Copper prices fell significantly during the onset of the coronavirus pandemic but bounced 76% from their March 2020 lows through the beginning of January 2021, thanks to reopening of the industrial activities and a strong demand from China, which is one of the top importers of the metal. However, according to Trading Economics, copper futures have been falling since January 7th due to slowing in demand from China. 

However, this situation could offer a great opportunity to buy stocks of the companies involved in copper mining, as the long-term outlook for copper remains positive.  Copper is one of the crucial elements in electric vehicles (EV) and renewable energy space.

Therefore, now could be an opportune time to buy the dip in Rio Tinto Plc (RIO), Southern Copper Corporation (SCCO), and Freeport-McMoRan, Inc. (FCX). Being three of the top companies involved in copper mining, they are expected to continue to see gains over the next decade as the.

Rio Tinto Plc (RIO)

Based in London, the United Kingdom, RIO is a mining company. It is engaged in finding, mining, and processing mineral resources worldwide. With operations in more than 36 countries, the company’s products include aluminum, copper, diamonds, gold, industrial minerals (borates, titanium dioxide and salt), iron ore and thermal and metallurgical coal.

For the fourth quarter ended December 2020, RIO’s Pilbara iron ore shipments increased 8% sequentially to 88.9 Mt (on a 100% basis) underpinned by record total material moved. Mined Copper production increased 2% sequentially to 132.5 kt. As a result of the ramp-up of the expansion at the CBG mine in Guinea and steady performance at the Pacific mines, the company’s Bauxite production for the full year 2020 increased 2% year-over-year to 56.1 Mt.

The consensus revenue estimate of $49.77 billion for the fiscal period ending December 2021 indicates a 13.4% increase from the same period last year. The consensus EPS estimate of $9.98 for the fiscal period ending December 2021 indicates a 38.9% increase year-over-year. Over the past year, the stock rallied more than 44% to close yesterday’s trading session at $77.

On January 15, the company announced that the Resolution Copper project has entered the next phase of public consultation in the ongoing permitting process with the release of its independent Final Environmental Impact Statement (EIS), led by the United States’ Forest Service. The final EIS is now subject to 45 days of further public review and comment before the U.S. Forest Service issues a final record of decision.

RIO reached an agreement on January 14, on a new electricity agreement with Meridian Energy that allows New Zealand’s Aluminium Smelter (NZAS) to continue operating the Tiwai Point aluminium smelter until December 31, 2024. On the same date, the company also announced its expansion in the scandium market and Rio Tinto Fer et Titane (RTFT) expects to begin commercial supply of scandium oxide in the second quarter of 2021.

RIO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. RIO has a grade A for Momentum and a B for Value, Stability and Sentiment.

In addition to the POWR Ratings grades I’ve just highlighted, you can see the RIO ratings for Growth and Quality here.

Also, the stock is ranked #6 of 43 stocks in the Industrial – Metals industry.  

Southern Copper Corporation (SCCO)

Founded in 1952, SCCO is an integrated copper producer. The company is engaged in the mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Ecuador, and Chile. SCCO’s segments include the Peruvian operations, the Mexican open-pit operations and the Mexican underground mining operations segment identified as the IMMSA unit.

2020 was a year of production records for the company. Copper production topped 1 million tons while molybdenum production reached 30,248 tons and silver production was 21.5 million ounces for the twelve months ended December 31, 2020. For the fourth quarter ended December 31, 2020 mined copper production increased 1.3% year-over-year to $259,744 tons driven by higher production across most of its mines. Net income increased more than 93% year-over-year to $590.2 million, yielding EPS of $0.76 which increased 90% year-over-year.

Analysts expect the company’s revenue to increase 28.9% for the quarter ending March 2021 and 10.1% in 2021. SCCO’s EPS is expected to grow 164.3% for the quarter ending March 2021, 40.4% in 2021 and at a rate of 7.3% per annum over the next five years. The stock has gained more than 27% over the past three months. It is currently trading 5.4% below its 52-week high of $72.

As mentioned in the company’s fourth quarter earnings release, SCCO’s current portfolio for approved projects in Peru totals $2.8 billion, out of which $1.6 billion has already been invested. The company’s Buenavista Zinc – Sonora project located within the Buenavista facility includes the development of a new concentrator to produce roughly 80,000 tons of zinc and 20,000 tons of copper per year. The basic engineering study and the detailed engineering study is 81% completed and SCCO is expected to initiate operations in 2023.

SCCO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A which equates to Strong Buy in our proprietary system. SCCO has a grade of A in Momentum and Quality, and a B in Growth and Stability.

To see additional POWR Ratings for Value and Sentiment for SCCO, Click here. In the Industrial – Metals industry, the stock is ranked #2.

Freeport-McMoRan, Inc. (FCX)

Headquartered in Phoenix, Arizona, FCX is a leading international mining company. Primarily engaged in the acquisition of mineral assets, the company mainly explores for copper, gold, molybdenum, cobalt, and silver, among other metals, as well as oil and gas. FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, copper and gold deposits, and mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America.

For the fourth quarter ended December 31, 2020 the company’s revenues increased 14.9% year-over-year to $4.5 billion. Copper production increased 4.5% year-over-year to 864 million of recoverable pounds. Also, the average realized price per pound for copper was reported to be $3.40 (as compared to $2.74 in the fourth quarter of 2019). Net income and adjusted EPS of $708 million and $0.39, respectively increased significantly from the fourth quarter of 2019.

Analysts expect the company’s revenue to increase 64.5% for the quarter ending March 2021, 40.5% in 2021 and 8.3% in 2022. FCX’s EPS is expected to grow 296.3% this year, 21.5% next year and at a rate of 38.7% per annum over the next five years. The company has an impressive earnings surprise history; it beat consensus EPS estimates in each of the trailing four quarters.

The company announced on February 2 that its Board of Directors has reinstated a cash dividend on its common stock at an annual rate of $0.30 per share. The Board intends to declare a quarterly dividend of $0.075 per share, with the initial quarterly dividend expected to be paid on May 1, 2021. On December 14, 2020, FCX announced the completion of a sale of its interests in the Kisanfu undeveloped project to a wholly owned subsidiary of China Molybdenum Co., Ltd. On a year-to-date basis, the stock has gained 8.2% to close yesterday’s trading session at $28.14. FCX has gained 153.5% over the past year.

It’s no surprise that FCX has an overall rating of B which equates to Buy in our POWR Ratings system. FCX has a grade A for Growth and Momentum, and B for Sentiment and Quality.

In total, we rate FCX on 8 different levels. Beyond what I stated above we also have given FCX grades for Value and Stability. Get all the FCX ratings here. The stock is ranked #8 in the Industrial – Metals industry. 

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SCCO shares were trading at $68.13 per share on Wednesday afternoon, down $0.00 (0.00%). Year-to-date, SCCO has gained 4.62%, versus a 2.52% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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