Copper at Record High: Investors Benefit from Ivanhoe Mines, Power Metallic Mines, and Southern Copper

Ivanhoe Mines: Special Factors Offer an Entry Opportunity

Ivanhoe Mines has not been part of the circle of established copper producers for very long. But since the start of commercial production at the Kamoa-Kakula mining complex in the Democratic Republic of the Congo in 2021, the company has gradually worked its way into the elite class of copper companies. While established majors often struggle with aging deposits—see Codelco in Chile—and declining ore grades, Ivanhoe is delivering massive organic growth through its three main projects.

At Kamoa-Kakula, the successful ramp-up of Phase 3—the commissioning of the new concentrator plant—has now been celebrated. Annual production capacity is thus heading toward 600,000 tons of copper. This makes the mine one of the five largest in the world. Kamoa-Kakula stands out for its high copper grades, which often average over 5%. By comparison, operator BHP expects ore grades of 0.85% to 0.90% for the giant Escondida mine in Chile for the full year. These high grades result in extremely low cash costs for Ivanhoe Mines. And the growth is not over yet. Ivanhoe is building Africa's largest copper smelter directly on-site at the property, which is expected to boost margins. This means the coarse copper concentrate no longer needs to be transported thousands of kilometres to ports.

Ivanhoe Mines' latest quarterly figures impressively demonstrate how the investments are paying off. Kamoa-Kakula produced a record volume of just over 115,000 tons of copper concentrate in the first quarter. However, when analyzing the financials, investors must note that Kamoa-Kakula is operated as a joint venture with Zijin Mining and the Congolese government. Ivanhoe therefore does not report the mine's billions in revenue but instead consolidates it using the equity method. As a result, the revenue of USD 162 million looks meagre; it comes primarily from the Kipushi zinc mine. On a net basis, Ivanhoe Mines also posted a loss of USD 2 million because it had to bear its share of a back-tax payment for Kamoa-Kakula.

In light of these one-time effects, the stock experienced a significant decline. From its peak in March, it fell by a third. This was certainly also because, at times, the transport of ore to Angola was restricted due to flooding along the railway line. Analysts remain optimistic for the full year, however. The consensus forecast is for adjusted earnings per share of USD 0.80. This currently puts Ivanhoe at a P/E ratio of just 12.5. Higher copper prices could lead to higher profits. Additionally, earnings are expected to rise significantly in the second half of the year as Phase 3 at Kamoa-Kakula operates at full capacity. Bold investors can bet on a comeback after the summer break.

Power Metallic Mines: High Copper Grades in the Heart of Canada

These days, high metal grades are really only found in new mining projects in Africa or parts of Asia. Power Metallic Mines, however, is the welcome exception here. With NISK, the company is developing one of the most exciting polymetallic projects in North America. It is located in the north of the Canadian province of Québec, in the James Bay region. In addition to copper, the area is rich in nickel, cobalt, palladium, and platinum, as it is a magmatic sulphide deposit. This is interesting not only in light of the discussion surrounding critical raw materials.

Power Metallic is currently advancing exploration of the project on a massive scale. A 100,000 m drilling program has already been budgeted for this year. In the spring, the focus was primarily on the high-grade Lion Zone, where infill drilling was conducted. Some excellent results were achieved here, including drill hole 26-095, which returned 11.46% copper equivalent over 22 m. The current summer program includes an additional 30,000 m, with work now set to proceed using six drill rigs simultaneously. Other sub-areas of the property are also being explored here.

CEO Terry Lynch presented his plans for Power Metallic Mines at the IIF.

https://www.youtube.com/watch?v=jpf05nGtB3s

The new drilling data is expected to be incorporated directly into the resource estimate to be announced in the third quarter. Shortly thereafter, an initial preliminary economic assessment (PEA) is also expected to be published. Analysts at GBC Research see the publication of these studies as an opportunity for a revaluation of the company. Power Metallic Mines could evolve from a pure exploration play into a developer. GBC has confirmed a price target of CAD 3.00, implying the stock could double in value.

At the same time, the company is securing at least CAD 25 million through a recent financing round. The fresh funds are intended to advance not only the Nisk project but also initial exploration on the newly acquired Jabul Baudan license in Saudi Arabia.

Power Metallic Mines' stock could be revalued by the market following the upcoming release of the resource and preliminary economic assessment. Additionally, ongoing drill results are likely to influence the share price. The shareholder base is noteworthy. With Gina Reinhart, Robert Friedland, and Rob McEwen, three heavyweights of the mining industry are backing the company. In addition, CEO Lynch's family holds around 18% of the shares (prior to the completion of the current financing).

Southern Copper: The Giant in Peru

Southern Copper Corporation is one of the copper producers that is relatively unknown outside the industry. But its market capitalization speaks volumes. The US corporation, headquartered in Phoenix, Arizona, is worth a whopping USD 168 billion and holds the largest reserves of any publicly traded Western corporation. It was originally founded as a consortium of several US companies seeking to exploit Peru's copper mines. And that is precisely what makes the company so successful today.

At the end of April, Southern Copper reported strong first-quarter results. Despite some operational hurdles, the company clearly beat market expectations with earnings per share of USD 1.92 and posted a significant jump in earnings compared to the same quarter last year (USD 1.19). Revenue climbed by a good quarter to USD 4.25 billion between January and March. This was achieved even though pure copper production fell by 4% year-over-year. The reason was lower ore grades in the Peruvian mines. On the positive side: strong cost control and higher prices for by-products such as molybdenum, silver, and zinc kept profit margins high.

Southern Copper is currently planning several major projects. Management has launched a massive investment program of over USD 20.5 billion for this decade. The goal is extremely ambitious: expanding annual copper production to 1.6 million tons. For one thing, after years of local protests and environmental concerns, a breakthrough was achieved at Tia Maria. The Peruvian government has approved the project. Southern Copper aims to start production as early as mid- to late this year. The goal is an annual production of 120,000 tons of high-purity copper. Los Chancas is then scheduled to go into production in 2031, with a whopping USD 2.6 billion being invested there.

The share is currently trading just below its all-time high. Analysts note that much of the growth is already priced in. In the long term, Southern Copper is a strong stock market story, but in the short term, some momentum could fade.

Ivanhoe Mines is the new giant in the copper business. The expansion of production is likely to pay off in the second half of the year. The stock is attractive following the recent pullback. Power Metallic Mines is transitioning from an explorer to a developer. According to analysts, the new resource estimate and PEA point to an upcoming revaluation of the share. Southern Copper is the giant in Peru and is demonstrating an impressive growth story on the operational front. However, a significant portion of this growth appears to be already priced in.