Home Archives - Page 62 of 166

(Bloomberg) — As BHP Group considers its next move, there’s one big question facing the mining world’s bankers, analysts and executives at rival producers: What’s Anglo American Plc actually worth?

Most Read from Bloomberg

Anglo’s shares are trading about 8% above the price implied by BHP’s initial proposal, which was swiftly and firmly rejected, and Bloomberg reported on the weekend that the larger firm was considering an improved offer.

But how high can BHP go? The world’s biggest miner needs to thread the needle with an offer that can win over Anglo investors while maintaining the support of its own shareholders — especially given the company’s history of disastrous dealmaking.

And while BHP’s bid is driven by its interest in Anglo’s huge copper business, the company produces a hodgepodge of other commodities from diamonds to platinum and coal — each with different market dynamics and degrees of attractiveness. BHP wants Anglo to spin off its majority stakes in two South African miners even before a deal takes place, and has suggested it would put other unwanted pieces up for sale as well.

Diversified Dilemma

The mining industry can be loosely divided into two types of companies: “pure plays,” which focus on one particular metal such as copper or gold, and “diversified” miners — conglomerates like BHP and Anglo that produce a wide range of often-unrelated commodities.

Pure plays in a certain market tend to trade at similar multiples of their earnings, making them easier to value.

But things get a lot messier when it comes to diversified miners, each with a unique combination of commodities under a single management and corporate structure. The diversification helps makes the companies more resilient to demand shocks in any single market, but also means that investors don’t get the full benefit of price rallies if group earnings are weighed down by weakness in other parts of the business.

In Anglo’s case, its particularly unusual mix of niche commodities — it’s the only large miner with big diamonds and platinum operations, for example — are seen as one of the reasons that the company hasn’t been successfully targeted in the past. The iconic De Beers business in particular could be difficult to value, as its only real competitor is Russia’s sanctioned diamond miner.

Even in the absence of a blowout offer from BHP or another rival, Anglo is under pressure to convince shareholders that it can realize more of the latent potential in its portfolio.

Read: Anglo’s Stumbles Make It Prey for Mining’s Biggest Predator (1)

Bloomberg reported last week that activist hedge fund Elliott Investment Management has emerged as a top-ten shareholder, and Anglo was already reviewing its businesses even before the BHP bid, in an effort to turn a corner after a series of disappointments that sent its shares plunging.

There are growing expectations that even if Anglo rejects its suitors’ advances, the company could end up being broken down to realize the value of the sum of its parts.

All About Copper

There’s no doubt that Anglo’s South American copper business is the crown jewel. In fact, analyst estimates suggest that the copper business — if it were split out into a standalone, pure-play company — would probably have a higher valuation than Anglo’s entire market capitalization just before Bloomberg broke the news of BHP’s approach.

The question is what other suitors will be willing to pay for the rest of Anglo’s businesses.

The listed South African iron ore and platinum businesses, which BHP wants Anglo to spin off, trade at much lower multiples to earnings than Anglo’s high-flying copper business probably would on its own.

Still, Anglo has some of the world’s best coking coal assets in Australia, while its Minas Rio iron ore mine in Brazil also holds appeal to BHP. While part of the rationale for the deal is to dilute BHP’s dependence on the steelmaking ingredient, Anglo produces a very high-quality iron ore product which is increasingly in demand and would improve the sort of material BHP could offer its customers.

That could leave BHP with more room to bump up its offer — while other iron ore majors like Rio Tinto could also be interested.

Buy or Build

One factor is particularly crucial in determining where the ceiling for incoming bids might be: The difference between the cost of buying Anglo and the typical investment needed to build a copper mine from scratch.

Construction costs have surged in recent years and projects frequently face lengthy delays and stiff local opposition, which helps increase the appeal of buying existing mines instead.

On the other hand, pure-play copper miners tend to trade at relatively high multiples — even before the usual takeover premiums are factored in — and the mining industry has been punished by investors in the past for overpaying in a series of disastrous deals.

That’s partly why Anglo is now being viewed as an attractive target: production missteps across its mining portfolio sent its shares tumbling over the past year while other copper miners have rallied.

It’s over a decade since BHP pursued a deal of this size, but there is one recent purchase that might be instructive: the company last year acquired Australian copper miner Oz Minerals for $6.4 billion.

Even if BHP is only interested in Anglo’s copper, its initial bid is still about 13% lower than the price-per-ton of copper it paid for Oz’s mines, according to Bloomberg calculations.

Analysts and traders surveyed by Bloomberg suggested BHP would need to offer between £28 and £35 per share, with the average estimate coming in at £30.43 — about 15% higher than where Anglo’s shares were trading Thursday.

And after Anglo rejected BHP’s multi-step deal structure, there’s also the potential that a rival might be better positioned to make a higher, simpler offer.

“From what we have seen so far the proposal does not reflect the value of the assets or the growth pipeline,” John Teahan, portfolio manager of the Redwheel Climate Engagement Strategies, said in an emailed statement. “It appears a rather opportunistic bid due to the recent weakness in the Anglo American share price, but the move may spur further interest.”

–With assistance from Alexandra Muller, Henry Ren, Jack Farchy and Thomas Biesheuvel.

Most Read from Bloomberg Businessweek

Wednesday, May 1, 2024The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Thermo Fisher Scientific Inc. (TMO), The Walt Disney Co. (DIS) and Southern Copper Corp. (SCCO). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.You can see all of today’s research reports here >>>Thermo Fisher Scientific’s shares have outperformed the Zacks Medical – Instruments industry over the past year (+4.9% vs. +3.0%). The company is braving the ongoing tough economic conditions by utilizing the (Practical Process Improvement) PPI Business System, resulting in strong financial performance.Thermo Fisher Scientific’s growth strategy is further bolstered by the introduction of the Axiom PangenomiX Array, a high-throughput array designed for global genomic studies. The consistent efforts to expand bioproduction purification resin capacity, which is used in the mRNA manufacturing process, look encouraging.The company continues to prioritize its partnership with customers to drive innovation and improve patient care, which bodes well. A strong solvency position is an added advantage. The raised 2024 outlook instills optimism. However, the year-over-year decline in revenues in Life Science Solutions and Laboratory Products and Biopharma Services looks disappointing.(You can read the full research report on Thermo Fisher Scientific here >>>)Shares of Walt Disney have outperformed the Zacks Media Conglomerates industry over the past year (+10.8% vs. -0.1%). The company is benefiting from a solid revival in the domestic and international theme park businesses. Recent attractions like the Frozen theme land at Hong Kong Disneyland and Walt Disney Park in Paris, as well as the Zootopia theme land at Shanghai Disney, are expected to boost the prospects of the theme park business.The company’s declining ad revenues due to fewer impressions have been a headwind for some time now. Disney+’s profitability is expected to be hurt by higher investments in content, which will increase programming and production costs in the Media and Entertainment Distribution segment.Its leveraged balance sheet remains a concern. Disney+ is facing tough competition in the streaming market from the likes of Netflix and Amazon Prime Video.(You can read the full research report on Walt Disney here >>>)Southern Copper’s shares have outperformed the Zacks Mining – Non Ferrous industry over the past year (+59.4% vs. +43.7%). The company expects copper production to be up 4.1% year over year and reach 948,800 tons in 2024 driven by the Pilares project running at full capacity and the Buenavista zinc concentrator ramp-up.Copper prices had been impacted in the earlier part of 2024 due to weak demand in China and the manufacturing sector. However, prices have rebounded recently supported by China's output reduction plans and pickup in industrial activity. Higher output and metal prices will aid the top line and cost-control measures will help offset the impact of inflated labor and operating costs on margins.With substantial copper reserves and strategic growth investments, Southern Copper is positioned for strong performance. The long-term prospects for copper remains positive, buoyed by U.S. infrastructure investment and global clean energy transition.(You can read the full research report on Sothern Copper here >>>)Other noteworthy reports we are featuring today include Public Service Enterprise Group Inc. (PEG), Tractor Supply Co. (TSCO) and Omnicom Group Inc. (OMC).Mark VickerySenior EditorNote: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>

Today's Must Read

Strategic Pacts Aids Thermo Fisher (TMO) Amid Stiff Rivalry

Disney (DIS) Banks on Disney+ Growth & Revival of Parks

Expansion Actions to Drive Southern Copper (SCCO), Costs Ail

Featured Reports

Investments to Boost PSEG (PEG) Amid Escalating ExpensesPer the Zacks analyst, Public Service Enterprise, also known as PSEG, invests heftily to boost its transmission infrastructure. Yet, rising costs to remediate MGP sites might hurt the stock.

Tractor Supply (TSCO) 'ONETractor' Strategy Seems EncouragingPer the Zacks analyst, Tractor Supply is focused on integrating its physical and digital operations to offer consumers a seamless shopping experience. Its 'ONETractor' Strategy looks good.

Omnicom (OMC) Gains From Diversification Amid Low LiquidityPer the Zacks analyst, Omnicom has a diversified business, with service offerings across areas of functional expertise and geographical regions. Low liquidity is concerning.

Sensata (ST) Gains from Organic Growth Amid Forex VolatilityPer Zacks analyst, Sensata's performance is cushioned by healthy organic growth amid unfavorable foreign exchange movement. Increasing momentum in electrification business bodes well.

Transocean (RIG) Likely to Benefit from Backlog of $8.9BThe Zacks analyst believes that RIG's backlog of $8.9 billion provides earnings and cash flow visibility, but is concerned over high cash costs at day rates.

Strategic Initiatives and Expansion Aid RH Amid High CostsPer the Zacks analyst, RH is benefiting from various strategic initiatives and expansion efforts. However, elevated expenses and high debt levels are a concern.

Deciphera (DCPH) Surges on $2.4B Buyout Offer From ONO PharmaPer the Zacks Analyst, shares of Deciphera have surged on a $2.4 billion buyout offer from ONO Pharma. The transaction is expected to close in the third quarter of 2024.

New Upgrades

Growth in Direct-To-Consumer Business Aids Skechers (SKX) Per the Zacks analyst, Skechers' direct-to-consumer business gains from growth in international and domestic markets. DTC sales increased 17.3% year over year to $829.9 million in first quarter.

Solid Growth of Digital Platform Aids Western Union (WU)Per the Zacks Analyst, Western Union's digital platform has been adding customers and strengthening its business. Streamlining of business operations will help it to focus on core competencies.

Expansion of Non-Mortgage Products Aids LendingTree (TREE)Per the Zacks analyst, LendingTree's initiatives to enhance SPRING and TreeQual platforms beyond mortgage-related revenue sources will improve cross-selling opportunities and drive profitability.

New Downgrades

Seasonal Fluctuation & Launch Costs Ail Standard Motor (SMP)The Zacks analyst is worried about weather-related factors that make Standard Motor's Temperature Control business highly unpredictable. The launch cost of new distribution center is also a concern.

Lower Volumes, Housing Slowdown Ail U.S. Silica (SLCA) Per the Zacks analyst, U.S. Silica's Oil & Gas division is being challenged by declining volumes. Its ISP segment also faces headwinds from the slowdown in the housing market.

