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Expansion Plans to Drive Southern Copper (SCCO), Costs Ail
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Southern Copper Corporation (SCCO - Free Report) is poised well for growth, backed by its industry-leading copper reserves, focus on increasing low-cost production and ongoing investment in expansion projects. Its cost control measures will help offset the impact of inflated fuel, labor and operating costs.
Output to Pick Up 2023 Onwards
In 2022, the company registered a 6.6% year-over-year decline in copper production to 894,703 tons, due to work stoppage at the Cuajone mine as well as lower ore grades. Molybdenum production was 13.3% down to 26,240 tons as a result of lower ore grades at the Toquepala mine. Zinc production was down 10.4% year over year to 60,010 tons due to lower production at the Charcas and Santa Barbara mines. Mined silver production was 18.56 million ounces, down 2.1% from last year. This was mainly due to a decline in production at Peruvian operations and the La Caridad mine which was partially offset by higher production at Buenavista and IMMSA mines.
These numbers are expected to pick up and reach 926,000 tons in 2023. This will be made possible by the Peruvian production coming back on track and new production on projects of Pilares and Buenavista zinc concentrators.
Solid Projects on Track
Southern Copper’s total investment program in Peru runs to $7.9 billion, including the Michiquillay ($2.5 billion) and Los Chancas ($2.6 billion) projects. Peru is currently the second-largest producer of copper globally and holds 13% of the world’s copper reserves. Michiquillay is expected to become one of Peru's largest copper mines and will produce 225,000 tons of copper per year for an initial mine life of more than 25 years and at a competitive cash cost. Production is expected to commence by 2032.
The Los Chancas project located in Apurimac, Peru is a copper and molybdenum porphyry deposit. The project envisions an open-pit mine with a combined operation of the concentrator and SX-EW processes to produce 130,000 tons of copper and 7,500 tons of molybdenum annually. The project is expected to commence in 2030.
The company has a number of other projects that are planned to be developed in the future, which will help in attaining its copper volume production target of 1.5 million tons by 2031.
Metal Prices to Pick Up in the Long Term
Copper prices had been on a downtrend in 2022 amid uncertainties surrounding the global economy, as new coronavirus restrictions in China affected the demand for the red metal, thus hurting prices. Zinc prices also bore the brunt of weak demand worries as COVID lockdowns in China stoked concerns over a global recession. Silver prices had also been negatively impacted, weighed down by the stronger U.S. dollar, rising interest rates and sluggish growth.
Industrial production in China has lagged expectations for the first two months of this year while political unrest in South America is fueling supply concerns. This has been weighing on copper prices lately.
The long-term outlook for copper is positive, as copper demand is expected to grow, driven by electric vehicles and renewable energy, and infrastructure investments. Copper prices will be supported by growth in public infrastructure investment in the United States, as well as global initiatives to address climate change.
Molybdenum prices are set to increase on the back of healthy demand and reduced supply. Long-term fundamentals for zinc remain strong due to its significant industrial consumption. Silver prices will gain eventually, given its industrial use, impending demand-supply imbalance and safe-haven demand.
Industry Leading Reserves & Low Cost: A Winning Combination
Southern Copper has the largest copper reserves in the industry and operates high-quality, world-class assets in investment-grade countries such as Mexico and Peru. Backed by its constant focus on increasing low-cost production and growth investments, the company is well-poised to continue delivering enhanced performance. Its efforts to lower costs have aided the company to negate the impacts of higher costs for diesel and fuel, operating and repair materials, supplies and energy, as well as higher labor costs.
Price Performance
Image Source: Zacks Investment Research
The company’s shares have fallen 2.6% over the past year compared with the industry’s 14% growth.
Zacks Rank & Stocks to Consider
Southern Copper currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Steel Dynamics Inc. (STLD - Free Report) , Olympic Steel Inc. (ZEUS - Free Report) and Nucor Corporation (NUE - Free Report) .
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). STLD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3% on average. STLD has rallied around 23.2% in a year.
Olympic Steel currently sports a Zacks Rank of 1. ZEUS’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2% on average. ZEUS has rallied around 51.7% in a year.
Nucor currently carries a Zacks Rank #2 (Buy). NUE’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.7% on average. NUE has rallied around 20.5% in a year.
