The Best Copper Stocks potential in 2022

Copper prices have risen by roughly 25% this year. The metal benefited from a revival in global industrial demand, confidence about economic development, demand in top consumer China, shortages from the best producers Chile and Peru, and Biden's infrastructure plan. Copper prices have fluctuated from $3.5035 per pound in February to $4.8840 per pound in May so far this year. It is now trading at roughly $4.42 per pound, with a yearly average of $4.24.

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coPPer Prices are forecasted to remain hiGh due to suPPly restrictions, low stocks, and a solid long-term demand outlook fueled by the ongoing green energy revolution. Stocks, for example, BHP Group BHP, Freeport-McMoRan Inc. FCX, Southern Copper Corporation SCCO, and Teck Resources Limited TECK are well-positioned to benefit from this growing trend.

"Charging Ahead" with Copper

Copper is a critical metal for the global economy, and it will be essential in achieving the global clean energy transition. As per the U.S. Geological Survey, copper is the world's third most consumed industrial metal.

Copper has long been considered a global economic bell, probably due to its wide spectrum usage. As per the IMF (International Monetary Fund), the global economy would grow by 4.9 percent in 2022. Global growth is expected to slow after 2022, to around 3.3 percent in the medium term. Copper consumption is expected to rise, as metal is critical to economic activity.

Demand would be boosted by infrastructure development in key countries like China and India. Rising worldwide awareness of greener energy and electric vehicles will be a significant stimulus for copper demand in the long run. Electric motors, batteries, inverters, and wiring are all made of red metal used in EVs.

While classic cars contain 18 to 49 pounds of copper, plug-in hybrid electric vehicles (PHEV) use 132 pounds, and battery electric vehicles (BEV) use 183 pounds, according to the International Copper Association ("ICA"). Copper-based technologies are used very widely in the EV charging infrastructure.

Clean energy technologies will account for about 45 percent of copper consumption in 2040, up from 24 percent in 2020, according to the International Energy Agency.

Global copper demand for charging infrastructure is estimated to reach 115,000 metric tons by 2025, according to Statista. Copper production in Chile and Peru accounts for over 40% of global output. The impact of the coronavirus epidemic had put a strain on supply from these countries.

The introduction of new virus strains could cause operations to be disrupted once more, affecting the copper supply. A recent tax and royalties measure in Chile, which the Senate has already approved, might jeopardize about 25% of the country's copper output if it is not amended. The royalty rate shall be calculated from the output rather than profits under the proposed adjustment, and it could jump to 75% if copper prices hit $4 per pound.

Several corporations may cease operations in the country due to this, given they are already incurring enormous expenditures. Community protests against mining operations are becoming more common in Peru, the world's second-largest producer. These developments may jeopardize copper production. Grade decline, growing input costs, water restrictions, and a lack of high-quality future development options further limit the metal's supply. Copper prices are likely to rise due to the demand-supply imbalance, which is good news for miners. Miners are increasingly focusing on cost-cutting techniques and digital innovation to improve operating efficiencies, which will help them increase profits over time.

Copper miners are part of the Zacks Mining - Non-Ferrous industry, which has grown 22.4 percent year to date vs. 6.3 percent for the more significant Basic Materials sector.

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The introduction of new virus strains could cause operations to be disrupted once more, affecting the copper supply. A recent tax and royalties measure in Chile, which the Senate has already approved, might jeopardize about 25% of the country's copper output if it is not amended.

4 Copper Stocks to Watch

We recommend keeping an eye on these copper mining stocks. Four such equities with a Zacks Rank #3 (Hold) and a VGM Score of A have been identified. According to a study, stocks with this combination provide the best investment potential.

BHP Group

The company has significantly reduced its long-term debt level in recent years, aided by robust cash flow, which will contribute to growth. Efforts to improve operational efficiency through better technology adoption across the whole value chain will remain to serve the company, reduce costs, and gain margins.

BHP plans to merge its corporate structure into a single entity, which currently consists of two-parent companies. This move will support its commodity-focused strategy (copper, nickel, and potash), which will enable it to capitalize on emerging global trends such as decarbonization, electrification, and rising living standards in developing countries, among others. The Spence Growth Option copper project was finished, and production (including cathodes) is planned to average 300,000 tons per year for the first four years.

BHP Group, based in Melbourne, Australia, is involved in oil and gas exploration, development, and production, as well as copper, silver, zinc, molybdenum, uranium, gold, iron ore, and metallurgical and energy coal mining. BHP's long-term earnings growth rate is expected to be 4%. The Zacks Consensus Estimate for fiscal 2022 earnings implies a 3 percent year-over-year increase. 14 | SKILLINGS MINING REVIEW February 2022

Freeport-McMoRan

Freeport-McMoRan is conducting exploration around existing mines with the goal of expanding reserves. Freeport-McMoRan will profit from an ongoing large-scale concentrator expansion project at Cerro Verde, which will add 600 million pounds of copper and 15 million pounds of molybdenum to annual production. Cerro Verde's expanding activities are aided by cost savings and large-scale, longterm reserves. It finished the Lone Star copper leach project and is expected to produce 200 million pounds of copper per year. The company's cost-cutting efforts and efforts to lower debt levels appear promising.

Mineral exploration and development, mining and milling of copper, gold, molybdenum, and silver, and smelting and refining of copper concentrates are all activities of this Phoenix, Arizona-based corporation. The Zacks Consensus Estimate for Freeport-earnings McMoRan's for fiscal 2022 shows a 23.7 percent increase year over year. Over the last couple of months, the estimates have been revised upward by 14%. The company's long-term earnings growth rate is expected to be 29 percent.

Southern Copper Corporation

Southern Copper Corporation owns the industry's largest copper reserves and manages high-quality, world-class assets in investment-grade countries, including Mexico and Peru. Its unwavering commitment to increasing lowcost production is admirable. Because Peru is the world's second-largest copper producer and possesses 13% of the world's copper reserves, the company will benefit from its efforts to expand there. It's worth noting that Peru's national output is expected to increase to 225000 tons in 2022. Southern Copper has a $7.9 billion investment program in Peru.

By developing its organic growth projects, the corporation retains its goal of producing 1.9 million tons by 2028. This Phoenix, Arizona-based corporation mines, explores, smelts, and refines copper and other minerals. In the last few months, the Zacks Consensus Estimate for Southern Copper's earnings for 2022 has risen by 5%. SCCO's longterm earnings growth rate is anticipated to be 16.1 percent.

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