BioPharma Downturn, Soft Chinese Market Hurt Bio-Rad (BIO)The Zacks analyst is worried about Bio-Rad's Life Science business affected by the biopharma challenges. Soft China market conditions dent Clinical Diagnostics sales.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Public Service Enterprise Group Incorporated (PEG) : Free Stock Analysis Report

Omnicom Group Inc. (OMC) : Free Stock Analysis Report

Thermo Fisher Scientific Inc. (TMO) : Free Stock Analysis Report

Tractor Supply Company (TSCO) : Free Stock Analysis Report

The Walt Disney Company (DIS) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Trading Symbol: ELR (TSX); EPS (JSE)

VANCOUVER, BC, April 30, 2024 /CNW/ – Eastern Platinum Limited ("Eastplats" or the "Company") is providing this bi-weekly default status report in accordance with National Policy 12-203 Cease Trade Orders for Continuous Disclosure Defaults ("NP 12-203"). On April 4, 2024, the Company announced that it was unable to file its annual audited financial statements for the fiscal year ended December 31, 2023 and the related management's discussion and analysis and annual information form for the fiscal year ended December 31, 2023 (the "Required Filings") by the deadline of April 1, 2024.

Eastplats (CNW Group/Eastern Platinum Ltd.)

On April 3, 2024, the British Columbia Securities Commission, as principal regulator, granted a temporary management cease trade order (the "MCTO") to the Company. The Company intends to file the 2023 Required Filings as soon as practicable.

Pursuant to NP 12-203, the Company must file bi-weekly default status reports in the form of further news releases during the period of the MCTO. The Company reports that since its news release of April 17, 2024, there have been no changes regarding the information contained in that news release that would reasonably be expected to be material to an investor. The Company confirms there have been no failures by it in fulfilling its stated intentions with respect to satisfying the provisions of the alternative information guidelines under NP 12-203, and there has not been, nor is there anticipated to be, any specified default subsequent to the default announced in the Company's news release of April 4, 2024. Lastly, there is no material information concerning the affairs of the Company that has not been generally disclosed.

About Eastern Platinum Limited

Eastplats owns directly and indirectly a number of platinum group metal ("PGM") and chrome assets in the Republic of South Africa. All of the Company's properties are situated on the western limb (Crocodile River Mine) and eastern limb (Kennedy's Vale, Spitzkop, Mareesburg) of the Bushveld Complex, the geological environment that hosts approximately 80% of the world's PGM-bearing ore.

Operations at the Crocodile River Mine currently include re-mining and processing its tailings resource from the Barplats Zandfontein tailings dam and mining and processing ore from the Zandfontein underground section to both produce PGM and chrome concentrates.

Cautionary Statement Regarding Forward-Looking Information

This press release contains "forward-looking statements" or "forward-looking information" (collectively referred to herein as "forward-looking statements") within the meaning of applicable securities legislation. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "will", "plan", "intends", "may", "will", "could", "expects", "anticipates" and similar expressions. Further disclosure of the risks and uncertainties facing the Company and other forward-looking statements are discussed in the Company's most recent Annual Information Form available under the Company's profile on www.sedarplus.ca.

In particular, this press release contains forward-looking statements pertaining to filing of the Required Filings and the timing thereof. These forward-looking statements are based on assumptions made by and information currently available to the Company. Although management considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties and readers are cautioned not to place undue reliance on these statements as a number of factors could cause actual results to differ materially from the beliefs, plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to, commodity prices, economic conditions, currency fluctuations, competition and regulations, legal proceedings and risks related to operations in foreign countries.

All forward-looking statements in this press release are expressly qualified in their entirety by this cautionary statement, the "Cautionary Statement on Forward-Looking Information" section contained in the Company's most recent Management's Discussion and Analysis available under the Company's profile on www.sedarplus.ca. The forward-looking statements in this press release are made as of the date they are given and, except as required by applicable securities laws, the Company disclaims any intention or obligation, and does not undertake, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

SOURCE Eastern Platinum Ltd.

Cision

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/April2024/30/c4612.html

Vale S.A. VALE reported first-quarter 2024 adjusted earnings per share of 39 cents, which missed the Zacks Consensus Estimate of 42 cents. The bottom line was down 5% from 41 cents reported in the year-ago quarter.

While there was an improvement in sales volumes of iron ore and copper courtesy of continued operational improvements, this was negated by reduced sales volumes of nickel, as well as declines in prices for iron ore, copper and nickel. Additionally, elevated costs and expenses contributed to the decline in the bottom line.

Revenues

Net operating revenues inched up 0.3% year over year to around $8.46 billion. The top line surpassed the Zacks Consensus Estimate of $8.35 billion.

VALE S.A. Price, Consensus and EPS SurpriseVALE S.A. Price, Consensus and EPS Surprise

VALE S.A. price-consensus-eps-surprise-chart | VALE S.A. Quote

In the first quarter of 2024, the Iron Solutions segment generated net operating revenues of $7 billion, marking a 10% increase compared with the same quarter last year. While the segment witnessed a 15% improvement in sales volume, attributed to Vale’s continuous operational enhancements, this was somewhat offset by lower prices. Notably, during the quarter, the S11D mine attained its highest production levels since 2020, bolstered by ongoing asset reliability initiatives that ensured enhanced operational stability even amid the rainy season.The Energy Transition Metals segment’s net operating revenues plunged 28% year over year to $1.4 billion. Nickel revenues plunged 45% year over year to $558 million due to an 18% decline in sales volume and a 33% decline in prices. Copper revenues inched up 1% to $587 million as a 22% improvement in sales volumes was negated by an 18% drop in prices. Improved performance at the Salobo complex, coupled with the Salobo 3 plant ramp-up led to higher copper production and sales during the quarter.

Operating Performance

In the first quarter of 2024, the cost of goods sold was around $5.4 billion, which marked an 8% increase from the year-ago quarter. The gross profit declined 11% year over year to $3.1 billion. The gross margin was 36.6% compared with 41.3% in the year-ago quarter.Selling, general and administrative expenditures rose 19% year over year to $140 million. Research and development expenses were $156 million, 12% higher than the year-ago quarter.Adjusted operating income was $2.7 billion in the reported quarter. The figure marked an 11% decline from the year-ago quarter. Adjusted EBITDA was $3.4 billion in the quarter compared with $3.7 billion in the year-ago quarter.Pro-forma adjusted EBITDA (including associates & Joint ventures) was down 9% year over year to $3.5 billion. The downfall was mainly due to lower iron ore fines, and nickel and copper realized prices. This was partially offset by increased iron ore and copper sales volumes. Higher costs and unfavorable currency also led to the decline.The Iron Solutions segment’s adjusted EBITDA was $3.46 billion, which was in line with the first quarter of 2023 as gains from higher sales volumes were offset by lower prices.The Energy Transition Metals segment’s EBITDA slumped 55% to $257 million from $573 million in the year-ago quarter. Copper operations witnessed a 29% year-over-year improvement in adjusted EBITDA to $284 million attributed to increased sales volumes. Adjusted EBITDA for nickel slumped 95% year over year to $17 million due to declining average prices and lower volumes sold.

Balance Sheet & Cash Flows

Vale exited the first quarter of 2024 with cash and cash equivalents of around $3.8 billion compared with $3.6 billion at the end of 2023. Cash flow generated from operations was $3.58 billion in the first quarter compared with $3.61 billion in the year-ago quarter.Gross debt and leases at the end of the quarter were $14.7 billion compared with $13.9 billion at the end of 2023. The increase reflected new loans raised by Vale Base Metals Ltd. and Vale, per the company’s liability management plan.Vale paid around $2.33 billion to shareholders in the form of dividends and repurchased shares for $275 million in the first quarter of 2024.

Other Updates

Vale recently entered into an agreement to acquire the entire 45% stake held by Cemig Geração e Transmissão S.A. in Aliança Geração de Energia S.A. for R$ 2.7 billion ($0.53 billion), effectively securing 100% ownership of Aliança Energia’s shares.Aliança Energia's power generation asset portfolio comprises seven hydroelectric power plants and three wind farms in Brazil, with an installed capacity of 1,438 MW and an average physical guarantee of 755 MW. This strategic move is in line with Vale's objective to have an energy matrix based on renewable sources in Brazil and its commitment to decarbonize operations at competitive costs.

Price Performance

In the past year, shares of Vale have lost 12.1% compared with the industry’s 12.3% decline.

Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank

Vale currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Performances

The company reported year-over-year improvement in sale volumes for copper and molybdenum, However, this was offset by the impact of lower prices for copper, molybdenum and zinc.Freeport-McMoRan Inc. FCX reported adjusted EPS of 32 cents, topping the Zacks Consensus Estimate of 27 cents.Gains from higher copper and gold sales, and elevated gold prices were offset by lower copper prices. This resulted in a 38% year-over-year decline in Freeport-McMoRan’s earnings.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report

VALE S.A. (VALE) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

Teck Resources Ltd (TECK) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Southern Copper Corporation SCCO reported first-quarter 2024 earnings of 95 cents per share, which beat the Zacks Consensus Estimate of 78 cents. The bottom line, however, declined 9.5% from the -year-ago quarter, mainly attributed to lower prices of copper, molybdenum and zinc. Also, reduced sales volumes for zinc and silver offset the gains from higher copper and molybdenum sales. Net sales were $2.6 billion, which marked a 7% decline year over year. The top line surpassed the consensus estimate of $2.5 billion.

Revenues were mainly impacted by lower prices for copper (5.4%), molybdenum (38.1%) and zinc (-21.8%). Southern Copper witnessed an 8.5% year-over-year increase in molybdenum sales volumes while its copper sales volume was up 2.8% in the first quarter of 2024. These gains were offset by lower sales volumes of zinc and silver, which declined 3.1% and 0.3% respectively.

Cost of sales decreased 3% year over year to $1.16 billion. Total operating costs were down 2% year over year to $1.4 billion.

Southern Copper Corporation Price, Consensus and EPS SurpriseSouthern Copper Corporation Price, Consensus and EPS Surprise

Southern Copper Corporation price-consensus-eps-surprise-chart | Southern Copper Corporation Quote

Operating profit was $1.19 billion, reflecting a 12% year-over-year decline. The operating margin was 45.8% compared with 48.5% in the year-ago quarter. Adjusted EBITDA declined 10% year over year to $1.42 billion in first-quarter 2024. Adjusted EBITDA margin was 54.5%, a 160-basis point contraction from the year-ago quarter’s margin of 56.1%.

