Southern Copper (SCCO) to Gain From Higher Production & Prices

Southern Copper Corporation SCCO is positioned for growth, supported by its industry-leading copper reserves and expansion projects. The recent pickup in copper and silver prices is expected to boost the company's results.

Upbeat Production Outlook

Southern Copper expects to produce 948,800 tons of copper in 2024, which indicates a 41% year-over-year improvement. The Pilares project began full operations in 2023, and the company started ramping up production at the Buenavista zinc concentrator. These projects are expected to add 43,800 tons to the total copper production this year.Silver production is projected to reach 20.5 million ounces, an 11.4% increase from 2023. Zinc output is expected to rise to 120,300 tons, reflecting an 83.7% year-over-year surge, primarily due to the Buenavista zinc concentrator's contribution. Over the next five years, this concentrator is expected to boost production by an average of 90,200 tons of zinc and 20,000 tons of copper annually.

Promising Projects on Track

Southern Copper boasts the largest copper reserves and operates high-quality, world-class assets in investment-grade countries like Mexico and Peru. The company is continuously investing to expand its portfolio and reserves, with a capital investment program exceeding $15 billion for this decade.This includes investments in the Buenavista Zinc, Pilares, El Pilar and El Arco projects in Mexico and the Tia Maria, Los Chancas and Michiquillay projects in Peru. This forecast also includes several infrastructure investments, including key investments, to bolster the competitiveness of the El Arco project.Southern Copper’s Michiquillay is expected to become one of Peru's largest copper mines with an expected production of 225,000 tons of copper per year (along with by-products of molybdenum, gold and silver) for more than 25 years. Production is expected to start by 2032. The Los Chancas project is an open-pit mine with a combined operation of concentrator and SX-EW processes and is expected to produce 130,000 tons of copper and 7,500 tons of molybdenum annually. The project is expected to commence operations in 2030.In Mexico, the company invested $439 million in the Buenavista Zinc – Sonora project. It has built a new concentrator plant. This facility has an annual production capacity of 100,000 tons of zinc and 20,000 tons of copper. Ramping up of the plant began in the first quarter after technical adjustments to the concentrator.Southern Copper expects to produce 54,500 tons of zinc and 11,900 tons of copper in 2024 and an average of 90,200 tons of zinc and 20,700 of copper per year in the next five years.Per reports, the Tia Maria project in Peru is likely to break ground by the end of 2024 or in the first half of 2025. The project has experienced delays due to protests that have halted the mine's development. SCCO has been working toward resolving issues with community groups.

SCCO to Benefit From Rising Metal Prices

Copper prices had been impacted earlier this year on weaker-than-expected data from China. However, there has been a recent spike in copper prices on signs of expansion in the manufacturing sector and strong demand amid worries about potential shortages. China’s top copper smelters have jointly agreed to cut down production at unprofitable plants due to raw material shortages. Silver prices have gained amid increasing expectations of interest rate cuts and safe haven demand.The long-term outlook for copper is positive, as copper demand is expected to grow driven by electric vehicles, renewable energy and infrastructure investments. Molybdenum prices are set to increase on the back of healthy demand and reduced supply. Long-term fundamentals for zinc and silver remain strong due to their significant industrial consumption.

Price Performance

The company’s shares have gained 84.5% over the past year compared with the industry’s 63.3% growth.

 

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 Zacks Rank & Other Stocks to Consider

Southern Copper currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.Some other top-ranked stocks from the basic materials space are ATI Inc. ATI, Carpenter Technology Corporation CRS and Ecolab Inc. ECL.ATI sports a Zacks Rank of 1 at present. ATI beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 8.3%. The company’s shares have soared 61.6% in the past year.Carpenter Technology currently flaunts a Zacks Rank of 1. CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, the average earnings surprise being 15.1%. The company’s shares have soared 133.4% in the past year.The Zacks Consensus Estimate for Ecolab's current-year earnings is pegged at $6.59 per share, indicating a year-over-year rise of 26.5%. ECL, which carries a Zacks Rank #2 (Buy) at present, beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 1.3%. The company’s shares have rallied 35.8% in the past year.

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Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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