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ECobalt downgraded as company optimizes feasibility for Idaho cobalt project


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ECobalt downgraded as company optimizes feasibility for Idaho cobalt project

Toronto Stock Exchange-listed eCobalt Solutions Inc. had its rating lowered by Canaccord Genuity analyst Eric Zaunscherb to "hold" from "speculative buy," to reflect a balance of risk as the company updates the feasibility study for its preproduction-stage Idaho cobalt project.

Zaunscherb said Feb. 13 that the outcome of the upcoming study will be essential for further investment decisions, as the premium for cobalt sulfate declined over the last few months while cobalt metal pricing firmed beyond Canaccord Genuity's forecast.

The miner has shifted its focus to production of a clean cobalt-copper concentrate in a bid to reduce initial CapEx and timelines, with the updated study expected to be completed in the second quarter.

Cancaccord Genuity raised the price target for eCobalt stock to C$1.50 from C$1.30.

S&P Global Ratings on Feb. 12 lifted Rio Tinto's long-term issuer credit rating to A from A-, with a positive outlook, owing to the mining giant's stronger balance sheet and debt reduction efforts, as well as its ability to preserve a leading cash cost position in its iron ore business.

The stable outlook reflects the analysts' view of limited downgrade prospects for the company's rating over the coming 12 months. The miner's performance is expected to remain robust on the back of supportive commodity prices and its focus on costs and productivity.

Rio Tinto recently posted a 90% year-over-year surge in its 2017 net earnings to US$8.76 billion, driven by higher copper and aluminum prices combined with a strong operational performance and an added US$400 million in free cash flow through its mine-to-market productivity program. Operating cash flow increased 64% year over year to US$13.88 billion for the year.

According to S&P, Rio Tinto's projected credit metrics, net debt and positive free operating cash flows, along with its adherence to the shareholder distribution policy, give it sufficient headroom to absorb a commodity price decline. The rating agency further said it is unlikely to downgrade Rio Tinto in the next two years, as it expects the company's credit ratios to be comfortably commensurate with an A rating.

The rating agency also raised the issue-level ratings on Rio Tinto's senior unsecured debt to A from A-.

S&P Global Ratings also upgraded its long-term issuer credit rating for First Quantum Minerals Ltd., to B from B- with a stable outlook, after the miner released its 2017 results.

In a Feb. 14 note, the rating agency attributed the upgrade to expectations that the miner will achieve an S&P-adjusted debt-to-EBITDA ratio of below 5x in 2018 and continue deleveraging in the following two years. According to S&P, this deleveraging will be driven by the scheduled start of commercial production at its Cobre Panama copper property in 2019 and the positive impact of the hedges that the company had in place over 2017.

S&P sees First Quantum improving its earnings in 2018 amid higher copper prices and a supportive market environment, but said the company's S&P-adjusted leverage in 2017 was higher than expected at 6x due to increased adjusted debt. Most of this debt is associated with the miner's acquisition of additional Cobre Panama stakes, and the additional US$600 million CapEx for the project is expected to further raise the company's debt in 2018.

The stable outlook reflects expectations that First Quantum's credit metrics will improve in 2018 and 2019.

First Quantum's 2017 EBITDA stood at US$1.15 billion, in line with S&P Global Ratings estimates and up 20% from the year before, despite hedging deals limiting the company's upside from the recent copper price rally.

Bernstein Research reiterated an "outperform" rating for First Quantum on Feb. 12, with a target price of C$26 per share, referring to the company's financial results as a "temporary, short-term setback." Bernstein analyst Paul Gait underscored the miner's long-term potential as its output is seen rising over the next three years with the addition of Cobre Panama's production and further room for this operation's expansion.

RBC Dominion Securities analyst Stephen Walker also took note of First Quantum's three-year guidance and planned expansion at Cobre Panama, prompting an increased C$23 price target for the miner's stock, up from C$21 per share. RBC, on Feb. 14, also reiterated its "outperform" rating on the company.

Furthermore, Walker forecasts First Quantum's copper production to grow from 574,000 tonnes in 2017 to 940,000 tonnes in 2021 with the Cobre Panama expansion.

Another upgrade in the week ending Feb. 16 was for TimkenSteel Corp., with KeyBanc raising the steelmaker's rating to "overweight" from "sector weight" on Feb. 12, with a US$17 price target.

Keybanc mentioned the company's improved valuation and risk/reward profile after a recent sell-off, better spot pricing in the sector and a stronger free cash flow estimate in its note.

Evraz Plc also saw an upgrade on Feb. 12, with Goldman Sachs raising the company's rating to "buy" from "hold" amid a strong coal price outlook with industry spreads and margins being driven by the "tightening steel market supply-demand fundamentals and rising cost pressures."

Goldman Sachs further noted Evraz's appealing valuation, with further upside related to the expectations of higher coal prices. The target price for the company's stock was raised to 430 pence from 300 pence per share.

Meanwhile, Fitch Ratings bumped up Nord Gold SE's long-term issuer default rating to BB from BB- with a stable outlook, citing the company's strong 2017 operational and financial results, alongside progress in the development of its projects.

Fitch said Feb. 12 that it expects Nord Gold's 2017 results to exceed expectations, with absolute revenue estimated to be 18% more than previous estimates and EBITDA coming in 37% higher due to better-than-expected gold prices. However, the stable outlook reflects the rating agency's view that the miner's business profile will not improve significantly further in 2018 to 2020.

On the same day, Echelon Wealth Partners analyst Ryan Walker initiated coverage of Troilus Gold Corp., tagging the company with a "speculative buy" rating and a C$3.50 price target.

According to Walker, investing in Troilus Gold will equate to exposure to a large resource in Quebec's Abitibi gold mining region, with further growth potential as the company recently launched a 30,000-meter drill program at its Troilus gold-copper project.

Yanzhou Coal Mining Co. Ltd.'s long-term foreign-currency issuer default rating was upgraded Feb. 13 by Fitch Ratings to B+ from B, with a stable outlook.

Fitch attributed the new rating to the consolidated credit profile of the coal miner's parent company, Yankuang Group. Ltd., which is also rated at B+. The firm sees a strong link between the companies, underpinned by solid strategic and operational ties.

Credit Suisse analyst Christopher Parkinson downgraded Compass Minerals International Inc. to "underperform" from "neutral" on Feb. 14, owing to increased margin challenges related to higher freight costs and flat volumes.

Parkinson also noted that the company's weak guidance for the first half of the year will put significant pressure on the second half, leading Credit Suisse to lower the target price for Compass Minerals' stock to US$60 per share from US$63 per share.

Elsewhere, Citi gave FMC Corp. a rating boost on Feb. 14, to "buy" from "neutral," while lowering the price target on the stock to US$95 from US$103.

Analyst Daniel Jester noted that the recent sell-off in the company's shares offers an opportunity to own a high-quality company as FMC's core business is poised for stronger growth.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.