Citi predicts rebound for European miners

European miners' production results have beaten Citi analysts' expectations and copper equivalent production is in line with pre-Covid levels, they said.

Earnings in the sector should bounce back in the second half of 2020, analysts Ephrem Ravi and Krishnan Agarwal said. They forecast free cash flow more than doubling in the second half with higher spending offset by cash releases.

"Resilient operations, higher commodity prices [and] cost tailwinds from continued weakness in currencies are key drivers for earnings recovery in 2H20," the analysts said in a note to clients. "Inventory destocking should further cushion the cash flow."

As a result, total dividends for 2020 should increase by about 10% with payment likely in 2021, Ravi said. Norsk Hydro will resume its dividend and Glencore's cash flow should support payment of a dividend in 2021, he said.

Ravi said Anglo American, Rio Tinto and Polymetal were his top picks in the sector. He opened "catalyst watches" for Anglo American, Polymetal, Fresnillo and Ferrexpo.