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Buy Lundin now, HudBay later: Desjardins

HudBay Minerals' copper smelter in Flin Flon, Manitoba.

Lundin Mining Corp. and HudBay Minerals Inc. are generally copper miners and have similar market caps. Lots of investors buy both stocks in tandem when they want copper exposure, but Desjardins Securities analyst Jackie Przybylowski offers another strategy.

“While Lundin remains attractively valued and it has the best possibility of positive stock price catalysts soon, early 2016 could present a buying opportunity for HudBay,” she said in a note.

Przybylowski stressed that the companies have different approaches. HudBay loves to develop projects by itself from a very early stage, while Lundin usually buys more complex projects (including producing mines) and participates in joint ventures.

Those strategies can be seen in action at this time. HudBay is ramping up production at one mine (Constancia) and it has another (Rosemont) in its pipeline. Lundin’s pipeline is less full, but, on the other hand, it has more potential for positive news flow through 2015 and early 2016 from its recently acquired operations.

Based on forecasted cash flows, Przybylowski said Lundin shares offer better value than HudBay shares right now. But that may change by early next year, as HudBay de-risks its key projects and Lundin’s growth trajectory tails off.

There is a superb chance Lundin will make another acquisition, but the analyst does not expect that to occur until the second half of 2016, and isn\’t pricing it set for now.

Przybylowski has a buy rating on Lundin shares and a price target of $8. She\’s a hang on HudBay shares with a $13 target, but asserted could rise by $4 within the next few years as HudBay ramps in the Constancia mine.