Production Details

Copper: SCCO mined 240,270 tons of copper, up 8% year over year. This reflected an increase in copper from concentrate production at all SCCO’s mines, partially offset by a decrease in SXEW cathode production at Buenavista and Toquepala. Copper sales were up 2.8% year over year to 235,206 tons.Molybdenum: The company mined 7,079 tons of molybdenum, reflecting a year-over-year improvement of 9.5% driven by higher output at the Toquepala, offset by lower output at La Caridad mines. Molybdenum sales were 7,036 tons , an 8.4% increase from 6,488 tons in the first quarter of 2023.Zinc: The company’s zinc production surged 75% year over year to 26,366 tons attributed to the contribution from the new Buenavista zinc concentrator. Zinc sales decreased 3% year over year to 25,653 tons.Silver: Southern Copper’s silver production was up 8% year over year to 4.78 million ounces due to lower production at all operations, barring Buenavista. Sales were down 3.4% year over year to 4.95 million ounces.

Cash Flow & Balance Sheet

Southern Copper generated net cash from operating activities of $0.7 billion in the first quarter of 2024, down from $1.19 billion in the year-ago comparable quarter. This decline was due to a $310.8 million increase in working capital, which was driven primarily by Mexican operations.

Cash and cash equivalents were $1.25 billion at the end of the first quarter compared with $1.15 billion as of the end of 2023. Long-term debt was $6.26 billion as of Mar 31, 2024, flat compared with the debt balance as of Dec 31, 2023.

SCCO made capital investments worth $214 million, 10.2% lower than the spending in the year-ago comparable quarter.

Price Performance

Shares of Southern Copper have gained 57% in the past year compared with the industry’s 44% growth.

Zacks Investment Research

Image Source: Zacks Investment Research

Zacks Rank

Southern Copper currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Performances

Except gold and silver, other metals (copper, zinc, nickel) experienced declines in prices in the first quarter, which was reflected in the results of other mining companies as well.Teck Resources TECK reported first-quarter 2024 adjusted earnings per share (EPS) of 56 cents, missing the Zacks Consensus Estimate of 87 cents. The bottom line marked a 58% year-over-year plunge.Gains from increased prices for steelmaking coal and higher copper sales volumes were offset by lower zinc and copper prices and decreased steelmaking coal sales volumes. Teck’s earnings were also impacted by increased unit costs at the steelmaking and Quebrada Blanca operations.Freeport-McMoRan Inc. FCX reported adjusted EPS of 32 cents, topping the Zacks Consensus Estimate of 27 cents. Gains from higher copper and gold sales and elevated gold prices were offset by lower copper prices. This resulted in a 38% year-over-year decline in Freeport-McMoRan’s earnings.First Quantum Minerals FQVLF recorded an adjusted quarterly loss of 20 cents per share, wider than the Zacks Consensus Estimate of a loss of 14 cents per share. This is in contrast to earnings of 11 cents per share reported in the first quarter of 2023. The company’s results have been negatively impacted by the disruptions experienced at the Cobre Panamá mine, which led to the mine being placed in a phase of Preservation and Safe Management since November 2023.

First Quantum Minerals witnessed a 32% decline in copper sales volumes in the quarter. This was mainly due to lower output at Cobre Panama while Kansanshi and Sentinel mines reported improvement in copper output. Lower copper realized prices also impacted FQVLF’s earnings in the quarter.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Freeport-McMoRan Inc. (FCX) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

First Quantum Minerals Ltd. (FQVLF) : Free Stock Analysis Report

Teck Resources Ltd (TECK) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Investors interested in stocks from the Mining – Non Ferrous sector have probably already heard of Lundin Mining (LUNMF) and Southern Copper (SCCO). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Lundin Mining and Southern Copper are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that LUNMF's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

LUNMF currently has a forward P/E ratio of 14.29, while SCCO has a forward P/E of 30.63. We also note that LUNMF has a PEG ratio of 0.72. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SCCO currently has a PEG ratio of 3.46.

Another notable valuation metric for LUNMF is its P/B ratio of 1.45. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SCCO has a P/B of 12.49.

Based on these metrics and many more, LUNMF holds a Value grade of B, while SCCO has a Value grade of F.

LUNMF has seen stronger estimate revision activity and sports more attractive valuation metrics than SCCO, so it seems like value investors will conclude that LUNMF is the superior option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Lundin Mining Corp. (LUNMF) : Free Stock Analysis Report

Southern Copper Corporation (SCCO) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

How much a stock's price changes over time is important for most investors, since price performance can both impact your investment portfolio and help you compare investment results across sectors and industries.

FOMO, or the fear of missing out, also plays a role in investing, particularly with tech giants and popular consumer-facing stocks.

What if you'd invested in Harmony Gold (HMY) ten years ago? It may not have been easy to hold on to HMY for all that time, but if you did, how much would your investment be worth today?

Harmony Gold's Business In-Depth

With that in mind, let's take a look at Harmony Gold's main business drivers.

Harmony Gold Mining Company Limited is based in Randfontein, South Africa. The company conducts underground and surface gold mining. It is also engaged in related activities such as exploration, processing, smelting and refining. Harmony is South Africa's biggest gold producer by volume with production of 1.47 million ounces in fiscal 2023.The company’s mining operations are principally concentrated in South Africa. The company has nine underground operations located in the Witwatersrand Basin. Additionally, Harmony has an open-pit mine on the Kraaipan Greenstone Belt along with several surface sources treatment operations. The Hidden Valley, which is located in Papua New Guinea, is an open-pit silver and gold mine.Also, many of these mines are located in the Free State Province such as Welcom, Virginia, Tshepong and Bambanani, along with the Evander gold mine in Mpumalanga province, the Elandskraal mine at the West Rand goldfields in Gauteng province, and Kalgold operations in the North West province.The company has discontinued its mining operations at Mt. Magnet and South Kalgoorlie in Western Australia as a strategic move. Harmony recorded sales of $2,774 million for fiscal 2023 (ended Jun 30, 2023).

Exploration Projects

Domestic Projects: In South Africa, Harmony operates a total of nine underground operations, one open pit operation and several surface operations including an open cast mine, and nine processing plants, which are located in all of the currently known goldfields in the Witwatersrand basin of South Africa as well as the Kraaipan Greenstone Belt.

International Projects: In Papua New Guinea (PNG), Harmony has full ownership of Hidden Valley, an open-cast gold and silver project that began production in June 2009, and 50% ownership of the Wafi-Golpu project. Harmony’s exploration portfolio focuses principally on highly prospective areas in PNG and the Wafi-Golpu project in particular. Harmony expects that if Wafi-Golpu is developed, it will shift the company’s geographical mix from more than 90% South African production to 75% domestic output and 25% offshore. Harmony, in December 2022, also acquired the Eva Copper project and surrounding exploration tenements from Copper Mountain Mining Corporation.

Bottom Line

Anyone can invest, but building a successful investment portfolio requires research, patience, and a little bit of risk. So, if you had invested in Harmony Gold ten years ago, you're likely feeling pretty good about your investment today.

According to our calculations, a $1000 investment made in April 2014 would be worth $2,785.93, or a gain of 178.59%, as of April 30, 2024, and this return excludes dividends but includes price increases.

In comparison, the S&P 500 gained 172.38% and the price of gold went up 73.14% over the same time frame.

Looking ahead, analysts are expecting more upside for HMY.

Earnings estimates for Harmony’s current fiscal have been going up over the past month. Harmony is benefiting from a diverse portfolio of gold development projects. The Wafi-Golpu project is expected to significantly boost the company’s production profile. The Eva Copper project in Australia also represents further upside. Also, the reduction in debt levels work in favor of the company. However, the company is exposed to issues such as mine shut downs and labor strikes. It is facing a tough labor relationship environment. Higher operational and production costs are also a concern. Apart from electricity supply concerns, the company has labor issues. These factors are resulting in high operational costs, which may dent margins. Weaker gold prices may also impact the company’s performance.

Shares have gained 12.61% over the past four weeks and there have been 1 higher earnings estimate revisions for fiscal 2024 compared to none lower. The consensus estimate has moved up as well.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Harmony Gold Mining Company Limited (HMY) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

For Immediate Release

Chicago, IL – April 30, 2024 – Today, Zacks Equity Research discusses Agnico Eagle Mines AEM, Gold Fields Ltd. GFI, AngloGold Ashanti PLC AU and Harmony Gold HMY.

Industry: Gold

Link: https://www.zacks.com/commentary/2264397/4-gold-stocks-to-buy-to-capitalize-on-solid-price-trends

With gold prices anticipated to gain further on demand-supply imbalance, companies like Agnico Eagle Mines, Gold Fields Ltd., AngloGold Ashanti PLC and Harmony Gold are well-poised for growth, backed by their strong balance sheets, efforts to lower costs and growth initiatives.

About the Industry

The Zacks Mining – Gold industry comprises companies engaged in extracting gold from mines. These mines may be either underground or open pits. Mining is a long and complex process, and requires significant financial resources. It involves exploration to evaluate the deposit's size; assessing ways to extract and process the ore efficiently, safely and responsibly; and developing the mine before the actual mining process. It normally takes 10-20 years for a gold mine to produce material that can finally be refined. Nowadays, industry players use a range of sophisticated techniques to extract gold and convert it into dore bars, an alloy of gold and silver, alongside other impurities. These are then sent for purification, after which gold is purchased as bars or coins or used in jewelry or other purposes.

Major Trends Shaping the Future of the Mining-Gold Industry

Upbeat Gold Prices to Drive Industry Growth: Since the start of 2024, gold prices have risen 13%. Remaining consistently above the $2,000-per-ounce mark, the yellow metal peaked at an unprecedented $2,431.55 per ounce in April. Several factors have contributed to this upward trajectory, including increased geopolitical tensions, a depreciating U.S. dollar, the potential for monetary policy easing, and continuous purchasing by central banks. Physical demand has also been strong in China of late since the weaker yuan, volatile stock market and comparatively low deposit rates have led investors to explore alternatives for their savings.

Impending Demand & Supply Imbalance to Support Prices: Depleting resources, declining supply in old mines and the lack of new mines have been inherent threats to the industry. Due to the scarcity of discoveries and exhaustive existing resources, miners prefer building up reserves through acquisitions rather than digging new ones that are risky and capital-intensive. On the demand side, the use of gold in energy, healthcare and technology is rising. India and China account for around 50% of consumer gold demand.

Economic strength in India is yielding wealth-driven buying. The yellow metal has long been considered a safe-haven investment in financial or political uncertainty. Gold demand continues to be on the rise from central banks. Therefore, there will be an eventual demand-supply imbalance, which is likely to drive gold prices.

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 encouraging near-term prospects. The Zacks Mining – Gold Industry, which is a 35-stock group within the broader Zacks Basic Materials sector, currently carries a Zacks Industry Rank #49, which places it in the top 19% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

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

Industry Versus S&P 500 & Sector

The Mining-Gold Industry has underperformed the S&P 500 Index and the Basic Material sector in a year. The stocks in the industry have collectively grown 0.4% compared with the broader sector’s rise of 4.6%. The S&P 500 has jumped 23.5% in the same timeframe.

Industry's Current Valuation

On the basis of the forward 12-month EV/EBITDA, a commonly used multiple for valuing gold-mining companies, we see that the industry is currently trading at 6.55X compared with the S&P 500’s 12.57X and the Basic Material sector’s forward 12-month EV/EBITDA of 7.16X.

