Macquarie upgrades Champion Iron to 'outperform'
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The news: Champion Iron shares lifted on the ASX as Macquarie analysts upgraded their rating on the miner, after the Canadian government classified high purity iron as a critical mineral.
The numbers: The analysts upgraded Champion Iron from 'neutral' to 'outperform' and raised its target price from $7.50 to $7.90.
Shares were up 0.9% to $6.66 by 11:15am AEST.
The analysts also updated their earnings per share (EPS) estimates on the stock in line with a potential ramp-up in production at the company's Kami mine, lowering EPS forecasts for FY28 to FY29 by 2% to 25%, and hiking them over 100% for FY30.
On Tuesday, the Canadian government moved to classify high purity iron as a critical mineral, joining 33 other critical minerals that form part of its critical minerals strategy.
The context: Macquarie analysts said the Canadian government's announcement will enable companies like Champion Iron to access grants, tax breaks and funding for exploration, capital projects and innovation.
While the degree of funding or tax assistance available to the Champion Iron's Kami development is unclear, the miner outlined it may be able to receive C$700 million ($770 million) in infrastructure funding to support the build, as well as potential further tax incentives on fixed capital investment.
The analysts said that Champion Iron "is our preference against our somewhat bearish stance on iron ore, with its high-quality product able to attract a premium insulating it against bulk 62% price declines".
Last month, Champion Iron posted a double-digit hit to its fourth quarter revenue and earnings, citing a 25% decrease in the net realised selling price for iron ore concentrate.
The sources: Macquarie research, ASX announcement
