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The mining firms that may not survive a further drop in base metals prices

Globe editors have posted this research report with permission of Dundee Securities. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following text is excerpted from the report:

As part of our analysis we "stress tested" our coverage universe at commodity prices 15% below current spot levels (our new forecasts do not assume a credit crisis developing in China, but we could be wrong). The idea was to determine which companies would find themselves in a bad situation if this commodity bear market is not over (looking at liquidity and cashflow). While we did not use the results of this stress test to set our target prices, it has influenced our ratings.

For the sake of the stress test analysis (our bear case scenario), we used a 15% discount to current spot prices and kept the commodity prices flat across the board except for the long term prices starting in 2018 for which we used our long term price forecast if it was lower.

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