Over the last five years, the industry traded as high as 9.26X and as low as 4.63X, with the median at 6.20X

4 Mining-Gold Stocks to Bet on

Salares Norte is a world-class project with one of the industry’s lower-cost profiles and a payback period of less than three years at current gold prices. It will boost GFI’s cash flow profile over the next few years. Despite substantial capital expenditure, primarily attributed to Salares Norte's construction, the company maintains a healthy net-debt-to-EBITDA ratio of 0.42X.

Gold Fields has been looking for value-accretive inorganic opportunities to bolster its pipeline. The Tarkwa mine, the flagship asset in its portfolio, is poised to sustain an annual production rate of approximately 500 thousand ounces over the next decade independently.

The company is currently making progress in negotiations with the Ghana government for the approval of the proposed Tarkwa/Iduapriem JV with AngloGold Ashanti. If approved, this partnership will unlock operational synergies, enabling higher production rates and grades, thereby extending the combined operation's mine life to at least 18 years.

The Zacks Consensus Estimate for the Sandton, South Africa-based company’s fiscal 2024 earnings has moved up 33% over the past 30 days. The consensus mark indicates year-over-year growth of 64.5%. GFI currently sports a Zacks Rank #1 (Strong Buy).

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

AEM continues to expand the exploration drilling of Roura Main, Sisar and Rimpi Zones to take advantage of better grades. LaRonde, Canadian Malartic and Nunavut are expected to be major drivers for cash flow generation over the next several years. A lower debt level contributes to its overall financial strength and stability.

The Zacks Consensus Estimate for the Toronto, Canada-based company’s 2024 earnings has moved up 18% over the past 30 days. The estimate indicates year-over-year growth of 24%. AEM has a trailing four-quarter earnings surprise of 16.5%, on average. The company currently has a long-term estimated earnings growth of 16.6% and a Zacks Rank #2 (Buy).

AngloGold Ashanti: In 2023, the company produced 2.593 million ounces of gold attributable, achieving its guidance for the year. It recently completed the acquisition of an 11.7% interest in G2 Goldfields Inc., a Canadian gold mining company with exploration properties in Guyana, South America. This move will provide AngloGold Ashanti with a solid position in one of the world’s key gold provinces with great potential for discoveries. AU produced 2.593 million ounces of gold in 2023 at total cash costs of $1,108 per ounce — within its guidance range.

The company delivered strong performances at Sunrise Dam, Iduapriem, Cuiabá, Kibali and Tropicana. The production projection for 2024 is pegged at 2.590-2.790 million ounces of gold. The mid-point indicates growth of 4%. This will be aided by the step-up at Obuasi following the completion of Phase 3 of the Obuasi redevelopment project and at Siguiri, wherein the company expects a year-over-year recovery following the 2023 CIL tank failure.

The company expects costs to be flat at the mid-point in 2024, reflecting the continued realization of benefits from the Full Asset Potential review program. The proposed joint venture with Gold Fields mentioned above will help leverage the operating efficiency advantage at Tarkwa and unlock higher gold grades at Iduapriem.

The Zacks Consensus Estimate for earnings for the Johannesburg, South Africa-based company’s fiscal 2024 has been revised upward by 61% over the past 30 days. The consensus mark is pegged at earnings of $2.84 per share, whereas it reported a loss of 11 cents in 2023. AU currently flaunts a Zacks Rank #1.

The company’s All-in sustaining costs declined 12% year over year to $1,403 per ounce in the first half of fiscal 2024. With this performance, the company has moved down the industry cost curve. HMY also reported an 11% increase in underground recovered grades to 6.29g/t from the 5.68g/t reported in the prior-year period, exceeding its guidance, primarily driven by Mponeng and Moab Khotsong. The company's efforts to reduce its debt levels appear encouraging. HMY’s flexible balance sheet continues to support its investments in its solid growth pipeline.

The Zacks Consensus Estimate for earnings for the Randfontein, South Africa-based company’s fiscal 2024 has been revised upward by 11% over the past 30 days. The consensus mark indicates year-over-year growth of 98%. HMY currently carries a Zacks Rank #2.

Why Haven’t You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.

Today you can access their live picks without cost or obligation.

See Stocks Free >>

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AngloGold Ashanti PLC (AU) : Free Stock Analysis Report

Agnico Eagle Mines Limited (AEM) : Free Stock Analysis Report

Gold Fields Limited (GFI) : Free Stock Analysis Report

Harmony Gold Mining Company Limited (HMY) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

(Bloomberg) — A takeover of Anglo American Plc would need to be pitched at more than £30 ($37.6) per share, a higher price than BHP Group Ltd. offered last week, according to analysts and traders surveyed by Bloomberg.

Most Read from Bloomberg

Anglo American shares are trading 8.8% above the value of BHP’s rebuffed takeover proposal, a sign traders are also expecting a higher bid. The premium has increased since Bloomberg News reported over the weekend that BHP is considering making an improved proposal.

Of the 12 survey participants who gave an acceptable price for a possible deal, the average value was £30.43 per share, with a range in responses between £28 and £35. BHP’s initial proposal, which has several moving parts, was at about £24.44 pence a share, according to a rough calculation by Bloomberg News based on where all the stocks are trading near midday in London.

Analysts at Deutsche Bank led by Liam Fitzpatrick see two possible scenarios: either the company is acquired at an improved price, or Anglo American delivers on some of the divestments proposed by BHP, which include a spin-off of platinum and iron ore subsidiaries.

A bid price above £31 would reflect fuller value, particularly if a cash component is introduced to compensate for uncertainties related to the spin-offs, Fitzpatrick wrote in a research note published Monday.

There is no certainty that any offer will ultimately be made. BHP has until May 22 to announce a firm intention to make an offer.

(Adds comparison to current BHP proposal in second and third paragraph)

Most Read from Bloomberg Businessweek

By Felix Njini and Clara Denina

JOHANNESBURG/LONDON (Reuters) – BHP Group can't cherry pick Anglo American assets without paying a hefty premium, Anglo investors told Reuters, concerned that they stand to lose heavily by holding shares in South African subsidiaries.

The world's No. 1 miner is weighing up its next move after its initial $39 billion takeover proposal for smaller rival Anglo was rejected last week. The proposed premium was 31% on Anglo's implied value.

BHP has proposed that Anglo sell its shares in units Anglo Platinum (Amplats) and Kumba Iron Ore as an option to exit the South African assets it doesn't want included in the deal.

Anglo said the unsolicited proposal significantly undervalued the company and introduced uncertainty, complexities and execution risk.

If the BHP proposal goes ahead, Anglo investors "could be stuck with three pieces of paper for a deal that could take a long time to close," a source at a Cape Town-based fund manager told Reuters.

The process to de-merge South African assets could take as long as 18 months, the source added, due to various regulatory processes that the transaction would need to go through. There is a risk that South African regulatory authorities, particularly its central bank, could be concerned about capital outflows from foreign investors not willing to hold the shares, the source added.

"BHP could just make it a clean offer and then it's up to them to deal with the un-bundling of the shares," the source said. "When the deal goes through they un-bundle Amplats and Kumba to their shareholders."

Amplats and Kumba's share prices could also come under significant selling pressure if the units were demerged, as several shareholders would not be able to hold the stocks as these are in South Africa, another source familiar with the companies said.

The majority of shares in Kumba and Amplats are sitting in liquid hands, the source said. "So the 30% premium is going to get eaten up by the loss on those other shares tanking."

CHERRY-PICKING

"I think it (the current bid) … places all of the risk on Anglo shareholders," said Django Davidson, partner and portfolio manager at Hosking Partners, which holds shares in Anglo.

"BHP wants to buy the good bits without any of the friction of disposing of the bad bit. It's by no means clear what the de-mergers would mean for the relationship with the South African government and what the underlying commodity prices will do over that period," Davidson added.

BHP has until May 22 to submit a binding offer and investors anticipate the company to sweeten its bid.

"BHP is seeking to make Anglo some sort of an agent for their own deal," Shane Watkins, Chief Investment Officer at All Weather Capital, said.

All Weather Capital holds shares in Anglo and BHP and Watkins said the nation's central bank is unlikely to approve the transaction if Anglo opts to de-merge its South African units.

"Anglo must tell BHP they don't like the deal or that they should buy the whole company, BHP can't cherry-pick," another source said.

(Reporting by Felix Njini and Clara Denina; Editing by David Evans)

(Bloomberg) — BHP Group Ltd.’s proposal for Anglo American Plc to spin off platinum and iron ore units before a takeover would likely require approval from South African regulators, according to a government agency.

Most Read from Bloomberg

Under BHP’s offer, Anglo would need to first divest its controlling interests in Kumba Iron Ore Ltd. and Anglo American Platinum Ltd., both of which are listed in Johannesburg and operate assets in South Africa. Anglo rejected the initial $39 billion proposal from the Australian mining giant last week.

Analysts have pointed to South Africa as one of the biggest potential hurdles to a deal, even if Anglo’s board can be won over. Founded in 1917 by Ernest Oppenheimer, Anglo has long ties to South Africa and was built on the back of the country’s gold mines. The proposed spinoffs highlight the fragile state of the country’s critical mining industry, as the ruling African National Congress struggles to bolster its appeal before elections next month.

Even before BHP’s proposal, Anglo’s platinum subsidiary was weighing thousands of job cuts in a country with one of the world’s highest unemployment rates. The ANC’s national chairman has signaled his opposition to BHP’s proposed takeover.

Even though BHP doesn’t want to buy Kumba and Amplats, South Africa could have an important role to play if an eventual deal is structured in the manner originally outlined. The country’s Competition Commission not only evaluates antitrust impacts but also “public interest” factors, including how a proposed acquisition will affect employment levels and historically disadvantaged people.

“There are numerous and current merger reviews in which the agency has imposed stringent conditions on the basis of the transactions’ effect on the public interest criteria,” said John Oxenham, Johannesburg-based managing partner at Primerio, a law firm that specializes in competition cases.

BHP is considering making an improved proposal for London-listed Anglo, Bloomberg reported April 27, citing people familiar with the matter. The main prize for BHP is Anglo’s South American copper operations, while the non-South African iron ore business and coking coal mines in Australia would also fit well with its existing operations.

If Anglo shareholders accept an improved offer with the same conditions, spinning off Kumba and Amplats is “very likely to meet the mandatory thresholds” that would require approval from South Africa’s regulatory authorities, Competition Commission spokesman Siyabulela Makunga said in an emailed response to questions. The agency assesses each deal “based on its own merits” in accordance with the law, he said.

Read More: BHP’s $39 Billion Bid for Anglo American Was Years in the Making

South Africa Mines Minister Gwede Mantashe has signaled his opposition to the takeover, telling Bloomberg last week that he “wouldn’t support” the proposal. “I don’t think Anglo will agree to that,” said Mantashe, who also chairs the ANC.

The country’s state pension fund – the Public Investment Corp. – is also Anglo’s second-largest shareholder, controlling an 8.4% stake, according to data compiled by Bloomberg.

–With assistance from Antony Sguazzin.

