Analysts expect copper to be a winner in the “clean energy” space for the next three to five years. The positive outlook for the metal also stems from anticipation the world’s transition to sustainable energy will boost copper demand. In addition, base metals prices on the London Metal Exchange (LME) rose on February 16 due to easing tensions between Russia and the West over Ukraine, and as attention shifted toward an energy crunch, mainly in China, which is causing smelter shutdowns. LME copper surged 0.4% in official activity to $10,009 per ton.
Furthermore, Goldman Sachs Group Inc. (GS) has stated that copper’s price is “building towards a breakout” on the back of a “diversified set of demand drivers.”
Therefore, we think against this backdrop, the copper mining stocks BHP Group Limited (BHP), Rio Tinto Group (RIO), Glencore plc (GLNCY), and Southern Copper Corporation (SCCO) might be solid bets,
BHP Group Limited (BHP)
Melbourne, Australia’s BHP functions as a natural resource organization, with two parent companies: BHP Group Limited and BHP Group Plc that operate as one. The company is engaged in natural resource businesses regarding minerals, oil, and gas. It is divided into Petroleum; Copper; Iron Ore; and Coal segments. On February 7, BHP announced that it is extending its partnership focused upon low carbon iron and steelmaking with the Centre for Ironmaking Materials Research (CIMR) at the University of Newcastle. Dr Rod Dukino, BHP VP Sales & Marketing Iron Ore, said, “The expanded research program with the University of Newcastle complements BHP’s existing partnerships with our key steelmaking customers in China, Japan, and South Korea. We are pursuing the long-term goal of net-zero Scope 3 greenhouse gas emissions by 2050.”
Also this month, BHP welcomed MV Mt. Tourmaline, an LNG-fueled Newcastlemax bulk carrier that is set to transport iron ore between Western Australia and Asia beginning this year. The new carrier is expected to improve energy efficiency and emissions intensity.
For its fiscal half-year ended December 31, BHP’s revenue from continuing operations increased 27% year-over-year to $30.53 billion. Its profit from operations rose 50.1% from the prior-year period to $14.85 billion, while its earnings per ordinary share came in at 186.20 cents, up 143.4% from the same period the prior year.
The $62.15 billion consensus revenue estimate for its fiscal year ending June 2022 indicates a 2.2% year-over-year increase.
The stock has gained 25.6% in price over the past three months and 11.9% year-to-date to close yesterday’s trading session at $67.52.
BHP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BHP has a Growth and Quality grade of B. In the 35-stock Industrial – Metals industry, it is ranked #6. Click here to see the additional POWR Ratings for BHP (Value, Momentum, Stability, and Sentiment).
Rio Tinto Group (RIO)
London-based RIO explores for and processes mineral resources worldwide. The company offers aluminum, copper, diamonds, gold, salt, and iron ore. It also owns and operates open pits and underground mines, mills, refineries, and power stations.
On January 24, it was reported that RIO, Turquoise Hill Resources Ltd. (TRQ), and the Government of Mongolia had reached an agreement that is expected to move the Oyu Tolgoi (OT) project forward. This might prove to be beneficial for the company.
On January 10, RIO announced that it had agreed to purchase four battery-electric trains in the Pilbara region of Western Australia. The purchase aligns with its strategy to reduce carbon emissions by 50% by 2030.
And last December, RIO declared that it had agreed to acquire the Rincon lithium project in Argentina. RIO’s Chief Executive Jakob Stausholm said, “This acquisition is strongly aligned with our strategy to prioritize growth capital in commodities that support decarbonization and to continue to deliver attractive returns to shareholders.”
For the six months ended June 30, 2021, RIO’s underlying EBITDA increased 118.2% year-over-year to $21.04 billion. Its net earnings rose 271.3% from the prior-year quarter to $12.31 billion, while its underlying EPS improved 156% from the same period the prior year to 751.90 cents.
