London Mining, Petropavlovsk offer "standalone and self-funded" potential, suggests JPM
Companies with resilient earnings and improving balance sheets represent the best bets, suggests the broker.
This year’s small cap mining winners will be those best able to demonstrate standalone value and self-funded growth, says JP Morgan, with , Petropavlovsk and Gem Diamonds its top picks.
The broker said small to mid-cap miners underperformed the large mining groups during the last 12 months due to weaker operational performances and widespread funding concerns.
In 2013, JPM said it prefers those miners that have passed beyond peak funding risk and are poised to deliver value on this “standalone and self-funded” basis, especially as it sees little predatory activity from the majors.
Companies with resilient earnings and improving balance sheets represent the best bets, suggests the broker, and on that basis () and Petropavlosk (LON:POG) are “clear candidates for a de-leveraging-driven equity re-rating in 2013.”
In 2013 JPM expects a maiden profit for of $0.48/shr and 41% year-on-year EPS growth for Petropavlovsk, with both driven by significant volume growth.
Gem Diamonds (LON:GEMD), meanwhile, has high exposure to improving macro and consumer sentiment, yet its shares are only up 2% in the last two months, adds JPM.
With US$79mln net cash and trading at a 16% discount to our NPV, GEMD’s investment case is undemanding, says the broker.