(Updated with information on Competition Commission from third paragraph)

Most Read from Bloomberg Businessweek

(Bloomberg) — Copper’s surge to $10,000 a ton just days after the bombshell news that BHP Group is trying to buy Anglo American Plc is highlighting a core disconnect at the heart of the industry: miners just aren’t building enough mines.

Most Read from Bloomberg

The biggest producers all want to increase copper output to take advantage of rising demand in electric vehicles, grid infrastructure and data centers. BHP has made its $39 billion proposal to buy Anglo American in large part because the world’s biggest miner wants to grow in copper.

Read: BHP’s $39 Billion Bid for Anglo American Was Years in the Making

Yet, that bullishness still isn’t translating into the huge investments involved in developing new pits and shafts and associated infrastructure. A successful takeover would make BHP the biggest copper producer with about 10% of the market, but it won’t make any difference toward meeting the world’s supply needs.

Production from existing mines is set to fall sharply in the coming years, and miners would need to spend more than $150 billion between 2025 and 2032 in order to fulfill the industry’s supply needs, according to CRU Group.

“Copper looks like the last remaining supply risk for the EV industry,” said Bernard Dahdah, senior commodities analyst at Natixis SA. “In a net-zero scenario, we’re going to need a vast amount of copper, and we’re going to need a different strategy to boost supply.”

The question of supply has been the driving force for copper’s 16% rally this year. Unlike the last time that prices hit $10,000, copper demand is relatively tepid for now and the physical market is well supplied.

Read: The Copper Market Grapples With a Crucial Question

Instead, the surge is being fueled by investors betting on looming shortages and the expectation that mining executives and their shareholders aren’t ready to finance and build enough new projects — and would rather buy out their rivals instead.

The reasons behind the underinvestment aren’t new, but they’re all getting worse: high-quality deposits are getting harder to find, and so is funding for small explorers; social and environmental resistance to mining is growing, and the cost of labor, equipment and raw materials has surged. And the handful of miners that have kept building have had a torrid time of late.

Speaking at the copper industry’s annual Cesco Week gathering earlier this month — and one day after BHP had privately made its pitch to Anglo — BHP’s head of copper and potash strategy Laura Whitton gave an assessment of the ways in which copper mining had become more difficult and more expensive.

The world was more reliant on older mines with lower ore grades than in the past, she said. “On supply, there’s a true challenge.”

While the copper market is relatively well supplied for now, investment bank analysts and a growing crowd of hedge fund investors are increasingly bullish on the outlook, believing it has the potential to rally to unprecedented levels over the next few years as the market faces growing shortages.

One key challenge is that new mines take years and often decades to build, and so decisions need to be calculated based on whether copper prices far in the future will justify the investment.

Miners would need $12,000 copper to justify spending on new mines, according to Olivia Markham, who co-manages the BlackRock World Mining Fund. And even then their investors may be reluctant to fund them.

“At a geological level, we have the projects — what we need is the money,” said Dahdah. “The last time copper prices were at $10,000, miners didn’t increase spending, they increased dividends.”

The lessons of the past decade would suggest that if the money does flow, it could come from China, but there are headwinds there too. Chinese-owned miners were responsible for about 40% of the net increases in supply over the past decade, but that looks set to fall to 16% over the next five years, according to McKinsey and Co.

Massive Chinese investment in overseas mining assets has already upended the markets for key battery metals such as nickel, lithium and cobalt, pushing them all into surpluses. Copper is also a key component in EV batteries and motors, but the global market is so large that China won’t be able to solve the industry’s supply challenge on its own.

“There is a clear and compelling need for additional mine capacity to be brought online,” said William Tankard, principal analyst for base metals at CRU. “The gauntlet is being laid down at the feet of the miners, and it’s going to be exceptionally challenging to deliver.”

Copper rose 0.4% to $10,003 a ton on Monday, adding to five weeks of gains.

–With assistance from Jack Farchy, Martin Ritchie and Jake Lloyd-Smith.

Most Read from Bloomberg Businessweek

(Bloomberg) — Several of Glencore Plc’s largest shareholders believe that the company should retain its coal assets, according to people familiar with the matter, throwing a proposed spinoff into doubt.

Most Read from Bloomberg

Glencore, the world’s largest shipper of thermal coal with a market capitalization of about $73 billion, had said it intended to spin the business off within two years of closing a deal to buy the steelmaking coal assets of Teck Resources Ltd.

But major Glencore shareholders believe that the company would be better off retaining its coal business, the people said, asking not to be identified because the information is private. The company’s largest shareholders are former Chief Executive Officer Ivan Glasenberg, the Qatar Investment Authority, and BlackRock Inc.

Glencore’s coal business is one of its most profitable units, driving record returns in recent years, and the plan to exit coal and list a new company in New York represented a major strategic pivot under current boss Gary Nagle. The company had long resisted pressure to follow rivals in exiting the business, arguing that the world still needed the dirtiest fuel and that it was more responsible to run the mines itself than sell them.

Read: Glencore, an Empire Built on Coal, Prepares to Say Goodbye

It’s not clear when and in what form Glencore might put the spinoff to a shareholder vote, with the deal to buy Teck’s coal business yet to close. The shareholders will only form a final view once there is a concrete proposal on the table, and their stance could still evolve, the people cautioned.

While Glencore announced its intention to spin off its coal assets when it agreed to the Teck deal in November, it has since then made clear that the separation would only go ahead if shareholders wanted it.

A Glencore spokesperson referred to comments made by CEO Nagle in February.

“When we announced the transaction, we said our intention was to spin out, and that is our intention,” Nagle told investors. “But it’s always subject to what our shareholders want, and we will consult with our shareholders, and it’s the decision of the shareholders ultimately to do that.”

Glencore’s coal business has long been a source of controversy among climate activists and some investors. In 2020, Norway’s sovereign wealth fund said it had sold its Glencore stake due to the company’s exposure to thermal coal.

When he unveiled the deal to buy Teck’s coal assets in November, Nagle argued that a spinoff made sense because Glencore’s coal and metals businesses would attract higher valuations as separate businesses than as one.

After the spinoff, Glencore’s remaining business would be one of the biggest miners and traders of copper, nickel and cobalt, all essential commodities for the energy transition.

But Glencore’s largest shareholders increasingly view the coal business as a cash cow that strengthens the entire company, the people said, and they see few benefits in spinning it off.

Glasenberg, the company’s largest shareholder according to data compiled by Bloomberg, rose to become Glencore CEO after running the company’s coal business and has long been a fan of the commodity.

Other shareholders like QIA also appreciate the cash flows that coal brings. Some, including BlackRock, might be forced to sell the coal business if it was spun off due to their own policies preventing them from owning coal-focused companies.

Most Read from Bloomberg Businessweek

Written by Karen Thomas, MSc, CFA at The Motley Fool Canada

2024 has been an interesting year so far. Despite a backdrop of higher interest rates and stubbornly high inflation, the TSX Composite Index is up 5% so far this year. Similarly, many stocks keep moving higher as they shake off macroeconomic risks and uncertainties. In this article, I’d like to discuss two hot stocks that have outperformed this year and are likely to continue to move higher.

Without further ado, here they are.

Agnico-Eagle Mines stock: +24.3% year to date

Arguably the world’s safest gold mining company, Agnico-Eagle Mines (TSX:AEM), finds itself in a favourable position these days. Years of laser focus on operational excellence and a conservative company risk profile have brought the company years of consistency, stability, and strong cash flows.

Today, the market is noticing like never before. This is because of two things. Firstly, in today’s world of increasing geopolitical turmoil and conflict, investors appreciate that Agnico is not affected by these forces. This is a function of the fact that Agnico-Eagle’s mines are all in politically safe, pro-mining jurisdictions, including places like Canada, Europe, Australia, and Mexico.

The benefits of this are innumerable. For example, Agnico’s mines operate without disruption caused by civil unrest and/or government interference. In turn, this leads to consistently stable results that are only affected by market forces and operational factors. In other words, Agnico is more of a master of its own fate versus other gold companies that have operations in unstable parts of the world.

Secondly, the gold price has rallied 8.5% so far this year. This is a function of inflation and geopolitical turmoil in the world. Gold is the safe haven for investors, after all. In fact, with persistently high inflation and continued geopolitical turmoil, the outlook for the price of gold remains bullish.

This, coupled with Agnico’s record production, has resulted in Agnico-Eagle Mines stock rallying 24.3% so far this year.

Teck: +26% year to date

Teck Resources (TSX:TECK.B) is a $34.5 billion globally diversified mining and metals company. It has operations in places such as Canada, the U.S., Chile, and Peru. Right now, the company’s operations are made up of three segments: copper, zinc, and steelmaking coal, which currently make up the biggest portion of the company’s revenue.

But this is about to change, as Teck has recently sold its coal business in two separate transactions after it was clear that shareholders did not support a spinoff of the business. The sale values the coal business at US$9 billion, which means that Teck will receive a significant cash infusion. This cash will be used for three things: debt repayment, investment to expand its copper business, and a quote “significant” return of cash to shareholders.

Once the sale of its coal business closes, Teck will emerge as a copper-focused company. The company has already been focusing its capital spend on its copper business. In fact, copper production increased 58% in Teck’s latest quarter.

Interestingly, this transformation and focus could not come at a better time. The copper market is expected to be undersupplied over the next few years, as supply disruptions and increases in demand have taken hold. As a result, copper prices have been rallying and are up 18% so far this year.

Looking ahead, with current liquidity of $7.9 billion and the $9.6 billion in cash proceeds from the coal business, Teck has the financial capability to significantly ramp up its copper operations in the next few years. This positions the company really well to benefit from the expected bullish copper market.

The post 2 Sizzling Hot Stocks to Buy Right Now appeared first on The Motley Fool Canada.

Should you invest $1,000 in Agnico Eagle Mines right now?

Before you buy stock in Agnico Eagle Mines, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Agnico Eagle Mines wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $15,578.55!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.

See the 10 stocks * Returns as of 3/20/24

Most Read from Bloomberg

The Australian miner is discussing with its advisers a revised proposal for Anglo American in the coming weeks, the people said, asking not to be identified as the matter is private. BHP is also in the process of discussing the merits of a deal with its key shareholders and trying to convince them to back the offer, the people said.

Read more: BHP’s $39 Billion Bid for Anglo American Was Years in the Making

BHP’s deliberations are ongoing and it hasn’t made a final decision on the size and structure of the new proposal, the people said.

A BHP spokesman declined to comment.

Anglo this week rejected an all-share deal in which it would spin off controlling stakes in South African platinum and iron ore companies to its shareholders before being acquired by BHP. The total per-share value of the non-binding proposal was about £25.08, BHP said. Anglo Chairman Stuart Chambers called the proposal “opportunistic” and said it failed to value the company’s prospects.

A tie-up with Anglo would give BHP roughly 10% of global copper mine supply ahead of an expected shortage that many market watchers have predicted will send prices soaring. If successful, the transaction would mark a return to large-scale dealmaking for BHP.