The $13.95 consensus EPS estimate for its fiscal year, ended Dec. 31, 2021, indicates an 81.3% year-over-year rise. And the $61.86 billion consensus revenue estimate for the same year reflects a 38.7% improvement from the prior year.
RIO’s shares have gained 25.2% in price over the past three months and 15.2% year-to-date to close yesterday’s trading session at $77.13.
It is no surprise that RIO has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has a Value, Stability, and Quality grade of B. It is ranked #2 in the Industrial – Metals industry. Click here to see the additional POWR Ratings for Growth, Momentum, and Sentiment for RIO.
Glencore plc (GLNCY)
GLNCY produces, refines, processes, and markets metals and minerals, and energy products in various parts of the world. The Baar, Switzerland-based company operates under the two broad segments of Marketing Activities and Industrial Activities, offering copper, nickel, cobalt, lead, zinc, etc.
On February 9, GLNCY announced that it has entered a marketing relationship with the United States Strategic Metals, LLC., that includes a long-term off-take agreement for 100% of the company’s products, such as cobalt and nickel sulfates, lithium products, and copper cathode, alongside a considerable embedded pre-payment. This should stand to benefit GLNCY.
On February 3, the company declared that it had formed a battery recycling joint venture with strategic partner Britishvolt. The joint venture is expected to support the U.K. battery recycling industry and help the company achieve its net-zero total emission goals by 2050.
For its fiscal year ended December 31, GLNCY’s revenue increased 43.1% year-over-year to $203.75 billion. Its income for the year and EPS came in at $4.35 billion and $0.37, respectively, up substantially from their negative year-ago values. The company’s cash and cash equivalent balance improved 120.8% from the prior year to $3.31 billion.
The Street’s $233.19 billion revenue estimate for its fiscal year ending Dec. 31, 2022 indicates a 14.5% increase from the prior year.
Over the past year, GLNCY’s stock has gained 55% in price, and 24.3% over the past six months, to close yesterday’s trading session at $11.55.
This promising outlook is reflected in GLNCY’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. GLNCY has a B grade for Growth, Momentum, and Stability. It is ranked #10 of 40 stocks in the Miners – Diversified industry. To see the additional POWR Ratings for Value, Sentiment, and Quality for GLNCY, click here.
Southern Copper Corporation (SCCO)
SCCO operates as a mining, exploring, smelting, and copper refining company in Peru, Mexico, Argentina, Ecuador, and Chile. The Phoenix, Ariz.-based concern engages in the mining, milling, and the flotation of copper ore to produce copper and molybdenum concentrates.
On January 27, SCCO declared a quarterly dividend of $1.00 per share of common stock, payable to shareholders on March 2. This reflects the company’s cash generation and shareholder return ability.
SCCO’s net sales increased 20.1% year-over-year to $2.82 billion in its fiscal fourth quarter ended Dec. 31, 2021. Its operating income rose 43.5% from the prior-year quarter to $1.53 billion. And its net income attributable to SCCO and net income per common share improved 41.1% and 42.1%, respectively, from the same period of the prior year to $833 million and $1.08.
Analysts expect SCCO’s EPS to come in at $1.21 for the quarter ending March 31, 2022.
The stock has gained 10.8% in price over the past three months and 9.1% year-to-date to close yesterday’s trading session at $67.33.
SCCO has an overall B rating, which translates to Buy in our POWR Rating system. The stock has an A grade for Quality and a B grade for Stability and Sentiment. It is ranked #7 in the Industrial – Metals industry.
In addition to the POWR Rating grades we have stated above, one can see SCCO ratings for Growth, Value, and Momentum here.
BHP shares were trading at $68.62 per share on Wednesday afternoon, up $1.10 (+1.63%). Year-to-date, BHP has gained 13.70%, versus a -6.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
4 Mining Stocks to Buy as Goldman Sachs Predicts Copper Prices are “Building Towards a Breakout” StockNews.com
