The copper industry is comprised of a number of companies that are dedicated to supplying value and performance to their customers. These copper mining companies are known for their innovation and quality products, which has led to their continued success.
The copper mining industry is expected to grow in 2022 and beyond, thanks to the increasing demand for copper products and copper mining companies maintaining growth. This growth is expected to be driven by a number of factors, including the increasing use of renewable energy sources, the continued growth of the automotive industry, and the increasing demand from the electronics sector.
Several copper mining companies have stood out this year for their results and operations, even while coming off of recent highs. The overall selloff in equities has affected copper mining stocks, giving these companies the potential to deliver the biggest opportunities for investment:
Junior mining company Solaris Resources (TSX:SLS) (OTCQB:SLSSF) has its flagship copper exploration project Warintza in southeastern Ecuador. The company reported new assay results from the first series of drill holes during follow-up drilling on the discovery of Warintza West. The results outline a new deposit that remains open in the Warintza cluster, just adjacent to the Mineral Resource Estimate (MRE) the company published in April 2022.
These follow-up holes fan out in all directions, outlining a broad porphyry deposit of at least 900m x 600m and still open and lie adjacent to and not included within the MRE. The company is focusing on targeting growth for the high-grade starter pit at Warintza Central and expanding the Warintza East discovery next while continuing the planned drilling at Warintza West. The Warintza Project is located in southeastern Ecuador, and Warintza West is the fourth and latest discovery at the project, a stellar record among copper mining companies.
Solaris Resources stock has come off of highs that reached $17, and pulled back, all the while continuing to deliver results from the Warintza Project and expanding the MRE. This is one stock that may be undervalued and would stand to benefit from future rising copper prices and improved market sentiment. Insiders at the company including Executive Chairman Richard Warke have also continued to exercise warrants at a premium to the market, most recently at $6.75, a show of confidence in the company and the investment opportunity it represents.
This Canadian copper mining company has operations in Mexico, the US, and Chile, and trades OTC under the ticker CSCCF. Capstone recently announced that the Mantos Blancos and Mantoverdes operations in Chile had both made commitments to the Copper Mark. Copper Mark is a United Nations framework promoting responsible production and sustainable development practices in mining. 10 of the largest copper-producing companies in the world are also covered by Copper Mark.
Canadian copper mining company Ero Copper produces and sells copper, gold, and silver, primarily in Brazil. The company continues to report strong sales and output and may be a value stock right now, as it has also come off of recent highs.
Canada-based Lundin Mining has copper, zinc, gold, and nickel explorations and is developing mineral properties in Chile, Brazil, Sweden, Portugal, and the US. The company has run into some issues at its Chilean Minera Ojos del Salao operation when a sinkhole developed near the Alcaparrosa mine, and operations have remained suspended for some time.
Copper mining companies track production and focus on mineral exploration and are therefore affected less by spot prices. The current volatility in copper prices has hit the broader market, but for the copper mining companies above consistently delivering value for shareholders, this volatility may be a small price to pay.
The market has been dealing with a few headwinds that have seen equities pull back from recent highs, but there are a few reasons that buyers are now stepping in more heavily and scooping up deals. The first is that the long term trend for rising copper prices remains in place due to a range of factors.
Low New Supply
The current slate of mining projects bringing copper to the market is far too small to keep up with expected demand in the coming years. A recent surge in M&A activity for copper mining companies in the space is a strong indication that the industry is aware of this imbalance and is working to consolidate and bring more supply online.
Inventories on the LME and other exchanges have fallen to record lows, reflecting a very tight market for traders.
Copper is an essential component in a number of key industries, including construction, electronics, and automotive manufacturing. As the world economy continues to recover from the pandemic, we expect to see increased demand for copper products, which will put upward pressure on prices.
Supply Chain Disruptions
The past two years and the conflict in Ukraine have caused widespread disruptions to global supply chains, and the copper industry has been no exception. This has led to delays in the delivery of copper products from mines to consumer countries, and has put upward pressure on prices.
Prices for copper mining stocks also track spot copper prices, but often amplify losses or gains. As copper prices came off of highs due to concerns about demand from China, equities reflected many of those market dynamics. This sets stocks for copper mining companies up for bigger gains in the future as copper prices rise again.
While spot copper might recover 30%-50% in the near term, investors could see gains of two to three times that in well-positioned copper mining companies. Oversold conditions and negative market sentiment have dragged down copper equities more than may be justified, and investors have already begun to buy back into those companies as they prepare for a market reversal for the entire mining industry.