Analysts lift BHP copper cost outlook, start NexGen Energy at buy

Anglo American-Teck merger could close by year-end, Jefferies says

Barclays raised its cost outlook for BHP’s Vicuna copper project, under development with Lundin Mining, saying the budget is likely to rise above the current phase-one estimate of $7 billion to $8 billion. The bank cited an analyst roundtable with BHP’s chief executive and chief financial officer for the revision.

“It was clear from the discussion that a higher number is likely,” Barclays said.

In a separate note on BHP’s Escondida mine, Barclays said the budget for a new concentrator there is “less at risk.” BHP had raised its capex estimate for that project by 14% at its FY26 results, to $5.4 billion to $6.3 billion, but Barclays said the increase mostly reflected a larger project scope. “BHP feels relatively more comfortable about the capex risks” at Escondida, the bank said.

Jefferies initiated coverage of NexGen Energy with a buy rating and an A$20.60 share-price target, drawn to the company’s Rook I high-grade uranium project in Canada. Rook I, one of the world’s largest undeveloped projects, hosts the Arrow uranium deposit. Jefferies analyst Daniel Roden said Arrow can underpin an operation producing 28 million pounds a year, with a separate discovery known as PCE located around two miles away and potentially sharing infrastructure.

“At 28 million lbs Rook may supply 14% of global reactor demand,” Jefferies said. “Shortfalls can influence incentive pricing on residual production, partially hedging execution risk.” NexGen ended Thursday at A$14.30.

On Anglo American, Jefferies said the London-listed miner is progressing on its planned simplification and is well-positioned to create significant value. Anglo is expected to complete its $53 billion merger with Canada-based Teck Resources by March 2027, but Jefferies said the deal could close by the end of this year.

“Overall, Anglo’s plans and execution have been just what the doctor ordered for a recovery from the company’s challenging 2023,” the analysts said.

Jefferies carries a buy rating on Anglo American with a target price of 50 pounds. Shares were up 1.1% at 41.78 pounds and 35% higher year to date.

Ord Minnett downgraded Paladin Energy to sell from lighten. The broker said it “never expects” Paladin to sustain Langer Heinrich’s nameplate production rate of 6 million pounds for a year.

“So we trimmed to 5.7” million pounds, Ord Minnett said of its annual production forecasts for fiscal years 2028 through 2030. The broker also raised projections for sustaining capex, citing new pits and tailings facilities.

Ord Minnett said a capex estimate of US$1.2 billion for the PLS project is “probably low” and expects other projects “will need to be deferred due to PLS funding challenges, which will no doubt include a significant capital raise.” The broker raised its target price to A$9.00 from A$8.50. Paladin’s stock was up 3.1% at A$11.61.

Morgan Stanley said the way for Rio Tinto to create more value from its aluminum business is by improving returns rather than pursuing volume growth. The bank described Rio’s aluminum division as “a high-quality but mixed-return business.” Operational and brownfield projects are “the most practical levers” for creating value, MS said, highlighting the AP60 ramp-up, Weipa replacement and expansion, and Matalco utilization as drivers.

“The key test is whether future spending can lift ROCE [return on capital employed] and free cash flow, rather than merely sustain the existing asset base,” Morgan Stanley said. “The company owns a differentiated aluminium business; executing on operational improvements and brownfield expansions will determine whether it can sustain a durable earnings and cash-flow pillar alongside iron ore and copper.”

Ord Minnett said Stanmore’s US$105 million acquisition of Moranbah South coal-project tenements from Exxaro represents a relatively low-cost strategic acquisition at roughly US$0.14 per metric ton. The deal also helps Stanmore avoid up to US$60 million in deferred and contingent acquisition payments that would be owed once the Isaac Downs Extension is developed, the broker said.

“While some investors may be concerned about the near-term increase to net debt, we see any weakness in the share price as a buying opportunity given current met-coal price tailwinds,” Ord Minnett said. The broker maintained a buy rating and target price of A$3.95 a share. Stanmore’s stock was down 1.0% at A$2.91.

Shaw & Partners said metallurgical testwork on Sunstone Metals returned materially higher recoveries of precious and base metals than previously assumed in an April scoping study. Recovery rates for copper rose to 80% from 75%, and for gold to 93% from 85%, analyst Peter Kormendy said. Recent assays have extended mineralization outside the existing Bramaderos Resource, the broker added.

“With only a handful of assays outstanding, we see limited scope for the December Quarter resource update to disappoint on grade or continuity,” Shaw said. “The key swing factor remains how much of the 1.7-3.5 million oz Copete-Porotillo and Melonal-linked exploration targets convert to resource in the next update.”