be a sign of a decent rally, and you could see the stock return to the $20 area, maybe even into the mid-$20. He would not buy this until it broke out.