Copper prices hit $4.50 per pound on April 29, the highest price in more than a decade. The rising demand for copper amid rising manufacturing and industrial activities and a global supply crunch has resulted in a 17% increase in copper prices in the first half of 2021, through June 17.

Given copper’s broad applications in electric vehicle (EV) production and the sustainable energy industry, the demand for copper is expected to remain high over the long term. However, underinvestment in the commodity has resulted in a supply crunch. According to Bank of America (BAC), copper is expected to exceed $20,000 a ton by 2024, with copper inventories currently hovering levels akin to 15 years ago.

Given this backdrop, we believe leading copper mining stocks Rio Tinto Group (RIO), Vale S.A. ADR (VALE), and Southern Copper Corporation (SCCO) should deliver significant returns in the near term.

Rio Tinto Group (RIO)

London-based RIO explores for, mines, and processes mineral resources globally. It markets aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and uranium. The company also owns and operates open pit and underground mines, refineries, and research and service facilities.

On June 17, RIO  opened a new scandium plant in Canada to further ramp up its production capacity, in line with market demand.

In May, RIO and Comptech agreed to collaborate to introduce a new generation of aluminum alloys to the market for use in advanced technologies. Amid the rising demand for electric vehicles (EVs) and 5G antennas, the company should emerge as a prominent player in the industry.

RIO’s sales revenue increased 3% year-over-year to $44.61 billion in the year ended December 31. Its net earnings grew 22% from its  year-ago value to $9.77 billion. Its net cash generated from operating activities rose 6% year-over-year to $15.88 billion over the period. And the company’s EPS increased 21% year-over-year to $7.70.

Analysts expect RIO’s revenues to increase 46.8% year-over-year to $65.48 billion in the current year. A $15.23  consensus EPS estimate for the current year indicates a 97.9% rise from the last year. Shares of RIO have gained 35.3% over the past year and 10.3% year-to-date.

It is no surprise that RIO has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

The stock also has a B grade for Value, Sentiment, and Stability. Among the 38 stocks in the Industrial – Metals industry, RIO is ranked #3. To see additional RIO ratings for Growth, Momentum, and Quality, click here.

Click here to check out our Industrial Sector Report for 2021

Vale S.A. ADR (VALE)

VALE produces and sells iron ore and iron ore pellets for use as raw materials in steelmaking worldwide. The Rio de Janeiro-based company’s segments include Ferrous Minerals, Base Metals, and Coal.

On June 29, VALE announced a CAD150 million ($119.14 million) investment to extend its current mining activities in Thompson, Manitoba, by 10 years. Given the emerging industrial sectors and zero-emission projects worldwide, the company’s plan to expand production should fetch significant returns in the extended period.

In April, VALE signed an investment agreement with Mitsui & Co., Ltd (MITSY) to acquire Mitsui´s stakes in the Moatize coal mine and the Nacala Logistics Corridor. The company expects this acquisition will help sustain its goal of becoming a leader in low-carbon mining. 

VALE’s net operating revenue increased 81.4% year-over-year to $12.65 billion in its  fiscal first quarter, ended March 31. Its operating income stood at $7.38 billion, up 276% from the same period last year. Its net income grew 3,301.9% from its year-ago value to $5.48 billion. The company’s EPS increased 2,080% year-over-year to $1.09.

A $17.83 billion consensus revenue estimate for its  fiscal third quarter (ending September 2021) indicates a 64.6% increase year-over-year. The Street expects the company’s EPS to rise 152.5% from the prior-year quarter to $1.49 in the current quarter. VALE gained 92.4% over the past year. The stock has gained 31.6% year-to-date.

VALE has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. In addition, VALE has an A for Growth and Quality, and a B for Value, Sentiment, and Momentum. It is ranked #2 in the Industrial – Metals industry. Click here to view additional VALE ratings for Stability.

Note that VALE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.

Southern Copper Corporation (SCCO)

SCC is one of the largest integrated copper producers in the world. The company produces  copper, molybdenum, zinc, lead, coal, and silver. It operates primarily in Peru, Mexico, Argentina, Ecuador, and Chile. SCC is based in Phoenix, Ariz.

SCCO’s net sales increased 47.3% year-over-year to $2.53 billion in its  fiscal first quarter, ended March 31. Its operating income grew 153.4% from its  year-ago value to $1.35 billion, while its net income improved 254.8% year-over-year to $767.10 million over the period. The company’s EPS increased 253.6% year-over-year to $0.99.

A $2.66 billion consensus revenue estimate for its fiscal third quarter, ending September 2021, indicates a 34.2% improvement from the same period last year. In addition, analysts expect the company’s EPS to come in at $1.1 in the current quarter, indicating a 69.2% rise year-over-year. Furthermore, SCCO surpassed the Street’s EPS estimates in each of the trailing four quarters, which is impressive.

SCCO has gained 41.7% over the past year. The stock gained 2.4% intraday to close yesterday’s trading session at $63.55.

SCCO has an overall B rating, which equates to Buy in our proprietary rating system. SCCO also has a B grade of B for Growth, Stability, and Quality. It is ranked #7 in the Industrial – Metals  industry.

Beyond what we’ve stated above, we have also rated SCCO for Value, Sentiment, and Momentum. Click here to view all SCCO ratings.  

RIO shares were trading at $82.08 per share on Thursday afternoon, down $0.86 (-1.04%). Year-to-date, RIO has gained 14.17%, versus a 17.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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