Boliden's stock has seen a significant increase of over 3% after being upgraded to a 'neutral' rating by UBS Global Research. This positive shift is due to a reassessment of the company's outlook, particularly in light of its recent acquisition of Neves Corvo and Zinkgruvan from Lundin. UBS analysts believe that this strategic move will enhance Boliden's valuation more favorably than previously expected. The acquisition is expected to be completed by mid-2025 and is projected to be beneficial to earnings and could create synergies with Boliden's existing operations.
However, there are challenges that Boliden must address, including lower mined grades and a challenging smelting environment with historically low zinc treatment charges. Despite these challenges, UBS analysts believe that Boliden's smelting operations are well-positioned compared to its peers. However, overcapacity in the smelting sector and a lack of investment in new mining projects may hinder significant earnings growth in the near future. Analysts also suggest that smelting earnings for 2025 may fall short of expectations, although consensus earnings forecasts have already taken this into account.
Boliden's mining division is currently facing declining production levels, primarily due to lower grades at key sites such as Aitik and Kevitsa. While analysts had previously expected this trend to stabilize in 2023 and 2024, recent guidance suggests a continued decline at Aitik and uncertainty regarding the mine plan at Kevitsa. This raises concerns about Boliden's ability to meet future output targets and maintain profitability.
UBS remains cautiously optimistic, suggesting that the market may start to consider a potential recovery for Boliden after several years of underperformance. However, this recovery is not expected to happen immediately. The analysts also note that Boliden's capital expenditure has peaked in 2023 and 2024 due to significant projects such as the Odda expansion and the Aitik tailings storage facility. While there are risks of cost overruns, UBS believes that Boliden has reached the peak of its capital spending, with a decline expected in 2025.
In light of the updated earnings outlook that includes the Neves Corvo and Zinkgruvan acquisition, UBS has raised its price target for Boliden to SEK310 per share. This adjustment reflects a more balanced risk-reward profile for the company, as the likelihood of further negative surprises has decreased. The analysts emphasize the importance of strategic acquisitions in enhancing Boliden's market position and financial performance.
As Boliden faces challenges in the mining and smelting sectors, the company's ability to adapt to changing market conditions will be crucial. The declining grades and competitive smelting landscape require a proactive approach to operational efficiency and investment in new projects. With the recent upgrade from UBS, investors may have renewed confidence in Boliden's potential for recovery and growth in the future.