TECK - Teck Resources And Newmont Corp: A Golden Long/Short In The Mining Space

2024-07-08 18:18:59 ET

Summary

• Undervaluation in Newmont along with over optimism in Teck's price leaves a unique opportunity to go long Gold and short Coal.
• Newmont continues to show growth in its pipeline, proving management's ability to think years ahead.
• Significant run up in Gold prices gives Newmont tailwinds for years to come.

Co-Authored by Analyst Antonio Mello

Thesis

Throughout the last year, there has been a lot of movement through the industrials sector, with gold prices driving upward and copper volatility in particular. The sector provides for a unique investment opportunity, specifically among two competitors, as the landscape of the industry gathers speculation. We believe there is a window of opportunity to capitalize on upside potential from the market discounting Newmont Corporation ( NEM ) and potential underperformance of Teck Resources ( TECK ). We propose 130% long exposure to Newmont Corporation and 50% short exposure in Teck Resources as gold price forecasts suggest significant top line upside for Newmont Corporation, while maintaining higher growth potential through exposure in copper and the company is liquid, providing for more investment opportunity to scale operations or increase total production.

Company Backgrounds

Teck Resources is Canada’s largest integrated natural resources group. Teck Resources has a Dual-class share structure, with the Keevil family holding significant voting control. The company is headquartered in Vancouver, Canada, but has widespread operations among. Specifically, Teck resources produces copper out of its four mines in Canada , Chile, and Peru. Teck Resources also produces zinc out of its Alaska operating mine and produces coal out of its mines in British Columbia. The majority of Teck Resources’ revenue has come from their coal production, as it is the largest producer in North America. The revenue breakdown as of the last fiscal year, follows with 56.86% of revenue coming from coal, 22.82% of revenue coming from copper, and 20.33% of revenue coming from zinc....

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