Copper prices have come down by more than 12% from the 12-month high but remain nearly 50% higher than a year ago. The sharp run-up in the commodity price of copper was the result of what seemed to investors as a global economy once more on the rise, following a devastating battle with the coronavirus. By mid-May, the signs of lower-than-expected economic growth began to weigh on copper prices and on the shares of the companies that mine copper.
For the miners, rising demand from renewable and sustainable energy producers drove up pricing. The recent downturn is not expected to last, if for no other reason than that demand for renewables will continue to grow. However, higher copper prices may make renewable energy projects financially unworkable.
A recent Citigroup estimate concluded that the global shortfall in copper production will reach 521,000 metric tons this year. Copper miners and refiners will need to invest more than $100 billion to dodge a shortfall that could reach 4.7 million metric tons annually by 2030. The good news is that high copper prices are encouraging more investment in mining projects that were once not believed to be economically feasible.
Among the world’s top producers of copper in 2020, one is nationalized, and the other trades only over the counter (OTC) in the United States. Chile’s national copper company, known as Codelco, produced 1.73 million metric tons of copper last year, the most of any copper miner. Chile’s estimated copper reserves are the largest in the world, at around 200 million metric tons.
OTC-traded Glencore produced 1.26 million metric tons of copper last year from operations in Australia, Africa and South America. Glencore’s major copper mines are located in Peru and Chile, and it was the world’s fourth-largest copper producer in 2020.
Another of the world’s top five copper producers, Freeport-McMoRan Inc. (NYSE: FCX) failed to make our list of the highest dividend payers, but over the course of the past 12 months, the company’s stock price has more than doubled. Freeport mined 1.45 million metric tons of copper in 2020. The company’s dividend yield is only about 0.95%, however.
Southern Copper
Phoenix-based Southern Copper Corp. (NYSE: SCCO) was 2020’s fifth-largest copper miner, with total production of 1 million metric tons. The company’s major operations are located in Mexico and Peru and the company is a subsidiary of Americas Mining, the mining arm of Grupo Mexico. Glencore pays a dividend yield of around 3.3%.
Southern Copper’s share price has increased by 33.3% over the past 12 months, and the stock currently trades at around $58.35, implying an upside of about 2.8% to a median price target of $60. None of the 15 brokerages covering the stock has a Buy or Strong Buy rating on the shares. The stock’s 52-week range is $45.88 to $83.29, and the annual dividend of $3.60 works out to a yield of 6.4%.
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