The mining industry is one of the most promising sectors for investors looking to capture high returns. Recently, prices for both precious and industrial metals have surged thanks to favorable policies from major central banks like the Federal Reserve and the People’s Bank of China.
In this article, we’ll explore three of the fundamentally sound metals and mining stocks, namely BHP Group Limited (BHP), Rio Tinto Group (RIO), and Southern Copper Corporation (SCCO), that you might consider to hedge against inflation.
When the Fed cuts interest rates, gold and silver become more attractive assets. Lower rates reduce the opportunity cost of holding these precious metals, prompting investors to flock toward them as safe havens.
Meanwhile, a significant shift toward renewable energy, electric vehicles, and the burgeoning AI sector is boosting the demand for industrial metals like copper and silver. Both recently hit all-time highs due to supply concerns and China’s commitment to infrastructure investment.
According to BHP, global copper consumption is expected to increase by an average of 1 million metric tons annually until 2035, thanks to the rise of copper-intensive technologies. Looking ahead to 2050, global copper demand could soar by 70% to reach 50 million tonnes per year, primarily driven by its essential role in decarbonization and emerging technologies.
The mining market grew from $2.14 trillion in 2023 to $2.28 trillion in 2024, exhibiting a CAGR of 6.5%. Further, the market is expected to reach $2.83 trillion by 2028, growing at a CAGR of 5.5%.
Given this backdrop, let’s evaluate the three Industrial - Metals picks, beginning with the third choice.
Stock #3: Southern Copper Corporation (SCCO)
SCCO is an integrated producer of copper and valuable by-products. It operates the mining, exploring, smelting, and refining facilities in Peru, Mexico, Argentina, Chile, and Ecuador. Its operating segments include Peruvian operations; Mexican open-pit operations; and Mexican underground mining operations.
On August 26, backed by its strong financials, the company paid its shareholders a quarterly dividend of $0.60 per share and a stock dividend of 0.0056 shares per share of common stock. SCCO pays an annual dividend of $2.37, which translates to a yield of 2.13% at the prevailing price levels. Its four-year average dividend yield is 4.52%. The company’s dividend payments have grown at a CAGR of 8.5% over the past five years.
The stock’s trailing-12-month gross profit margin of 55.83% is 95.9% higher than the industry average of 28.49%. In addition, its trailing-12-month net income margin and ROTA of 26.15% and 15.47% are considerably above the industry averages of 5.02% and 2.34%, respectively.
SCCO’s sales for the second quarter (ended June 30, 2024) increased 35.5% year-over-year to $3.12 billion. The company reported an operating income of $1.61 billion, indicating a 78.5% growth from the prior year quarter. SCCO’s adjusted EBITDA came in at $1.80 billion, up 61.1% year-over-year, while its net income per share grew 73.2% from the prior-year quarter to $1.23.
The consensus revenue estimate of $2.94 billion for the fiscal third quarter (ended September 2024) represents a 17.4% increase year-over-year. The consensus EPS estimate of $1.11 for the to-be-reported quarter indicates a 40.5% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
SCCO shares have surged 55.6% over the past year and 33.4% year-to-date to close the last trading session at $111.99.
SCCO’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Stability and Sentiment. Among 29 stocks in the Industrial - Metals industry, it is ranked #5. Click here to see SCCO’s ratings for Growth, Value, and Momentum.
Stock #2: BHP Group Limited (BHP)
Headquartered in Melbourne, Australia, BHP operates as a resources company in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and internationally. It operates through Petroleum; Copper; Iron Ore; and Coal segments.
On July 30, BHP and Lundin Mining Corporation agreed to jointly acquire Filo Corp. and its Filo del Sol copper project through a Canadian plan of arrangement. As part of the deal, both companies will form a 50/50 joint venture to manage the FDS and Josemaria projects in Argentina and Chile. BHP will contribute $2.1 billion to the transaction, which aligns with its strategy of acquiring early-stage copper assets and forming strategic partnerships for long-term growth.
BHP had a strong start to FY 2025, with production rising across all major commodities. In its recent operational report for the quarter that ended on September 30, 2024, the company posted a 4% year-over-year increase in copper production to 476.3 kt, driven by improved feed grades at Escondida. Iron ore production at WAIO grew 2%, aided by the completion of the Port Debottlenecking Project and South Flank ramp-up, while energy coal production rose 2% to 3.7 Mt.
For the fiscal year ended June 30, 2024, BHP’s revenues increased 3.5% year-over-year to $55.70 billion. Its underlying attributable profit grew 2.2% from the year-ago value to $13.70 billion, while its underlying EBITDA came in at $29 billion, up 3.6% year-over-year, with a margin of 54%. Also, the company’s free cash flow increased to $11.90 billion from $5.60 billion recorded last year.
Analysts expect BHP’s EPS for the current year (ending June 2025) to be $4.81 and grow by 7.9% year-over-year to $5.20 next year. Meanwhile, its revenue for the fiscal years 2024 and 2025 is forecasted to reach $52.02 billion and $51.13 billion, respectively.
The stock has gained 6.9% over the past month to close the last trading session at $56.89.
BHP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value and Stability. Within the same industry, it is ranked #3. Click here to see the other BHP ratings for Growth, Momentum, and Sentiment.
Stock #1: Rio Tinto Group (RIO)
London-based mining and metals company RIO is involved in the global exploration and production of materials through four segments: Iron Ore; Aluminum; Copper; and Minerals. Its business also includes diamond mining, sorting and marketing, and lithium exploration.
On October 9, the company agreed to acquire Arcadium Lithium for $6.7 billion, a deal that will catapult it to become the world’s third-largest miner of the metal used in electric vehicle batteries. Already a leader in iron ore, RIO is expanding its focus on processing high-end, low-carbon materials essential for the energy transition.
The company would gain access to lithium mines and processing facilities across Argentina, Australia, Canada, and the U.S. through the acquisition, fueling future growth.
On August 15, RIO partnered with the Queensland Government to strengthen the heavy industrial manufacturing base around Gladstone and boost renewable energy investments. The partnership secures the future of Boyne Smelters Limited, Australia’s second-largest aluminum smelter, ensuring sustainability and long-term growth for RIO’s operations.
For six months of fiscal 2024 that ended on June 30, 2024, RIO reported consolidated sales revenue of $26.80 billion, indicating a marginal year-over-year increase. The company’s operating profit for the same period rose 14% from the year-ago value to $8.26 billion. In addition, profit after tax for the period and EPS came in at $5.89 billion and $3.56, up 19.1% and 13.3% year-over-year, respectively.
Street expects RIO’s EPS and revenue for the fiscal year ending in December 2024 to be $7.04 and $52.82 billion, respectively. Over the past month, the stock has gained 4.1%, closing the last trading session at $65.09.
It’s no surprise that RIO has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Value, Stability, and Quality. Out of 29 stocks in the Industrial – Metals industry, RIO is ranked first.
Beyond what is stated above, we’ve also rated RIO for Growth, Momentum, and Sentiment. Get all RIO ratings here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
BHP shares were trading at $57.14 per share on Friday afternoon, up $0.25 (+0.44%). Year-to-date, BHP has declined -11.86%, versus a 24.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Metals & Mining Stocks to Buy for Inflation Protection StockNews.com
