Lonmin upgraded by HSBC on poor share performance

After a poor share price performance, HSBC has upgraded Lonmin from ‘hold’ to ‘buy’ but has cut its target price from 135p to 76p.

Mining

10,633.77

15:45 15/11/24

1.51%

158.40

The company’s first quarter production report out on Thursday was mixed, according to the investment bank.

“Safety stoppages impeded production momentum at the key Generation 2 shafts, but the processing division performed well, drawing down ore and concentrate inventory in the period. Although mined platinum volumes of 158koz were 16% lower y-o-y, refined volumes climbed 23% to 171koz.”

HSBC said it has updated its valuation to reflect weaker platinum pricing from its Metals Quarterly report out earlier in January.

“We maintain our 33% discount to our DCF for Lonmin (at a 7.5% real discount rate) to account for valuation risk given high gearing to key driver assumptions. We cut our target price to 76p from 135p. As this implies upside of 32%, we upgrade to Buy from Hold.”

Shares in Lonmin had dropped 3.25p (5.94%) to 51.5p at 1115 GMT.