Zacks Industry Outlook Highlights Southern Copper, Freeport-McMoRan, Lundin Mining, Coeur Mining and Ero Copper

For Immediate Release

Chicago, IL – July 10, 2024 – Today, Zacks Equity Research discusses Southern Copper Corp. SCCO, Freeport-McMoRan Inc. FCX, Lundin Mining LUNMF, Coeur Mining CDE and Ero Copper ERO.

Industry: Mining – Non-Ferrous Link: https://www.zacks.com/commentary/2298570/5-non-ferrous-metal-mining-stocks-to-watch-in-a-promising-industry The prospects of the Zacks Mining – Non Ferrous industry appear promising at the moment, backed by the upward trajectory in metal prices.

The demand for non-ferrous metals is expected to be supported by the energy-transition trend, which will buoy the industry. We suggest keeping a close eye on companies like Southern Copper Corp., Freeport-McMoRan Inc., Lundin Mining, Coeur Mining and Ero Copper. These companies are strategically focused on building reserves, technological investments, cost control and enhancing production efficiency, positioning them well to capitalize on the industry’s growth potential.

About the Industry

The Zacks Mining – Non Ferrous industry comprises companies that produce non-ferrous metals, including copper, gold, silver, cobalt, molybdenum, zinc, aluminum and uranium.

These metals are utilized by various industries, including aerospace, automotive, packaging, construction, machinery, electronics, transportation, jewelry, chemical and nuclear energy. Mining is a long, complex and capital-intensive process. Significant exploration and development to evaluate the size of the deposit, followed by the assessment of ways to extract and process ore efficiently, safely and responsibly, precede the actual mining operations.

Miners continuously seek opportunities to grow their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets internally and through acquisitions.

What’s Shaping the Future of the Mining – Non Ferrous Industry?

Improving Metal Prices to Aid Industry: Copper prices have notched gains of more than 18.8% so far this year, aided by supply concerns and signs of improving demand from top consumer China. Gold has appreciated 14.5% so far this year.

Gold prices are currently around £2,360 an ounce following key U.S. jobs data that showed a softening labor market, fueling expectations of interest rate cuts in September. Backed by these factors, silver prices are currently around £31 an ounce, yielding a 29.7% year-to-date gain. Silver prices have also gained support on expectations that China will unveil more stimulus measures and demand from the solar panel sector.

Uranium prices are currently at £86 per pound, the highest in two weeks, amid robust demand and tight supply. The United States and 20 other countries intend to triple their nuclear power by 2050. Story continues

Meanwhile, investors continue to assess the impacts of the U.S. ban on Russian nuclear fuel imports may have on the global supply chains. Overall, industry players are dealing with depleting resources, declining supply in old mines and a lack of new mines. Development projects are inherently risky and capital-intensive.

While demand has been strong, there will be an eventual deficit in metal supply, leading to a situation that will bolster metal prices. This, in turn, will favor the industry in the long haul. Efforts Underway to Sustain Margins Amid High Costs: The industry has been facing a shortage of skilled workforce lately, which has hiked wages.

Industry players have also been grappling with escalating production costs, including electricity, water and materials, as well as higher freight expenses and supply-chain issues. Since the industry cannot control the prices of its products, it focuses on improving sales volumes, increasing operating cash flows and lowering unit net cash costs. Industry participants are opting for alternative energy sources to minimize fuel-price volatility and secure supply.

Miners are now committed to cost-reduction strategies and digital innovation to drive operating efficiencies. Strong Demand to Support Industry: The demand for non-ferrous metals will remain high in the future, given their wide use in primary sectors, including transportation, electricity, construction, telecommunication, energy and information technology. The demand for electric vehicles and renewable energy is expected to be a significant growth driver for metals like copper and nickel in the years to come.

The plan to overhaul and upgrade the nation’s infrastructure, and promote green policies, per the U.S. Infrastructure Investment and Jobs Act, will also require a massive amount of non-ferrous metals.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright prospects for the near term. The Zacks Mining – Non Ferrous industry, an 11-stock group within the broader Zacks Basic Materials Sector, currently carries a Zacks Industry Rank #63, which places it in the top 25% of 250 Zacks industries.

Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of this year, the industry’s earnings estimates for the current year have been revised upward by 15%.

Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and its valuation picture.

Industry Versus S&P 500 & Sector

The Zacks Mining- Non Ferrous Industry has outperformed its sector and the Zacks S&P 500 composite over the past 12 months. The stocks in this industry have collectively gained 45.4% in the past year compared with the Zacks Basic Materials sector’s rise of 3.4%. The S&P 500 has grown 27.7% in the said time frame.

Industry’s Current Valuation

Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Mining- Non Ferrous stocks, we see that the industry is currently trading at 7.8X compared with the S&P 500’s 15.11X.

The Basic Materials sector’s trailing 12-month EV/EBITDA is at 7.03X. Over the last five years, the industry traded as high as 9.36X and as low as 3.35X, the median being 6.57X.

5 Mining – Non Ferrous Stocks to Keep a Tab on

Ero Copper: The company has been progressing with its strategic initiatives, which will drive significant near-term growth. In June, the company received the operational license for the Tucuma Project, thus clearing the last remaining approval necessary for commercial operation.

First concentrate is expected early in the third quarter of 2024. Copper production from the Tucuma Operations is anticipated between 17,000 and 25,000 tons in the second half of 2024. For 2025, production is projected at 53,000-58,000, marking Tucuma’s first full year of production.

The Caraiba mill expansion, which is expected to increase mill throughput capacity from 3.2 million tons per year to 4.2 million tons per year, was completed in December 2023. The Xavantina operations achieved record gold production in the first quarter of 2024, driven by favorable grade reconciliations that have continued into the second quarter. Backed by this, ERO raised its guidance for 2024 gold production to 60,000-65,000 ounces from the prior stated 55,000-60,000 ounces.

ERO is on track to double copper production to more than 100,000 tons in 2025. ERO shares have gained 41% in the past six months. The Zacks Consensus Estimate for the Vancouver, Canada-based company’s fiscal 2024 earnings indicates year-over-year growth of 95.4%.

The estimate has moved up 9% in the past 90 days. The company has a trailing four-quarter earnings surprise of 53.9%, on average. ERO currently sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here. Lundin Mining: The company increased its stake in the Caserones copper mine to 70% on Jul 2, 2024, resulting in an additional 120,000-130,000 tons of copper being added to its production profile on a 100% basis. This move adds a long-life asset in a tier-one jurisdiction strategically located in the Vicuna District, solidifying LUNMF’s position as a meaningful copper producer globally.

While maintaining a focus on growth plans and capital allocation, the company is committed to optimizing assets and operational efficiencies to drive down costs. Exploration efforts, with a £48-million budget for 2024, include drilling campaigns at Caserones, Josemaria, Chapada and Zinkgruvan, targeting various high-potential areas and extensions to existing deposits. LUNMF shares have gained 45.7% in the past six months.

The Zacks Consensus Estimate for Vancouver, Canada-based LUNMF’s fiscal 2024 earnings suggests a year-over-year improvement of 91%. The consensus estimate has moved up 42% in the past 90 days. It has a long-term estimated earnings growth rate of 48.1%.

The company currently carries a Zacks Rank #2 (Buy). Southern Copper: The company has the largest copper reserve in the industry and operates world-class assets in investment-grade countries, such as Mexico and Peru. SCCO expects copper production to rise 4% year over year and reach 948,800 tons in 2024.

The company expects this growth to be driven by the Pilares project running at full capacity and ramp up of the Buenavista zinc concentrators. The company’s capital investment program for this decade exceeds £15 billion and includes investments at the Buenavista Zinc, Pilares, El Pilar and El Arco projects in Mexico, and the Tia Maria, Los Chancas and Michiquillay projects in Peru. Given its constant commitment to increasing low-cost production and growth investments, the company is well-poised to continue delivering an enhanced performance.

