Back to top

Image: Bigstock

5 Non-Ferrous Metal Mining Stocks to Watch on Improving Industry Trends

Read MoreHide Full Article

The prospects of the Zacks Mining - Non Ferrous industry appear promising at the moment, backed by the upward trajectory of metal prices. The demand for non-ferrous metals is expected to be supported by the energy-transition trend, which will buoy the industry.

We suggest keeping a close eye on companies like Southern Copper Corporation (SCCO - Free Report) , Freeport-McMoRan Inc. (FCX - Free Report) , Lundin Mining (LUNMF - Free Report) , Ero Copper (ERO - Free Report) and Centrus Energy (LEU - Free Report) . These companies are strategically focused on building reserves, technological investments, cost control and enhancing production efficiency, positioning them well to capitalize on the industry's growth potential.

About the Industry

The Zacks Mining - Non Ferrous industry comprises companies that produce non-ferrous metals, including copper, gold, silver, cobalt, molybdenum, zinc, aluminum and uranium. These metals are utilized by various industries, including aerospace, automotive, packaging, construction, machinery, electronics, transportation, jewelry, chemical and nuclear energy. Mining is a long, complex and capital-intensive process. Significant exploration and development to evaluate the size of the deposit, followed by the assessment of ways to extract and process ore efficiently, safely and responsibly, precede the actual mining operations. Miners continuously seek opportunities to grow their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets internally and through acquisitions.

What's Shaping the Future of the Mining - Non Ferrous Industry?

Improving Metal Prices Raise Optimism: Copper prices have notched gains of more than 12% so far this year and are currently trading at the levels last seen in June 2022. Copper smelters jointly agreed to cut down production at unprofitable plants due to raw material shortages. The recent expansion witnessed in the U.S. manufacturing sector bodes well for the industrial metal. In retaliation to Moscow’s invasion of Ukraine, the United States and the U.K. banned the deliveries of newly produced Russian copper, aluminum or nickel on the London Metal Exchange or Chicago Mercantile Exchange.  This has led to a surge in metal prices. Gold has appreciated 15.5% so far this year. Recent price increases have been driven by strong demand from central banks and a surge in safe-haven demand following geopolitical tensions in the Middle East. Silver prices have also benefitted from geopolitical tensions and improving industrial demand. Uranium had surged to 15-year highs of $106 per pound in February following the declaration from Kazatomprom, the world's largest uranium mining company based in Kazakhstan, stating its intention to limit uranium production to 80% of the permitted maximum output. Prices have since steadied at around $90 per pound. Uranium prices will be supported by robust demand and tight supply. Overall, industry players are dealing with depleting resources, declining supply in old mines and a lack of new mines. Development projects are inherently risky and capital-intensive. While demand has been strong, there will be an eventual deficit in metal supply, leading to a situation that will bolster metal prices. This, in turn, will favor the industry in the long haul.

Efforts Underway to Sustain Margins Amid High Costs: The industry has been facing a shortage of skilled workforce lately, which has hiked wages. Industry players have also been grappling with escalating production costs, including electricity, water and materials, as well as higher freight expenses and supply-chain issues. Since the industry cannot control the prices of its products, it focuses on improving sales volumes, increasing operating cash flows and lowering unit net cash costs. Industry participants are opting for alternate energy sources to minimize fuel-price volatility and secure supply. Miners are now committed to cost-reduction strategies and digital innovation to drive operating efficiencies.

Strong Demand to Support Industry: The demand for non-ferrous metals will remain high in the future, given their wide use in primary sectors, including transportation, electricity, construction, telecommunication, energy and information technology. The demand for electric vehicles and renewable energy is expected to be a significant growth driver for metals like copper and nickel in the years to come. The plan to overhaul and upgrade the nation’s infrastructure, and promote green policies, per the U.S. Infrastructure Investment and Jobs Act, will also require a huge amount of non-ferrous metals.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bright prospects for the near term. The Zacks Mining - Non Ferrous industry, a 10-stock group within the broader Zacks Basic Materials Sector, currently carries a Zacks Industry Rank #63, which places it in the top 25% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since the beginning of this year, the industry’s earnings estimates for the current year have been revised upward by 3%.

Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and its valuation picture.

Industry Versus S&P 500 & Sector

The Zacks Mining- Non Ferrous Industry has outperformed its sector but lagged the Zacks S&P 500 composite over the past 12 months. The stocks in this industry have collectively gained 27% in the past year compared with the Zacks Basic Materials sector’s rise of 0.9%. The S&P 500 has grown 22.6% in the said time frame.

One-Year Price Performance


Industry's Current Valuation

Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Mining- Non Ferrous stocks, we see that the industry is currently trading at 7.98X compared with the S&P 500’s 12.57X. The Basic Materials sector’s trailing 12-month EV/EBITDA is at 7.06X. This is shown in the charts below.

Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)

Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)

Over the last five years, the industry traded as high as 8.88X and as low as 3.35X, the median being 6.57X.

5 Mining - Non Ferrous Stocks to Keep a Tab on

Centrus Energy: The company started the production of High-Assay Low-Enriched Uranium (“HALEU”) at its American Centrifuge Plant in Piketon, OH, in October 2023. It is the first U.S.-owned uranium enrichment plant to begin production since 1954. Backed by these developments, the company has gained 33.1% in a year. After making its first delivery of HALEU to the U.S. Department of Energy, completing phase one of its contract with the department, Centrus will now move on to phase two of the contract, which requires a full year of HALEU production at the rate of 900 kilograms per year at the Ohio facility. Being the only company in the United States licensed to produce HALEU, Centrus Energy has an edge over its peers. Subject to the availability of funding, the company has the capability to expand the HALEU production at the Piketon facility and produce Low-Enriched Uranium for existing reactors.

