KGHM revealed during a press conference yesterday that its copper price forecasts used for internal budgeting and hedging activities amount to USD/t 6000 for 2007, versus our expectation of USD/t 6338 (5% difference), and USD/t 2700 for longer term, versus our expectation of USD/t 3850 (30% difference).
Our view: Company forecasts are more conservative compared with our expectations, which means that the company hedges itself against worse scenario than we anticipate. However, we retain our estimates for hedging losses for 2007 and onwards, based on management guidance for participation levels in existing hedging contracts. We reiterate our Buy rating for the stock.