1 Top Canadian Mining Stock to Keep an Eye on Right Now

Here’s why long-term investors looking for a top mining stock to add may want to consider Turquoise Hill Resources (TSX:TRQ)(NYSE:TRQ).

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A miner down a mine shaft

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Investors looking for a top Canadian mining stock to buy right now have quite a few choices. Indeed, the Canadian metals and mining space is one that’s quite large. Investors not only have to choose what company they want to invest in but also the metal or commodity being mined.

One of the metals I think is likely to continue to perform well in the post-pandemic recovery is copper. Copper is a unique metal in that copper tends to track the pace of economic activity well. Accordingly, it’s unsurprising to see copper taking off of late, once again.

In this space, Turquoise Hill Resources (TSX:TRQ)(NYSE:TRQ) is a great choice. Let’s dive into why investors may want to consider this stock, considering the fact that TRQ stock has more than halved since May highs.

Let’s dive in.

Analysts cut ratings due to increased mine funding

Unfortunately, the significant dip in Turquoise Hill in recent months does appear to be the result of an ongoing issue the company is facing. The slow-and-steady declines in TRQ stock have been interspersed with steep selloffs from time to time.

Much of this has to do with the fact that Turquoise Hill Resources has stated that it will require additional funding of $1.2 billion for the development of its Hugo North Lift One project in Mongolia. Oyu Tolgoi is one of the largest copper-silver-gold mines in the world. It has long been a bone of contention between Turquoise and Rio Tinto. 

Major delays regarding underground mining and open-pit metal deferral have led to an increase in funding. The company would require a total of $3.6 billion now as compared to $2.4 billion decided in July. Moreover, metal production from the mine is expected to be delayed beyond 2024 primarily due to COVID-19 restrictions. 

Pointing out the major financing issues that the Canadian miner is facing, Canaccord Genuity analyst Dalton Baretto has changed his rating for Turquoise Hill Resources to “Hold” from “Sell.” Moreover, with operations getting delayed by six months, Mr. Baretto has also trimmed his projection for Turquoise shares to $12 from $20. The current average of the Montreal-based miner stands at $23.86. 

Strong quarterly results for this mining stock

Turquoise Hill Resources released its earnings report for the period ending on September 30 on November 2. Accordingly, the company posted revenue of $622.8 million as compared to $264.4 million of the same period last year. This translates to a massive 136% jump on a year-over-year basis.

The company’s management team stated that it is well on track to fulfill its 2021 production guidance. Excavated copper and gold jumped by 34.9% and 338.2%, respectively, for the said quarter. This has been possible, as the company shifted its mining activity to high-grade areas of Phase B. 

Moreover, earnings in Q3 slumped to $22.9 million from $161.7 million in the third quarter of 2020. This loss is partly due to underground delays as well as a $34.8 million jump in operational costs. 

These operational concerns appear to be keeping investors up at night right now.

Bottom line

Turquoise Hill is certainly facing some financial challenges along with operational delays. However, the company has shown that it can remain profitable in this environment due to its volume increase.

I’m of the view Turquoise Hill could be a great value pick at these levels. It’s overlooked and positioned well to take advantage of rising commodities prices. Long-term investors seeking value may want to give this stock a look.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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