II is a mining company that explores copper, gold, silver, and other precious metals across countries including the U.S., China, and Switzerland. The company went from negative cash flow and unprofitability to generating decent cash flow in recent years. Topline growth was quite strong—above 30% for some time—but in the most recent quarter decelerated to around 15%. III’s share price has solid momentum and is trading at 1.3x Price/Book. With that said, we would consider these mining companies high risk due to volatile, unpredictable operating results. We would be comfortable adding a small position. EPS of 23c beat estimates of 4c (only one analyst). For mining companies, production and costs are the key metrics. While copper and gold production declined in the quarter, this was largely planned due to mining development, and production guidance for the year is going to be at the high end of forecasts. Costs remains good.
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