Mining New Profits In Copper’s Rebound

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Although copper has been hit hard by the world economic slowdown and general financial malaise, it has fared somewhat better than other non-precious metals.  Along with the housing industry, copper is required for making the vital components and wiring needed to meet rising tech and electronic demands.  The London Metal Exchange reports copper inventories are at their lowest levels since the beginning of June this year.  Amid scarcity concerns, three copper mining companies are well-positioned to benefit from the anticipated increase in copper prices.

Freeport-McMoRan (NYSE: FCX), founded in 1987, is the copper industries mining leader.  Investors are rewarded with a generous $1.25 dividend, which is a 3.50% dividend yield.  The companies’ market cap is $33.59 billion and has an excellent ROE of 21.92%.

Freeport-McMoRan continues to grow revenue and net income.  Revenue for year end 2011 was $20.880 billion, which was almost $2 billion more than 2010’s $18.982 billion, and annual net income also rose from $4.336 billion in 2010 to $4.560 billion in 2011.  Revenue for Q1 and Q2 2012 totaled $9.080 billion, and net income for the first half of 2012 was $1.474 billion.

Analysts rate Freeport-McMoRan as buy/hold, and are estimating a 19% increase in sales growth.  2012’s revenue is expected to come in at $22.10 billion with a target share price of $46.00 - $49.00.  The stock currently trades around $35.00 a share.

Southern Copper (NYSE: SCCO) has been in business since 1952 mining copper and other metals in Mexico and South America.  The company has a dividend yield of 3.0% and pays a $0.96 dividend.  Southern Copper has a $27.38 billion market cap and an excellent ROE of 55.67%.

Annual revenue for 2011 was $6.819 billion, a marked increase from 2010’s $5.150 billion.  Net income jumped by almost $1 billion, rising from $1.554 billion in 2010 to $2.336 billion in 2011.  For the first half of 2012, the company earned $3.456 billion in revenue and $1.184 billion in net income.

Analysts rate Southern Copper as hold, and estimate 2012 annual revenue at $6.78 billion.  The target stock price ranges between $36.00 and $43.00.  The stock currently trades around $32.00 a share.

For investors looking for a bargain, Sterlite Industries (NYSE: SSLT) is just coming off its lows and currently trades around $7.30 a share. The company has been mining copper since 1986 and is headquartered in India.  Sterlite pays a cash dividend of $0.12 which translates to a 1.50% dividend yield.  The company has a market cap of $6.12 billion.

Sterlite reports $4.19 billion of cash against $2.82 billion of debt.  The companies’ fiscal year ends in March, and annual revenue for the year ended 3/12 was $8.088 billion, considerably higher than 3/11’s revenue of $6.783 billion.  Net income likewise rose, coming in at $1.163 billion and $1.541 billion, respectively.

Analysts rate Sterlite as a buy and give it a projected target price of $11.41.

Demand for copper is expected to grow because of an increase in new housing starts, new projects and repairs planned for state and federal infrastructure and increasing tech demands.  When added to China’s estimated 6-7% increased demand this year, Southern Copper, Freeport-McMoRan Copper & Gold, and Sterlite Industries could see their stock prices rebound nicely before the year ends.   

 

 


kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Motley Fool newsletter services recommend Sterlite Industries (India) Ltd.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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