Is It Time to Start Buying Mining Stocks Again?

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"Absent a recession, we expect metal prices to remain very strong," analysts Fraser Phillips and Adam Schatzker of RBC Capital Markets wrote in a note to clients.

Following the meltdown in metals and mining stocks this month, analysts are questioning whether the bleeding has finally stopped. RBC Capital Market points out that metal prices are under pressure from technical selling, as evidenced by the large number of short positions on the London Metals Exchange. But it feels that fundamentals remain solid, with the markets in deficit and inventories at historically low levels.

"Absent a recession, we expect metal prices to remain very strong," analysts Fraser Phillips and Adam Schatzker wrote in a note to clients.

But what about the equities? In their note, the RBC analysts point out that stocks have outperformed the underlying commodities in recent months as investors started to accept the "stronger for longer" pricing.

But they wrote that the recent sell-off has brought the stocks down from an historically high premium to net asset value of 28% to just 9% (based on forward curve prices). And UBS analyst Tony Lesiak added that copper equities now trade at a 30% discount to "fair value."

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