SCCO shares gained 41.3% in the last six months. The Zacks Consensus Estimate for the Phoenix, AZ-based company’s fiscal 2024 earnings suggests year-over-year growth of 39%. The estimate has moved up 26% over the past 90 days.

SCCO has a long-term estimated earnings growth rate of 22.8%. The company currently carries a Zacks Rank #2. Freeport-McMoRan: The company’s efforts to expand reserves through exploration near existing mines will fuel growth.

FCX is implementing the latest technologies and data analytics in leaching processes across its North America and South America operations. Initial results are providing incremental low-cost additions to FCX’s expected annual production and the potential to add to its reserves. Production from Safford/Lone Star is approaching 300 million pounds of copper annually, ahead of the initial plan to produce more than 200 million pounds per year.

FCX is ramping up underground production at Grasberg in Indonesia, increasing milling rates. It is on track with its smelter projects in Indonesia (the Manyar smelter and precious metals refinery projects) and achieved a 92% completion milestone at the end of the first quarter of 2024. PT-FI completed a project to install additional milling facilities in December 2023 that would increase its milling capacity to roughly 240,000 metric tons of ore per day.

The company’s focus on cost management and lowering debt levels is commendable. FCX shares have gained 23.8% in the past six months. The Zacks Consensus Estimate for the company’s earnings for fiscal 2024 has moved up 3.6% over the past 60 days.

The estimate indicates year-over-year growth of 11.7%. FCX has a trailing four-quarter earnings surprise of 23.5%, on average. It has a long-term estimated earnings growth rate of 14.2%.

The Phoenix, AZ-based company currently carries a Zacks Rank #3 (Hold). Coeur Mining: In April 2024, the company announced that its newly expanded Rochester silver and gold mine in Nevada achieved commercial production. The company expects 2024 production to be 4.8-6.6 million ounces of silver and 37,000-50,000 ounces of gold.

Production is expected to gain from commissioning and ramp-up at Rochester. Once fully operational, throughput levels are estimated to be 2.5 times higher than in the past, making Rochester one of the world’s largest open-pit heap leach operations. It is expected to be America’s largest source of domestically produced and processed silver and will be a key driver of CDE’s cash flow growth.

In June, the company reported results from its multi-year exploration drilling and development program at the Kensington underground gold mine, which is encouraging with high grades and wide intercepts encountered in Elmira South, and Upper and Lower Kensington. The findings affirm that the project is well-positioned for a return to a sustained period of free cash flow generation and to be an important contributor to Coeur’s U.S.-centric portfolio of long-lived mines in North America. Backed by these developments, the company’s shares have gained 139% in the past six months.

This Chicago, IL-based company explores, develops and produces gold, silver, zinc and lead properties, with five operations in the United States, Mexico and Canada. The Zacks Consensus Estimate for CDE’s fiscal 2024 earnings suggests a year-over-year improvement of 134.8%. The consensus estimate has moved up to an earnings per share of 8 cents from the expected loss of 5 cents 90 days ago.

The company currently carries a Zacks Rank #3.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security.

No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice.

Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report[1] Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report[2]

Southern Copper Corporation (SCCO) : Free Stock Analysis Report[3] Coeur Mining, Inc. (CDE) : Free Stock Analysis Report[4] Lundin Mining Corp. (LUNMF) : Free Stock Analysis Report[5]

Ero Copper Corp. (ERO) : Free Stock Analysis Report[6]

To read this article on Zacks.com click here.[7]

Zacks Investment Research[8]

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References

1. ^ Click to get this free report (www.zacks.com)
2. ^ Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report (www.zacks.com)
3. ^ Southern Copper Corporation (SCCO) : Free Stock Analysis Report (www.zacks.com)
4. ^ Coeur Mining, Inc. (CDE) : Free Stock Analysis Report (www.zacks.com)
5. ^ Lundin Mining Corp. (LUNMF) : Free Stock Analysis Report (www.zacks.com)
6. ^ Ero Copper Corp. (ERO) : Free Stock Analysis Report (www.zacks.com)
7. ^ To read this article on Zacks.com click here. (www.zacks.com)
8. ^ Zacks Investment Research (www.zacks.com)