The Globe and Mail reports in its Saturday, Sept. 12, edition that CIBC World Markets analyst Raphael de Souza commenced coverage on Sierra Metals ($1.99) with an "outperformer" rating and a $2.60 share target, matching the current consensus.
The Globe's David Leeder writes that Mr. de Souza says in a note: "SMT provides investors diversified exposure to copper (Cu), zinc (Zn), silver (Ag) and lead (Pb) through three operating assets and a strong balance sheet position. We forecast a significant pick-up in free cash flow (FCF) generation over the next 18 months, at an average 13-per-cent FCF yield in 2020-2021 versus negative 4 per cent in 2019, which by our estimates would be sufficient to fund growth, debt repayments and potentially distribute cash to shareholders. Also, we note that our current 2021 Ag price forecast is $19 per ounce, well below the current spot price of $28 per ounce. While we acknowledge the risks of COVID-19 to SMT's operations in Peru and Mexico, we believe these are captured in our valuation through a discounted P/NAV multiple and a 10-per-cent discount rate across all assets."
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