Hudbay Minerals (HBM.TO)

(A Top Pick Nov 4/15. Down 3.58%.) Had liked this for the long-term aspects as well as the optionality of owning an operating mine in a commodity that is trading at commodity market prices that nobody can mine at. Zinc is the hot metal today and this is a zinc producer.

(Market Call Minute.) Probably one of the better plays on copper and zinc right now. They are probably going to have to do a financing at some point or else have a royalty stream.

Over the next couple of years, with Constancia coming on stream and some of their other prospects further down the line, this is a company that is going to do well. A lot of people have been worried about the balance sheet and credit worthiness. In almost all their cases, their covenants have been modified or terms have been extended. One of the better managed mining companies.

(Market Call Minute.) Probably the highest leverage to zinc amongst the majors.

Normally base metals stocks like this do very well from October through to April of each year. We are getting to the end of the seasonal strength for base metals. Normally from around the end of April into May is the time to take profits. The chart is showing that it is starting to have difficulties and getting into resistance. This company is a major producer of copper. Copper, on a technical basis, broke a key support level just last week on the downside.

(Market Call Minute.) Copper has finally had its bounce and is not bouncing very nicely. If China really has an issue, there are a lot of yellow flags on this.

These companies are huge beneficiaries of the US$ rolling over. He would use this more as a trading opportunity. Pick a position, and if it rallies up sell some or all and replace it. These things are cyclical and move around quite a bit. There is still room left in the metals area, and zinc is one he thinks is opportune.

It was a top pick a couple of months ago. If you can buy it anywhere under $5 you should do fairly well. New management has come in and cleanup. He likes it. It is a well managed company with operations in northern Manitoba. He see increasing cash flow and production and a better commodity market would make it even better. With a clean balance sheet, he is not as concerned as some people seem to be at the current time.

The big question is, where are we in the metals cycle. There has been a terrific bounce on oil. Are we going to see a bounce in the base metals? Companies like this have a very hard time producing ore at a profit at these prices. They basically can’t make any money until the commodity cycle turns a little. At the moment he is zero weighted metal.

If you accept that base metals tag along with gold, then it could get moving. He is addicted to it. It is one of his few biggish mining companies.

If you think gold is rallying because it has been oversold, with the stock starting to turn the corner with a little bit of volume, you could be a Buyer here. It seems to be at its low of 2009. Would be a little leery about analysts changing their tune on gold stocks because of a good week.

(A Top Pick Feb 25/15. Down 70.84%.) The primary concern is what the pressure is going to be on their debt covenants at current copper prices. Given the production they have coming online in the next couple of years, you should see those covenants relax. Should finish this year with about $200 million in cash at least, and they still have fairly large credit facilities. There are also some good assets coming on stream. Dividend yield is 0.65%.

Sell or hold? He would say there is no catalyst for this stock. If you had to go into another mining stock, Lundin (LUN-T) wouldn’t be a bad stock, but he would prefer going into a forestry company such as West Fraser (WFT-T).

They have a major mine, Constancia, coming on stream in Peru, and have managed to finance it despite a lot of people who didn’t think they could pull it off. Good management and they have some more opportunities going forward.

It is attempting to form a bottom, but he will not buy it here. It needs to break the neckline at about $7.