Most Read from Bloomberg Businessweek

(Bloomberg) — When Mike Henry took over as chief executive officer of BHP Group in 2020, the world’s biggest mining company had lost its swagger.

Most Read from Bloomberg

Bruised by a series of painful missteps and a run-in with activist Elliott Investment Management, the Anglo-Australian behemoth was kicking crucial decisions down the road, and increasingly aware that its reliance on fossil-fuel-heavy commodities could start turning investors away.

Detail-focused and exacting, Henry didn’t fit the stereotype of the hard-charging and charismatic mining executive that the industry so often turned to for its leaders. But he moved quickly and methodically, and within 20 months BHP had announced the most dramatic shakeup since its creation two decades earlier. The company would sell off its oil and gas business and dismantle a dual listing structure that it had outgrown years earlier; it finally greenlit a giant potash mine in Henry’s native Canada after years of wavering.

BHP also started making a tentative return to acquisitions. The industry’s biggest player had spent years on the M&A sidelines, serving penitence for a series of disastrous takeover bids and deals. So Henry started small. When he found himself in a bidding war, the CEO showed he was willing to walk away. Eventually, BHP worked itself up to a $6.4 billion copper takeover last year.

The decisions of the past few years may appear disparate, but each one, according to people familiar with the matter, was always aiming toward the same goal. For years, it’s been an open secret in the mining industry that BHP’s boss was looking for the “Big One” — a mega-deal to supercharge the company’s copper business.

And now, it’s finally time.

The news this week that BHP proposed a $39 billion deal to partly break up and then acquire Anglo American Plc has set the mining industry alight. The proposal, which Anglo swiftly and forcefully rejected on Friday, would mark the end of one of the world’s oldest mining companies and hand BHP control of some of the best and biggest copper mines at a time when the world is barreling toward a supply shortage.

BHP, which has a market value of about $140 billion, has made copper a central part of its strategy, betting that supply will struggle to keep pace with demand for metal to build electric vehicles, solar panels and high-voltage cables. But the company’s expansion options at its own assets are not enough to offset its retreat from fossil fuels, creating pressure to add new mines from outside. The offer is also sparking predictions that it will set off a wider wave of mining M&A, with many of BHP and Anglo’s rivals scouting for their own copper deals.

But there are huge question marks over whether BHP can pull it off. Henry and his team have come up with a complicated, multistep deal that would ensure BHP only gets the parts of Anglo it actually wants, and minimizes risks for the company. Yet critics are already calling the deal unworkable, and it’s not clear how the CEO’s logic-driven approach will deal with the less predictable real-world realities: even if Anglo can be convinced by an improved bid, BHP will still need to win over regulators in what can be politically charged approval processes.

And Elliott has once again reared its head. Bloomberg reported Friday that the activist has emerged as one of Anglo’s biggest shareholders, introducing a new unknown to the situation in the form of an old adversary.

For Henry, 58, this is the culmination of years of strategizing and preparation. When Anglo suffered a series of setbacks that sent its shares plunging and put its management on the back foot, the CEO of BHP was ready to act, according to people familiar with his thinking. The company has been working seriously on the proposal for months with Henry personally leading the charge, and is undeterred by Anglo’s initial rejection. It’s likely to soon come back with an improved proposal, the people said.

Read: Anglo’s Stumbles Make It Prey for Mining’s Biggest Predator

“He’s spent a long time, very deliberately putting himself in a position where he can now move quickly and opportunistically," said George Cheveley, a portfolio manager at Ninety One UK Ltd., a shareholder in both companies, and who worked at BHP in the mid-2000s. “He's an incredibly hard working, detailed person.”

In discussions with people who know and work with Henry, “detailed” is a word that comes up a lot. He’s often several steps ahead of others, they say, and employees have learned it’s best to admit ignorance rather than trying to bluff their way through a conversation. Decisions are invariably based on cold logic and hard facts.

Born in Canada to a navy family, Henry has Japanese heritage and is fluent in the language, having first worked for Mitsubishi Corp. before joining BHP in 2003. Over the next 17 years he worked his way up through the ranks, running trading and coal operations before taking over the miner’s Australian business, where its biggest and most profitable mines are located.

When Henry became CEO he soon took steps to start cleaning up the company’s portfolio of assets and implementing changes that would ultimately make it easier to pursue a deal when the time came. One of the biggest moves was the collapse of the company’s dual listing, which dated back to its creation two decades earlier when Australia’s BHP Ltd. merged with rival Billiton. In announcing the decision to leave London, he emphasized how it would unleash the company's agility to do deals quickly.

While the changes reshaped BHP, it was still stuck with a major long-term problem: Its business was dominated by iron ore and coal and lacked big enough growth options in copper and nickel, the sort of “future facing” commodities that many investors favor for their exposure to the energy transition.

By early 2022, Henry had beefed up his deal team and issued marching orders — they would start evaluating BHP’s big copper-producing rivals, including Freeport-McMoRan Inc. and Glencore Plc.

For BHP, the prospect of any mega-deal means contending with a history of painful missteps, as the miner has repeatedly fallen short in its most ambitious moves. The company made an audacious $150 billion run at number-two miner Rio Tinto Group that eventually failed, while a $39-billion pursuit of Potash Corp. of Saskatchewan Inc. collapsed when the Canadian government moved against the company. Before Henry took over, BHP's most recent big deal was a hugely expensive foray into shale, which it quickly reversed.

Read: BHP Seeks to Break Mining’s M&A Curse with Thorny Anglo Deal

But Henry also recognized that BHP had missed opportunities in the past and had not been prepared enough or nimble enough to pounce when its rival were wounded. He was determined he would be ready next time.

Cracks Show

It was around the same time — in the first half of 2022 — that cracks were starting to show at one of BHP’s smaller rivals, Anglo American. A few days after new CEO Duncan Wanblad took the helm, the company announced a major setback at its mines, with production falling and costs rising.

But it was over the course of last year that the pressure really built up. Many of the issues were outside of Anglo’s control — the diamond market imploded, platinum prices collapsed and rail and port problems in South Africa have squeezed exports from the company’s cash-cow iron ore business. Anglo is the only major miner with big platinum and diamond businesses and is particularly exposed to South Africa. Its complicated structure — with majority shareholdings in two large, listed South African mining companies — and its unusual product mix have been part of the reason it hasn’t been successfully targeted previously.

The biggest disappointment, however, came in December, when the London-based company announced a big and surprising cut to its copper production, sending its shares plunging. Anglo’s management has been under increasing pressure since then — it started a review of its businesses and faced calls from some analysts and investors to pare back expansion plans or even sell some assets.

Wanblad, a 57-year-old South African, is also a long-time employee, and like his counterpart at BHP is described by employees as deeply analytical.

People close to Henry say he’s been confused by Anglo’s failure to take tough decisions to address its problems. BHP had kept a file on Anglo for years, but the mounting missteps in recent months spurred the company to start looking at a potential deal more seriously, eventually culminating in the proposal first reported by Bloomberg this week.

Separate First

BHP has outlined a deal in which it wants Anglo to first separate out its South African platinum and iron ore businesses — spinning them off to shareholders — before proceeding with an all-share takeover. At last Tuesday’s closing prices, the share ratio would value Anglo at £31.1 billion, according to BHP’s calculations.

It’s easy to see Henry’s focus on detail and logic in the proposal. BHP would only go ahead with the takeover if Anglo completes its exit from the South African companies, simplifying its structure and reducing exposure to a country where miners have long contended with power shortages, logistics disruptions and fractious labor relations. The company has also flagged its intention to put assets including De Beers, the iconic diamond business, under strategic review — generally business speak for “up for sale.”

Anglo has pushed back hard on the design of the deal, arguing that it creates uncertainty and “significant execution risks,” in addition to its assessment that the offer itself undervalues the company. Spinning off the South African businesses would take time, leaving Anglo exposed to changes in commodity prices and other factors— potentially for months — despite already having agreed to a takeover price.

And there are other uncertainties. The deal, which would give BHP roughly 10% of global copper mine output, is likely to raise antitrust red flags, especially in its biggest customer China.

Read: China Could Hinder BHP’s Bid to Become Copper’s Top Producer

Some South African politicians have already reacted negatively to the announcement, raising questions about whether BHP has a strategy to ensure a deal doesn’t turn into a political lightning rod, especially in an election year. While Anglo is listed and headquartered in London, it’s a deeply South African company ingrained with the country’s history, politics and economy.

When the African mining industry gathered in Cape Town in February, Anglo boss Wanblad was one of the keynote speakers, a few hours after President Cyril Ramaphosa took the stage. Nobody questioned the absence of Henry or other senior BHP executives — unlike Anglo, the company doesn't operate any pits or shafts in Africa. But in hindsight, Henry’s absence seems like a curiously missed opportunity to meet with key politicians and other influential figures.

“There's a lot of issues and obstacles to overcome, so we'll have to see,’’ said Professor Frederik Anseel, the Interim Dean at UNSW Business School — one of Australia's leading business universities. “South African government, a bit of competitor analysis, China involvement. Clearly these are hurdles BHP will need to take and I think the first reactions from South Africa were not super positive.’’

Henry will also need to convince his own investors that Anglo’s vulnerability presents a can’t-miss opportunity to snap up valuable copper mines.

And while he’s successfully transformed the company, not all of his strategic moves have paid off. Henry initially championed nickel — a metal used to make electric vehicle batteries — as a parallel commodity to copper. The company looked to expand its existing operations and went on the hunt for deals, but a glut of supply from Indonesia has sent prices plunging, forcing BHP to take a $2.5 billion writedown on its flagship mine and consider shutting it altogether.

But the foray also holds some insight into Henry’s strategy. When its offer for a Canadian nickel project turned into a bidding war, BHP ended up walking away. Company insiders point to this as a differentiator from his predecessors: The ego-driven culture of the past is gone, they say, and BHP would rather lose out on a deal than risk destroying value.

What happens now? Under UK takeover law BHP has until May 22 to either announce a firm intention to make an offer or walk away, and the company is expected to return soon with an improved proposal in the hopes of winning over Anglo’s board and management. Analysts at Jefferies and Co. have suggested the per-share value for the whole company will need to be at least £28 for Anglo to take it seriously and enter talks.

And the arrival of Elliott on the scene presents a potential wild card. The activist hedge fund led by Paul Singer amassed its 2.5% holding in Anglo over recent months, Bloomberg reported on Friday. The firm is known for stepping in to beaten-down stocks and then pushing companies to take measures ranging from share buybacks to outright sales of the business.

Many in the industry believe the BHP offer has fired the gun on a new wave of restructuring for the global mining industry — and one that is almost certain to involve Anglo, whether or not BHP succeeds.

“For a while we’ve felt that within mining there’s probably some consolidation due. While nobody wants to be the one who is consolidated, Anglo are in a position now where they have to make the best of it,” said Chevely, the portfolio manager at Ninety One. “In a year’s time, I don’t think Anglo is sat there as the same company they are today.”

–With assistance from William Clowes, Jack Farchy and Mark Burton.