The Zacks Consensus Estimate for the Bethesda, MD-based company’s fiscal 2024 earnings has been unchanged over the past 30 days. LEU has a trailing four-quarter earnings surprise of 137%, on average. The company currently flaunts a Zacks Rank # 1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Price: LEU

Lundin Mining: The company acquired a 51% stake in the Caserones copper mine in July 2023, resulting in an additional 120,000-130,000 tons of copper being added to its production profile on a 100% basis. This move adds a long-life asset in a tier-one jurisdiction strategically located in the Vicuña District. This acquisition and contributions from the expansion project at Neves-Corvo resulted in a remarkable 27% increase in its copper production to a record 315kt in 2023. This has led to a 39.8% appreciation in its share price over the past year. LUNMF expects copper production in 2024 to be up 16-27%. While maintaining a focus on growth plans and capital allocation, the company is committed to optimizing assets and operational efficiencies to drive down costs. Exploration efforts, with a $48-million budget for 2024, include drilling campaigns at Caserones, Josemaria, Chapada and Zinkgruvan, targeting various high-potential areas and extensions to existing deposits.

The Zacks Consensus Estimate for Vancouver, Canada-based LUNMF’s fiscal 2024 earnings suggests a year-over-year improvement of 91%. The consensus estimate has moved up 47% in the past 30 days. It has a long-term estimated earnings growth rate of 19.9%. The company currently carries a Zacks Rank #2 (Buy).

Price: LUNMF

Southern Copper: The company has the largest copper reserve in the industry and operates world-class assets in investment-grade countries, such as Mexico and Peru. SCCO expects copper production to rise 2.6% year over year and reach 935,900 tons in 2024. The company expects this growth to be driven by the Pilares project running at full capacity and ramp up of the Buenavista zinc concentrators. The company’s capital investment program for this decade exceeds $15 billion and includes investments at the Buenavista Zinc, Pilares, El Pilar and El Arco projects in Mexico, and the Tia Maria, Los Chancas and Michiquillay projects in Peru. Given its constant commitment to increasing low-cost production and growth investments, the company is well-poised to continue delivering an enhanced performance. SCCO’s shares have gained 42.6% over the past year.

The Zacks Consensus Estimate for the Phoenix, AZ-based company’s fiscal 2024 earnings suggests year-over-year growth of 24%. The estimate has moved up 11% over the past 30 days. SCCO has a long-term estimated earnings growth rate of 8.9%. The company currently carries a Zacks Rank #3 (Hold).

Price: SCCO

Freeport-McMoRan: The company's efforts to expand reserves through exploration near existing mines will fuel growth. FCX is implementing the latest technologies and data analytics in leaching processes across its North America and South America operations. Initial results are providing incremental low-cost additions to FCX’s expected annual production and the potential to add to its reserves. Aided by these efforts, in the fourth quarter of 2023, the company hit its target of 200 million pounds of copper annually. Plans are underway to double its Bagdad operation's concentrator capacity and increase Safford/Lone Star's capacity to 300 million pounds of copper per year from oxide ores (higher than the initial target of 200 million pounds). FCX is ramping up underground production at Grasberg in Indonesia, increasing milling rates. It is on track with its smelter projects in Indonesia (the Manyar smelter and precious metals refinery projects) and achieved a 90% completion milestone at the end of 2023. PT-FI completed a project to install additional milling facilities in December 2023 that would increase milling capacity to roughly 240,000 metric tons of ore per day. The company’s focus on cost management and lowering debt levels is commendable. FCX shares have gained 18.7% in a year.

The Zacks Consensus Estimate for the company’s earnings for fiscal 2024 has moved up 5% over the past 30 days. The estimate indicates year-over-year growth of 4%. FCX has a trailing four-quarter earnings surprise of 21.5%, on average. It has a long-term estimated earnings growth rate of 13.8%. The Phoenix, AZ-based company currently carries a Zacks Rank #3.

Price: FCX

Ero Copper: The company has been progressing with its strategic initiatives, which will drive significant near-term growth. Among these, the construction of the Tucumã Project is running on schedule and is 90% complete, per the last available status as of February 2024. The production of copper concentrate is scheduled to commence in the second half of 2024. The Caraíba mill expansion, which is expected to increase mill throughput capacity from 3.2 million tons per year to 4.2 million tons per year, was completed in December 2023. The Xavantina Operations' NX60 initiative was completed in 2023. As a result, the company achieved record gold production for the year. It expects to sustain annual gold production levels of 55,000-60,000 ounces, moving forward. ERO is on track to double copper production to more than 100,000 tons in 2025 and expects to achieve higher sustained gold production levels of 55,000-60,000 ounces per year beginning in 2024. ERO shares have gained 9.1% in the past year.

The Zacks Consensus Estimate for the Vancouver, Canada-based company’s fiscal 2024 earnings indicates year-over-year growth of 79%. The estimate has moved up 8% in the past 30 days. ERO currently carries a Zacks Rank #3.

Price: ERO

Published in