Copper Stocks: Will the Chilean Miner Strike Affect the Industry?

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(List compiled by Andrew Dominguez. Data sourced from Finviz.)

Mining is one of the oldest industries in the world. This is because metals and minerals were necessary in making the first spear and the first agricultural tools and are currently used to make everything from kitchenware and glass to the infrastructure that is the backbone of modern society.

One of the most crucial metals for city builders, especially in those in rapidly developing countries, is copper. Most of it is used for electrical wires, roofing and plumbing, and industrial machinery, with rest being used in electronics and architecture, among other things.

Demand for copper in the rich world is also strong. Gregor McDonald points out that we are “at a time when the world proposes to switch energy demand to the power grid, newly populated by wind and solar.”

In other words, the switch to new energy sources will necessitate an expansion to the power grid, which will require tons of copper. (via Business Insider

This sustained high level of demand for copper makes a strike at Escondida mine quite untimely. The mine is world’s largest and accounts for seven percent of all copper, report Moises Avila and Fabian Cambero of Reuters. It is majority-owned by mining giant BHP Billiton. Other shareholders include Rio Tinto and Mitsubishi Materials. 

The union strike has garnered the direct attention of Chile’s President, Sebastian Pinera, and has been ongoing for seven days.

At the same time, Kazakhmys PLC and OAO GMK Norilsk Nickel are also reporting lower copper output, write Agnieszka Troszkiewicz and Yi Tian of Bloomberg.

As a result, copper futures prices are on the rise and could hit new highs in upcoming months.

Interested in finding copper stocks? Here is a list of companies that could see revenues increase with the price of the metal.

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List sorted by projected five year earnings per share growth.

1. Southern Copper Corp. (SCCO): Market cap of $31.46B. Earnings per share is expected to grow by 25.17% over the next five years. SCCO produces copper, molybdenum, zinc and silver. All of the its mining, smelting and refining facilities are located in Peru and in Mexico, and it conducts exploration activities in those countries and Chile. It operates the Toquepala and Cuajone mines in the Andes Mountains southeast of the city of Lima, Peru. It also operates a smelter and refinery west of the Toquepala and Cuajone mines in the coastal city of Ilo, Peru.

2. Rio Tinto plc (RIO): Market cap of $136.93B. Earnings per share is expected to grow by 16.80% over the next five years. RIO is engaged in minerals exploration, development, production and processing. Its major products are aluminum, copper, diamonds, coal, iron ore, uranium, molybdenum, gold, borates, titanium dioxide, salt and talc.

3. BHP Billiton Ltd. (BHP): Market cap of $247.41B. Earnings per share is expected to grow by 16.0% over the next five years. BHP is a diversified natural resources company. It operates nine customer sector groups (CSGs): petroleum, aluminium, base metals (including uranium), diamonds and specialty products, stainless steel materials, iron ore, manganese, metallurgical coal and energy coal. During the fiscal year ended June 30, 2010 (fiscal 2010), the Company realized an annual production volume of 158.56 million barrels of oil equivalent. During fiscal 2010, the company produced 1.2 million tonnes of aluminium. It also produced 13.9 million tonnes of bauxite and 3.8 million tonnes of alumina.

4. Freeport-McMoRan Copper & Gold Inc. (FCX): Market cap of $51.58B. Earnings per share is expected to grow by 1.15% over the next five years. FCX is a copper, gold and molybdenum mining company. Its portfolio of assets includes the Grasberg minerals district in Indonesia, mining operations in North and South America, and the Tenke Fungurume (Tenke) minerals district in the Democratic Republic of Congo (DRC). It operates seven copper mines in North America: Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Tyrone and Chino in New Mexico. It operates four copper mines in South America: Cerro Verde in Peru, and El Abra, Candelaria and Ojos del Salado in Chile.

5. Sterlite Industries (India) Ltd. (SLT): Market cap of $50.45B. Earnings per share is expected to shrink by 6.45% over the next five years. SLT is a non-ferrous metals and mining company. It is a subsidiary of Vedanta Resources plc (Vedanta). It is engaged in copper, zinc, aluminum and commercial power generation. Its copper business is custom smelting. Its operations also include a copper smelter, two copper refineries, three copper rod plants, a dore anode plant, sulphuric and phosphoric acid plants, and captive power plants at its facilities in Silvassa and Tuticorin in India, as well as a precious metal refinery at Fujairah in the United Arab Emirates.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: BHP , FCX , RIO , SCCO , SLT

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