We Anticipate BHP Boosting Its Bid for BHP by Up to 11% / Potash Junior's Strong PEA

FRC Top Picks

The following table shows last week’s top five performers among our Top Picks, including five junior resource companies. The top performer, Starcore International (TSX: SAM), was up 40%. SAM operates a gold mine in Mexico, and several early-stage gold projects in B.C., and Africa.

Source: FRC

Last month, companies on our Top Picks list were up 22% on average vs 6% for the benchmark (TSXV). Our top picks have outperformed the benchmark in five out of the six time periods listed below. 

1. Since the earliest initiating date of companies in the list of Top Picks  (as of Apr 29, 2024) 2. Green (blue) indicates FRC's picks outperformed (underperformed) the benchmark. 3. Past performance is not indicative of future performance.  4. Our complete list of top picks (updated weekly) can be viewed here: Top Picks List

Weekly Mining Commentary

Last week, global equity markets were up 1.5% on average (down 1.0% in the previous week). Recent U.S. macroeconomic data revealed slower than anticipated GDP growth, coupled with sustained inflation. The market placed greater emphasis on the sluggish GDP growth, resulting in weakness in the US$, and strength in equities and metal prices. We anticipate the Fed cutting rates in Q4.

Source: FRC / Various

Last week, metal prices were up 0.4% on average (up 1.6% in the previous week).

Gold producer valuations were up 0.9% last week (down 4.0% in the prior week); base metal producers were up 3.9% last week (down 0.3% in the prior week). On average, gold producer valuations are 17% lower compared to the past three instances when gold surpassed US$2k/oz.

Source: S&P Capital IQ & FRC

We are maintaining our metal price forecasts.

Key Developments:

• Last Thursday, BHP Group (MCAP: US$143B) made headlines by announcing its bid to acquire Anglo American (MCAP: US$40B) for US$39B. BHP is the largest mining company in the world by MCAP, and the third largest copper producer. If completed, this deal will elevate BHP to the top spot, controlling 10% of the global copper supply. Anglo swiftly rejected BHP's offer, stating it undervalued their stock. BHP is now contemplating an improved offer. The following section outlines our assessment of the deal's valuation.

  Just prior to BHP’s bid, Anglo’s shares were trading at 1.7x revenue, and 5.0x EBITDA, which were 26% lower than sector averages. Despite BHP's bid lifting Anglo's multiples by 22%, they trail sector averages by 10%. Assuming BHP is willing to align with sector multiples, we anticipate BHP could increase its offer by up to 11%, bringing its bid to US$43B.

Weekly Crypto Commentary

Prices of mainstream/popular cryptos were up 1% on average last week (up 10% in the previous week).

Source: FRC/Yahoo Finance

The global MCAP of cryptos is US$2.43T, down 12% MoM, but up 93%YoY.

Source: CoinGecko

Last week, BTC was down 3%, while the S&P 500 was up 2%.

Source: FRC/ Yahoo Finance

The global hash rate of BTC (defined as calculations performed per second/an indicator of network difficulty) is 638 exahashes per second (EH/s), down 1% WoW, but up 6% MoM. The decrease in hash rates is positive for miners as their efficiency rates (BTC production per EH/s) are inversely linked to global hash rates. 

Total Hash Rate (BTC) 

Companies operating in the crypto space are trading at an average EV/R of 8.0x (previously 7.3x).

Source: S&P Capital IQ/FRC

Source: S&P Capital IQ/FRC