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Expansion Plans to Drive Southern Copper (SCCO), Costs Ail
Southern Copper Corporation (SCCO - Free Report) is poised well for growth, backed by its industry-leading copper reserves, focus on increasing low-cost production and ongoing investment in expansion projects. Its cost control measures will help offset the impact of inflated fuel, labor and operating costs.
Output to Pick Up 2023 Onwards
In 2022, the company registered a 6.6% year-over-year decline in copper production to 894,703 tons, due to work stoppage at the Cuajone mine as well as lower ore grades. Molybdenum production was 13.3% down to 26,240 tons as a result of lower ore grades at the Toquepala mine. Zinc production was down 10.4% year over year to 60,010 tons due to lower production at the Charcas and Santa Barbara mines. Mined silver production was 18.56 million ounces, down 2.1% from last year. This was mainly due to a decline in production at Peruvian operations and the La Caridad mine which was partially offset by higher production at Buenavista and IMMSA mines.
These numbers are expected to pick up and reach 926,000 tons in 2023. This will be made possible by the Peruvian production coming back on track and new production on projects of Pilares and Buenavista zinc concentrators.
Solid Projects on Track
Southern Copper’s total investment program in Peru runs to $7.9 billion, including the Michiquillay ($2.5 billion) and Los Chancas ($2.6 billion) projects. Peru is currently the second-largest producer of copper globally and holds 13% of the world’s copper reserves. Michiquillay is expected to become one of Peru's largest copper mines and will produce 225,000 tons of copper per year for an initial mine life of more than 25 years and at a competitive cash cost. Production is expected to commence by 2032.
The Los Chancas project located in Apurimac, Peru is a copper and molybdenum porphyry deposit. The project envisions an open-pit mine with a combined operation of the concentrator and SX-EW processes to produce 130,000 tons of copper and 7,500 tons of molybdenum annually. The project is expected to commence in 2030.
The company has a number of other projects that are planned to be developed in the future, which will help in attaining its copper volume production target of 1.5 million tons by 2031.
Metal Prices to Pick Up in the Long Term
Copper prices had been on a downtrend in 2022 amid uncertainties surrounding the global economy, as new coronavirus restrictions in China affected the demand for the red metal, thus hurting prices. Zinc prices also bore the brunt of weak demand worries as COVID lockdowns in China stoked concerns over a global recession. Silver prices had also been negatively impacted, weighed down by the stronger U.S. dollar, rising interest rates and sluggish growth.
Industrial production in China has lagged expectations for the first two months of this year while political unrest in South America is fueling supply concerns. This has been weighing on copper prices lately.
The long-term outlook for copper is positive, as copper demand is expected to grow, driven by electric vehicles and renewable energy, and infrastructure investments. Copper prices will be supported by growth in public infrastructure investment in the United States, as well as global initiatives to address climate change.
Molybdenum prices are set to increase on the back of healthy demand and reduced supply. Long-term fundamentals for zinc remain strong due to its significant industrial consumption. Silver prices will gain eventually, given its industrial use, impending demand-supply imbalance and safe-haven demand.
Industry Leading Reserves & Low Cost: A Winning Combination
Southern Copper has the largest copper reserves in the industry and operates high-quality, world-class assets in investment-grade countries such as Mexico and Peru. Backed by its constant focus on increasing low-cost production and growth investments, the company is well-poised to continue delivering enhanced performance. Its efforts to lower costs have aided the company to negate the impacts of higher costs for diesel and fuel, operating and repair materials, supplies and energy, as well as higher labor costs.
Price Performance
Image Source: Zacks Investment Research
The company’s shares have fallen 2.6% over the past year compared with the industry’s 14% growth.
Zacks Rank & Stocks to Consider
Southern Copper currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the basic materials space are Steel Dynamics Inc. (STLD - Free Report) , Olympic Steel Inc. (ZEUS - Free Report) and Nucor Corporation (NUE - Free Report) .
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). STLD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3% on average. STLD has rallied around 23.2% in a year.
Olympic Steel currently sports a Zacks Rank of 1. ZEUS’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2% on average. ZEUS has rallied around 51.7% in a year.
Nucor currently carries a Zacks Rank #2 (Buy). NUE’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.7% on average. NUE has rallied around 20.5% in a year.