Most Read from Bloomberg Businessweek

Teck Resources (TSE:TECK.B) First Quarter 2024 ResultsKey Financial Results

Revenue: CA$3.99b (up 5.4% from 1Q 2023).
Net income: CA$343.0m (down 71% from 1Q 2023).
Profit margin: 8.6% (down from 31% in 1Q 2023). The decrease in margin was driven by higher expenses.
EPS: CA$0.66 (down from CA$2.27 in 1Q 2023).

earnings-and-revenue-growth

All figures shown in the chart above are for the trailing 12 month (TTM) period

Teck Resources Revenues and Earnings Miss Expectations

Revenue missed analyst estimates by 6.5%. Earnings per share (EPS) also missed analyst estimates by 26%.

Looking ahead, revenue is expected to decline by 13% p.a. on average during the next 3 years, while revenues in the Metals and Mining industry in Canada are expected to grow by 15%.

Performance of the Canadian Metals and Mining industry.

The company's shares are up 6.2% from a week ago.

Risk Analysis

You still need to take note of risks, for example – Teck Resources has 1 warning sign we think you should be aware of.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Release Date: April 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: Can you provide an overview of Southern Copper’s financial performance in Q1 2024? A (CFO): In Q1 2024, Southern Copper achieved a robust financial performance with a significant increase in net profit compared to the previous quarter. This was primarily driven by higher copper prices and efficient cost management strategies.

Warning! GuruFocus has detected 7 Warning Signs with MHK.

Q: What are the company’s projections for copper production in the upcoming quarters? A (CEO): We are optimistic about our production capabilities and expect to increase our copper output by 10% in the next quarter. This is due to the completion of our recent expansions and improvements in mining efficiency.

Q: How is Southern Copper addressing environmental concerns related to its mining operations? A (Head of Sustainability): We are committed to minimizing our environmental impact. Recent initiatives include investing in renewable energy projects and water reclamation processes to reduce our carbon footprint and water usage.

Q: Can you discuss any challenges the company faces in its operations? A (COO): One of the main challenges is the fluctuating cost of energy and its impact on operational costs. We are actively seeking alternative energy sources and more efficient technologies to mitigate these effects.

Q: What strategic investments is Southern Copper planning for the future? A (CFO): We plan to invest in advanced mining technologies and expand our exploration activities to new regions. These investments are aimed at increasing our production capacity and ensuring long-term sustainability.

Q: How does the current geopolitical climate affect the company’s operations? A (CEO): Geopolitical tensions, particularly trade policies and tariffs, do pose risks. However, we are strategically positioned to manage these challenges through our diversified operations and strong market relationships.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Southern Copper (NYSE:SCCO) First Quarter 2024 ResultsKey Financial Results

Revenue: US$2.60b (down 6.9% from 1Q 2023).
Net income: US$736.0m (down 9.5% from 1Q 2023).
Profit margin: 28% (in line with 1Q 2023).
EPS: US$0.95 (down from US$1.05 in 1Q 2023).

earnings-and-revenue-growth

All figures shown in the chart above are for the trailing 12 month (TTM) period

Southern Copper Revenues and Earnings Beat Expectations

Revenue exceeded analyst estimates by 4.4%. Earnings per share (EPS) also surpassed analyst estimates by 28%.

Looking ahead, revenue is forecast to grow 7.3% p.a. on average during the next 3 years, compared to a 4.9% growth forecast for the Metals and Mining industry in the US.

Performance of the American Metals and Mining industry.

The company's shares are up 3.1% from a week ago.

Risk Analysis

Before you take the next step you should know about the 2 warning signs for Southern Copper (1 shouldn't be ignored!) that we have uncovered.

(Bloomberg) — The last time BHP Group took a swing at another major miner, it was Rio Tinto Plc back in 2007. That could have been a blockbuster $150 billion takeover, but with metals prices crashing as the financial crisis took hold and with China signaling its discontent, the plan crumbled.

Most Read from Bloomberg

Having confirmed a takeover approach for rival Anglo American Plc on Thursday only to have it swiftly rejected, executives at the world’s biggest digger will be wringing their hands. They need a better outcome this time — even with one of the most complex deals the industry has seen in years.

The sector as a whole has a dismal track record when it comes to acquisitions. Caught out by the scale of China’s economic acceleration at the start of the century and desperate to add supply, mining giants went on a shopping spree. The result was that billions of shareholder dollars were incinerated through poor purchases and investments in often overly ambitious, large-scale projects.

BHP is no exception. It failed in a $39-billion pursuit of Potash Corp. of Saskatchewan Inc. It did pull off the $12.1 billion purchase of Petrohawk Energy Corp. in 2011 — but the move into shale proved to be an expensive mistake. It resulted in the early exit of chief executive Marius Kloppers, and BHP ultimately cut its losses and sold out to BP Plc in 2018.

BHP retreated into its role as a conservative heavyweight and flagship Australian company, focusing on cleaning up the consequences of the splurge. It appointed appropriately technocratic leaders and sold assets rather than buying them, spinning off what became South32 Ltd. in 2015. It only began testing the acquisition waters again in 2022, securing the $6.4 billion purchase of copper producer OZ Minerals Ltd.

“The large deals in the past have been hard to deliver, hard to show how they add value. In a number of cases, you roll forward a couple of years and deals are unwound,” said David Radclyffe, managing director at Global Mining Research in Sydney.

“So given that this deal is a complex structure, with complex geographies, and a complex commodity mix — it appears that the real opportunity is copper, BHP just has to take all the rest and deal with that as it can — it does raise a few flags.”

Digging Deep

Eager to cherry-pick the best of Anglo American’s assets outside South Africa and to seize copper assets before the metal’s price really takes off, BHP is betting on an unusually byzantine structure. Its $39 billion all-share offer is dependent on spinning off Anglo American Platinum and Kumba Iron Ore, and it has already said assets beyond copper, metallurgical coal and iron ore would be “subject to strategic review.”

Pulling off such a deal will be tricky.

Buyers for businesses like diamond arm De Beers are not plentiful, and that’s before considering the additional challenge of navigating any sales demanded by global antitrust authorities, as China and other major jurisdictions consider the impact of allowing BHP to become the world’s largest copper producer.

Even when such deals do work, the fallout can be dud assets that weigh on the balance sheet for years. BHP’s 2001 purchase of Billiton — the deal that created today’s miner — took years to clean up.

In large part, the willingness to take on such a drawn out and risky bid is in itself a reflection of the lack of options for miners eager to expand out of steelmaking commodities — which have underpinned profitability for years — and into the ingredients of a green energy transition. That includes many metals where scale is simply too small, and others where there are simply too few assets available to buy — including copper, which broke through $10,000 a ton on Friday for the first time in two years.

“BHP can probably pull this off this time because at least it is the right time in the cycle,” said Matthew Langsford, portfolio manager at Sydney-based Terra Capital, who is interested in copper but isn’t a shareholder in BHP or Anglo American. “We are a long way from large new copper supply coming to market and inventories are low.”

Anglo’s swift rejection — and its shares — suggest BHP will have to pay more to win over Anglo. That will add another layer of complexity, and test the balance between paying enough to capture its quarry and remaining below levels that will rattle shareholders with long memories.

“I 100% agree with the logic. Obviously it’s a complicated deal with what needs to happen, but the thing that worries me with BHP is their propensity to overspend sometimes. Once they’ve made their decision, if it’s got too much friction they generally increase their offer,” said Matthew Haupt, portfolio manager at Wilson Asset Management in Sydney and who is underweight on BHP.

“You wouldn’t expect much more – between 5% and 10%. Even 10% would be a stretch.”

–With assistance from Clara Ferreira Marques, Annie Lee, Yasufumi Saito and Sybilla Gross.

(Updates with Anglo rejection of the deal, copper threshold, comment in paragraph 15)

Most Read from Bloomberg Businessweek

By Clara Denina and Melanie Burton

LONDON (Reuters) -Anglo American rejected BHP's 31.1 billion pound ($39 billion) takeover offer on Friday, saying it significantly undervalued the miner and its future prospects.

BHP, which has until May 22 to make a binding bid, is expected to sweeten its 25.08 pound per share offer to try to clinch a deal that would create the world's biggest miner of copper, a metal central to the clean energy shift.

Reuters reported on Thursday, citing two sources, that Anglo's management did not consider the proposal attractive.

"We would need to see more money on the table before we sold our shares," said Todd Warren, a portfolio manager at Tribeca Investment Partners in Sydney, which holds shares in Anglo.

Anticipation among analysts and investors that BHP would increase its offer were reflected in Anglo's London-listed shares, which hit their highest level in a year. They were trading about 3.5% higher at 26.50 pounds at 1612 GMT.

News that activist investor Elliott has built a $1 billion position in Anglo, according to a person with knowledge of the stake, also buoyed the stock.

New York-based Elliott locked horns with BHP in 2017, when it built a 5% stake in the Australian miner and pushed for a series of strategic changes in order to return more cash to shareholders.

Anglo said the BHP deal's complexity created uncertainty and that it was already well-placed to create significant value from assets aligned with the energy transition and other demand trends.

"The BHP proposal is opportunistic and fails to value Anglo American's prospects," Anglo Chairman Stuart Chambers said in a statement, adding that it diluted the value upside for Anglo's shareholders relative to BHP's.

The mining group started a strategic review of its assets in February in response to a 94% fall in annual profit and a series of writedowns caused by lower commodity demand.

Mining has seen a mergers and acquisitions rush as companies seek more exposure to metals needed for the global energy transition, and further consolidation could follow.

A deal, if successful, would be the largest mining takeover globally in 2024 and among the top 10 largest deals for the sector ever, LSEG data shows.

BHP's shares closed 4.6% lower in Australia after the world's largest listed mining group on Thursday offered holders of Anglo shares a premium of 31% to Wednesday's market close.

Investors may also have concerns about the merits of the deal as it faces different regional jurisdictions and some Anglo businesses are lower-margin than BHP's, analysts said.

"It's not clear how BHP adds value to the deal if it is required to offer considerably more," said Brenton Saunders, a portfolio manager at Pendal, of the deal's complex structure.

The Australian group's CEO Mike Henry and other BHP executives including Chief Financial Officer Vandita Pant will brief investors on their proposal next week, fund managers said.

SOUTH AFRICA

A condition of BHP's proposal is that Anglo first distributes to shareholders its stakes in Anglo American Platinum (Amplats) and Kumba Iron Ore, both of which operate in South Africa, where BHP has no assets.

A source familiar with BHP's thinking said those assets would be better managed locally. BHP jettisoned its smaller assets years ago to focus on higher-volume commodities.

Kumba is hobbled by a failing logistics network while Amplats, which faces lower metal prices and falling demand, said in February it was embarking on a restructuring that could affect about 3,700 jobs.

Any exit by Anglo, which was founded in Johannesburg in 1917 and employs more than 40,000 South Africans, would be a further economic blow to the country, whose miners have been cutting jobs and investment as platinum especially falls out of favour.

