It's not that long ago that I was being tempted by Evraz(LSE: EVR) and its forecast profits for this year after years of losses.
But iron ore prices have dipped again over the past few months (albeit still ahead of this time last year), the City's analysts are pegging back their forecasts again, and I'm starting to get more and more concerned about the company's big debts.
Adding to concerns, a second-quarter production report showed crude steel output down by 9.5% over the previous quarter, to 3.3m tonnes -- though that was put down to planned repairs at one of the company's plants. Production of steel products was also down, by 8%.
There was a rise in average selling prices, though the key worry is whether the trend will continue long enough and strongly enough to divert the threat from debts.
At the end of 2016, net debt had fallen, but it still stood at $4.8bn (down from $5.3bn a year previously). But for a company with forecast pre-tax profit dipping to only around £420m in 2018, it's a big risk.
In fact, the markets have been responding to Evraz's fortunes with a mix of optimism and fear. 2016 saw the share price treble, but things have gone off the boil in 2017 -- though the past month has seen an uptick again to 235p. I suspect we're seeing a mix of profit taking coupled with optimistic investors buying on the dips.
Over the long term the firm, a third owned by Roman Abramovich, might do well if we see some serious strengthening of iron and steel prices. But right now, I think there are far less risky alternatives.
A better bet
One of them is KAZ Minerals(LSE: KAZ), formerly known as Kazakhmys, whose share price has been performing stunningly well -- it's four-bagged in 12 months and looks like it's still going.
KAZ has also been through a something of a profits disaster, though nowhere near as troubling as the travails at Evraz, with earnings per share collapsing in the four years to 2015.
But the copper miner really does seem to be pulling things around, and expects to achieve operating costs at the lower end of the industry range from its new Bozshakol and Aktogay plants. In fact, chief executive Oleg Novachuk told us at first-quarter time that KAZ was "amongst the lowest-cost copper producers globally in 2016."
Big production rises
Q1 Copper production rose by 16% as the firm's new operations are ramping up, and there are great expectations ahead -- with the company claiming that its "major growth projects at Bozshakol and Aktogay are expected to deliver one of the highest growth rates in the industry and transform KAZ Minerals into a company dominated by world class, open pit copper mines."
Even with the share price having soared to 645p, we're still looking at forward P/E multiples of 11.5 this year and only 8.5 on 2018 expectations, with tasty PEG ratios of just 0.1 and 0.2 respectively -- that's what forecast EPS growth of 80% and 35% can do for a share valuation.
There's some debt, but at $2.7bn at December 2016, I see that as modest compared to the potential here -- though it's likely to keep any kind of decent dividend an unlikely prospect for a few years yet.
KAZ Minerals is definitely the one I'd buy here.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes