On Wednesday, Barclays downgraded shares of Boliden AB (BOL:SS) (OTC: BDNNF), a Sweden-based metal mining company, from Overweight to Underweight, adjusting the price target to SEK 300 from SEK 365. The revision reflects concerns over the company's recent share price performance and financial projections.
The downgrade comes after Boliden's shares outperformed its peer Antofagasta (LON:ANTO) PLC over the past six months, which led to a "squeezed" valuation. Additionally, the firm anticipates that Boliden's free cash flow will remain negative until 2026, potentially being allocated to projects that have not yet been approved.
Barclays has also increased its long-term sustaining capital expenditure assumption for Boliden to SEK 8.5 billion per annum. This adjustment reduces the net present value (NPV) of the company, influencing the decision to lower the stock's rating and price target.
The analysis also suggests that Boliden may consider an equity issuance to fund the acquisition of Lundin Mining (OTC:LUNMF)'s European assets. This potential move comes at a time when Boliden is expected to deliver several critical projects over the next three years, though their track record in project delivery has been inconsistent.
Moreover, Barclays notes that there are additional headwinds for Boliden, including unfavorable terms in zinc and copper treatment and refining contracts that extend into 2025. These contracts are likely to continue impacting smelting profitability. Furthermore, zinc prices, which are currently trading well above the cost curve, may face pressure from an anticipated 10% growth in mine supply by 2025.
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