Boliden's shares saw a significant increase of over 3% after UBS Global Research upgraded its rating to 'neutral'.
This positive shift in stock performance is attributed 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 be beneficial and that Boliden's valuation is more favorable than previously expected. The acquisition, expected to be completed by mid-2025, is projected to increase earnings and create synergies with Boliden's existing operations.
However, UBS analysts have also highlighted some challenges that Boliden faces. These include lower mined grades and a difficult smelting outlook, worsened by historically low zinc treatment charges. While Boliden's smelting business is in a better position compared to its peers, the overcapacity in the smelting sector and a lack of investment in new mining projects may hinder significant earnings growth. Analysts have also indicated that smelting earnings for 2025 may fall short of expectations, although consensus earnings forecasts have started to reflect this potential weakness.
Boliden's mining division has encountered difficulties, particularly with declining production levels due to lower grades at key sites such as Aitik and Kevitsa. Analysts had previously expected this trend to bottom out in 2023 and 2024, but recent guidance suggests a continued decline at Aitik and uncertainty regarding the mine plan at Kevitsa. This ongoing struggle with production raises concerns about the company's ability to maintain output levels in the near future.
UBS believes that despite several years of underperformance, the market may start to anticipate a potential recovery for Boliden, although this is not expected to happen immediately. The analysts have also noted the company's capital expenditure, which peaked in 2023 and 2024 due to significant projects such as the Odda expansion and the Aitik tailings storage facility. While there are risks associated with potential cost overruns, UBS analysts are optimistic that Boliden's peak in capital expenditure is now behind it, with spending expected to decline in 2025.
In light of the updated earnings outlook that incorporates 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 appears to be reduced. The analysts' reassessment indicates cautious optimism regarding Boliden's future performance, despite the challenges it faces.
As Boliden navigates the complexities of the mining and smelting sectors, the company's strategic decisions and operational adjustments will be crucial in determining its trajectory. The market's response to the UBS upgrade suggests that investors are closely monitoring Boliden's developments, particularly regarding its recent acquisitions and the broader industry landscape. With the potential for synergies from the new assets and a more favorable valuation, Boliden may be well-positioned to overcome current challenges and emerge stronger in the future.