South Africa's Public Investment Corporation (PIC) holds 6.99% of Anglo American, LSEG data shows, and the government is scrutinising BHP's proposal.

The move comes weeks before a general election in which voter anger about a stagnant economy and high unemployment could cost the long-governing African National Congress its majority.

On Friday, Impala Platinum announced it could cut 3,900 jobs in South Africa due to lower metal prices.

Beyond South Africa, attention turned to potential antitrust hurdles in China, the world's biggest buyer of copper, and in Japan and India, which take BHP's steel-making coal.

Glencore was forced to sell its interest in Xstrata's Las Bambas copper project in 2013 to clear a hurdle set by Chinese regulators for its $35 billion deal.

(Reporting by Clara Denina in London, Melanie Burton in Melbourne, Scott Murdoch in Sydney; additional reporting Archisma Iyer; Writing by Miyoung Kim, Elaine Hardcastle and Alexander Smith; Editing by Sonali Paul, Neil Fullick, Jamie Freed and Catherine Evans)

(Bloomberg) — When former boss Mark Cutifani left Anglo American Plc in mid-April 2022, things had rarely looked better for the century-old miner. Metals prices soared as the world emerged from lockdowns, the company had recently posted its best-ever annual profit and the popular industry veteran was handing over to a trusted lieutenant. Anglo stock hit a record the same day.

Most Read from Bloomberg

Two years later, the company’s reputation is in tatters. A series of missteps had sent its value plunging by half. And now industry heavyweight BHP Group is moving in.

BHP’s proposal to break up Anglo and cherry pick its best assets marks a humbling moment for the mining house founded by the storied Oppenheimer dynasty and owner of the iconic De Beers diamond business. While analysts broadly expect BHP will need to sweeten its offer — which valued Anglo at about $39 billion — the move is raising existential questions about the future of the company and whether it can continue in its current form.

BHP’s shares closed 2.2% lower in London on Thursday after it announced its proposal, while Anglo’s shares jumped 16%, leaving its market capitalization around the value of BHP’s bid. Dual-listed BHP fell as much as 4.7% in Sydney on Friday, the most since September.

For BHP, the crisis at Anglo has come at the perfect time. The smaller company, which owns a handful of the world’s most desirable copper mines, is suddenly vulnerable just as the industry leader is finally ready to flex its dealmaking muscles, after years of holding back.

And it’s not the only one — other big miners have also been shifting their focus back to acquisitive growth. Anglo has been underperforming at a time when money is pouring into the wider metals and commodities space, and rumors had swirled for months that the floundering miner was in play.

Read: Mega Miners Are Hunting for Deals After Decade on the Sidelines

So when BHP Chairman Ken MacKenzie picked up the phone to his counterpart at Anglo earlier this month to make his proposal, it was a call that Anglo had been expecting for months in some form or other, according to people close to the company.

“Anglo was the most-liked stock a couple of years ago,” said Ben Davis, an analyst at Liberum Capital. “Repeated guidance disappointments and relative underperformance of its commodity basket has left it vulnerable to approaches.”

In many ways, the seeds of Anglo’s troubles months were sown well before Cutifani’s triumphant exit.

Just days after he left, the company announced a major setback at its mines, with production falling and costs rising. And what initially looked like a one-off for an otherwise reliable producer spiraled out from there. Problems multiplied across the portfolio, while Anglo revealed a cost blowout at the flagship fertilizer project the company had bought a few years earlier.

The disasters continued to pile up. Many of the issues were outside of Anglo’s control — the diamond market imploded, platinum prices collapsed and rail and port problems in South Africa have squeezed exports from the company’s cash-cow iron ore business. Anglo is the only major miner with big platinum and diamond businesses and is particularly exposed to South Africa, which means it lagged rivals who weren’t dealing with the same hurdles.

As the pressures built, Anglo’s balance sheet was already stretched by its ambitious plan to build a fertilizer mine in the north of England. Unpopular with some investors, the project — long championed by new CEO Duncan Wanblad — kept getting more expensive and completion further away.

Read: Massive New UK Mine Hinges on a Market that Barely Exists

The real kicker came in December, during a routine update on Anglo’s business. Investors had been expecting cuts in South Africa, which were disappointing but not surprising.

But the market reacted in shock to a much bigger bombshell: Anglo’s South American copper mines — the company’s crown jewels — would need to slash production by roughly 20% to reduce costs. The shares cratered, plunging 19% in a single day.

The company has sought to turn the corner, telling investors it’s reviewing all its businesses. Anglo is open to selling its De Beers mining unit and looking for a partner for the big English fertilizer project.

But its weakness has left the company vulnerable. BHP has made a nonbinding proposal to buy Anglo in an all-share deal that valued the smaller company at about $39 billion based on Tuesday’s prices, BHP said in a statement on Thursday morning. Crucially, BHP wants Anglo to first split off the South African platinum and iron ore businesses, spinning them out to existing shareholders, before a takeover could happen.

Anglo said late Wednesday it was assessing the proposal, confirming it had received an approach after Bloomberg first reported BHP’s interest.

The move is a convoluted way for BHP to get its hands on Anglo’s coveted copper mines, and the clearest evidence yet that the largest producers are ready to dive back into dealmaking. The companies spent much of the past decade under a type of self-enforced ban, after a series of disastrous deals led to billions in writedowns and a cost a series of CEOs their jobs.

Now, flush with cash and having rebuilt investor trust, the industry is turning back to growth — and going in search of copper. The deal proposed by BHP would create by far the world’s biggest copper producer, just as demand for the energy transition is predicted to soar.

Read: An Eye-Watering Squeeze in Copper Ore Is Firing Up the Bulls

BHP CEO Mike Henry, who had transformed the company by getting out of oil and gas, was given a mandate by his board to seek transformational deals, and was already running the numbers on rivals including Freeport-McMoRan Inc. and Glencore Plc in early 2022, Bloomberg reported at the time.

One of the keys for BHP to pull off a deal for Anglo may lie in South Africa. The country’s state pension fund manager is Anglo’s biggest shareholder, and the group’s platinum and iron ore companies are two of South Africa’s biggest listed stocks. (Anglo is the majority owner of both but they have small free floats on the Johannesburg Stock Exchange.)

In a statement on Thursday, the Public Investment Corp. reiterated that the mining sector is of critical importance to the country and that any opportunities that arise need to take this factor into account.

Read: South Africa Mines Minister Signals Opposition to BHP-Anglo Deal

Anglo has long links with the country: Founded in 1917 by entrepreneur Ernest Oppenheimer, Anglo American was built on the back of South Africa’s giant gold mines. Moving into diamonds with control of De Beers after Oppenheimer was elected to the board in 1926 — it owns 85% of the company after selling it and then buying it back — and then adding platinum and coal, Anglo grew rich and powerful through much of the 20th century.

As Apartheid sanctions bit, the company invested more in South Africa, becoming a sprawling conglomerate. Then, as international markets became accessible again, it rapidly grew overseas, building and buying coal mines in Australia, iron ore in Brazil and copper in Chile and Peru.

To be sure, this is not Anglo American’s first crisis. In 2015, the company almost collapsed amid huge debts and tumbling metal prices. Cutifani intially announced plans to sell half its mines, before backtracking as commodity prices recovered.

The difficulties at the time saw Indian billionaire Anil Agarwal grab a 20% stake in the company, which led to two years of deep speculation about his plans for the business. The tycoon ultimately walked away, unwinding his position.

While Anglo survived the attentions of Agarwal, the show of interest from the world’s biggest mining company may be more difficult to move past.

–With assistance from Millie Munshi and Jessica Zhou.

(Updates with share prices in fourth paragraph)

Most Read from Bloomberg Businessweek

CONNECT WITH US

Tweets

Tweet with hash tag #miningfeeds or @miningfeeds and your tweets will be displayed across this site.

Tweets by MiningFeeds

MOST ACTIVE MINING STOCKS

Daily Gainers


CMC Metals Ltd.	CMB.V	+900.00%
Eden Energy Ltd	EDE.AX	+200.00%
GoviEx Uranium Inc.	GXU.V	+42.86%
Eagle Nickel Ltd.	ENL.AX	+41.67%
Citigold Corp. Limited	CTO.AX	+33.33%
Mount Burgess Mining NL	MTB.AX	+33.33%
Exalt Resources Limited	ERD.AX	+31.94%
Casa Minerals Inc.	CASA.V	+30.00%
Cariboo Rose Resources Ltd	CRB.V	+28.57%
Belmont Resources Inc.	BEA.V	+28.57%

EasternTime (ET)	Presentation	Ticker(s)
9:30 AM	Bannerman Energy Ltd.	OTCQX: BNNLF \| ASX: BMN
10:30 AM	Global Atomic Corp.	OTCQX: GLATF \| TSX: GLO
11: 00 AM	F3 Uranium Corp.	OTCQB: FUUFF \| TSXV: FUU
11:30 AM	Western Uranium & Vanadium Corp.	OTCQX: WSTRF \| CSE: WUC
1:00 PM	Myriad Uranium Corp.	OTCQB: MYRUF \| CSE: M
1:30 PM	C2C Metals Corp.	Pink: CTCGF \| CSE: CTOC

EasternTime (ET)	Presentation	Ticker(s)
9:30 AM	Novo Resources Corp.	OTCQX: NSRPF \| TSX: NVO
10:00 AM	CleanTech Lithium Plc	OTCQX: CTLHF \| AIM: CTL
10: 30 AM	Outcrop Silver	OTCQX: OCGSF \| TSXV: OCG
11:30 AM	WallBridge Mining Company Ltd.	OTCQB: WLBMF \| TSX: WM
12:00 PM	Minera Alamos, Inc.	OTCQX: MAIFF \| TSXV: MAI
1:00 PM	Graphite One Inc.	OTCQX: GPHOF \| TSXV: GPH
1:30 PM	Spruce Ridge Resources Ltd	OTCQB: SRCGF \| TSXV: SHL
2:00 PM	AbraSilver Resource Corp.	OTCQX: ABBRF \| TSXV: ABRA
2:30 PM	White Gold Corp.	OTCQX: WHGOF \| TSXV: WGO

EasternTime (ET)	Presentation	Ticker(s)
9:30 AM	Serabi Gold Plc	OTCQX: SRBIF \| TSX: SBI
10:30 AM	Silver Range Resources Ltd.	Pink: SLRRF \| TSXV: SNG
11: 00 AM	Newcore Gold Ltd.	OTCQX: NCAUF \| TSXV: NCAU

CONNECT WITH US

Tweets

MOST ACTIVE MINING STOCKS

Daily Gainers

Articles

FOUND POSTS

Venezuela’s Lawmakers Advance Mining Reform to Attract Foreign Investment

Solaris Resources (TSX:SLS) Expands Warintza Copper District as Investor Interest Grows

Ontario Accelerates Roads to Unlock Ring of Fire Mining Potential by 2031

Lucas Birdsall on the Impact of Copper and Silver Production on COMEX Futures

Saskatchewan’s Rook I Mine Could Make Canada the World’s Largest Uranium Exporter