4 Leveraged Copper Stocks for the Current Copper Rally

The copper stocks on our list trade at discounted valuation multiples compared with their peers

SmallCapPower | January 2, 2018: Copper prices climbed to a four-year high of US$3.28 per lb recently, rallying ~11% from a low in early December. Today, we’ve identified four copper stocks and their current discounted valuation multiples. In addition to a strong year for the base metal, which is up ~30% Y/Y, copper demand is expected to remain robust during 2018. China, which accounts for half of global copper demand, saw imports of copper rise to 329,168 tonnes in November, up 19% Y/Y. In addition, the risk of labour strikes in Latin America could serve as a potential catalyst for copper prices. According to analysts at Citi, over 30 labour contracts, covering about five million tonnes of mine supply, are set to expire in 2018, primarily in Chile and Peru.

Hudbay Minerals Inc. (TSX:HBM) – $11.13
Base Metals

Hudbay Minerals is a Canada-based copper-zinc producer with assets in North and South America. The Company’s assets include its Manitoba and Peru operations. The Company’s Constancia copper porphyry project was acquired in 2011, and was brought into production in 2014. The Constancia property comprises 22,520 hectares in southeastern Peru, 100 kilometers south of Cusco. In addition, Hudbay has three producing mines in Manitoba; the 777 Mine, the Lalor Mine and the Reed Mine. Additionally, Hudbay operates two processing facilities in Snow Lake and Flin Flon, Manitoba.

  • Market Cap: $2,908 Million
  • Price/Cash Flows Per Share (2018): 4.5x
  • Peer Average: 6.4x
  • Month over Month Return: 14%

Teck Resources Ltd. (TSX:TECK.B) – $32.33
Specialty Mining & Metals

Teck Resources is one of Canada’s largest resource companies with business units focused on the production and exploration of copper, zinc, coal and energy. The Company has interests in 13 mines and 6 projects in Canada, Peru, Chile and the United States. Teck has set an annual guidance for 283Kt of copper during 2017.

  • Market Cap: $18,695 Million
  • Price/Cash Flows Per Share (2018): 4.8x
  • Peer Average: 6.8x
  • Month over Month Return: 12%

First Quantum Minerals Ltd. (TSX:FM) – $17.12
Base Metals

First Quantum Minerals produces copper, gold, nickel and zinc. The Company’s portfolio of assets includes seven mines and one copper smelter across six countries. First Quantum Minerals has a 2017 copper production guidance of 570,000 tonnes.

  • Market Cap: $11,802 Million
  • Price/Cash Flows Per Share (2018): 6.4x
  • Peer Average: 6.8x
  • Month over Month Return: 28%

Freeport-McMoRan Inc. (NYSE:FCX) – $19.27
Base Metals

Headquartered in Phoenix, Arizona, Freeport is the world’s largest publicly-traded copper producer. The Company’s diverse portfolio of assets, includes the Grasberg minerals district in Indonesia; one of the world’s largest copper deposits, along with the Morenci minerals district in Arizona and the Cerro Verde operations in Peru. In total, the Company has 10 operating mines, seven of which are in North America.

  • Market Cap: $27,900 Million
  • Price/Cash Flows Per Share (2018): 5.6x
  • Peer Average: 6.8x
  • Month over Month Return: 33%

Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own units in any of the companies mentioned above.

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