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MP Materials (NYSE:MP) -2.5% in Monday’s trading as BMO Capital initiates coverage with a Market Perform rating and $16.50 price target, believing the company will benefit from the increasing shift away from current China-dominated supply chains but the current low price environment likely will weigh on the shares in the near term.
As a producer with $947M of cash on hand as of Q1 2024, MP (MP) stands out from a backdrop of many unfinanced rare earth development projects in having the capital to execute upon growth strategy, BMO analyst Greg Jones says, adding the company recently issued $750M of convertible notes with net proceeds used to extend its debt maturity profile by repurchasing $400M of outstanding convertible notes, and buying back ~7% of its common stock.
But Jones also notes rare earth prices have been under pressure due to lower than anticipated demand, increased supply, geopolitical and trade tensions, and challenging global market conditions, with the timing and ramp of a potential price recovery unclear.
BMO also resumes coverage of Teck Resources (TECK) with an Outperform rating and C$79 PT, raised from C$45, saying the company has changed significantly with completion of the coal separation and construction of the QB2 copper mine; BMO’s commodity outlook is also significantly different from 17 months ago.