Few miners offer pure exposure to copper
Another way to get exposure to copper that removes the difficulties of rolling futures or CFD contracts is to invest in mining companies that extract or refine copper. The table below shows 16 mining companies with exposure to copper with Codelco, the largest copper producer in the world, absent from the list as the Chilean miner is only listed in Chile and thus not investable for our clients. The copper mining industry has delivered a median total return in USD of 132.6% over the past five years beating the global equity up 105% in the same period. The rising copper prices the past year driven by investors positioning themselves in green metals (defined as metals that will play a key role in the green transformation) which in turn has pushed up revenue in the industry by almost 40%. Sell-side analysts are generally bullish on copper miners with a median upside of 16% from current levels. In our view investors should select one or two copper miners to get exposure and avoid the ETFs on the industry as they are too broad-based and lack the pure exposure profile needed to play the copper market.
|First Quantum Minerals Ltd||14,962||5.1||41.9||20.9||111.3||84.2|
|Southern Copper Corp||45,944||8.6||39.7||3.1||128.9||81.6|
|KGHM Polska Miedz SA||7,026||3.8||28.3||26.4||80.0||73.8|
|Jiangxi Copper Co Ltd||9,843||7.2||44.6||37.8||27.3||71.0|
|OZ Minerals Ltd||6,397||7.6||38.7||-6.1||288.4||60.0|
|Glencore PLC *||65,890||4.5||-7.5||13.9||78.2||39.0|
|Teck Resources Ltd||14,468||3.9||28.7||19.9||22.0||27.0|
|BHP Group Ltd||131,046||4.0||41.7||18.6||136.4||26.0|
|Zijin Mining Group Co Ltd||39,925||8.8||27.4||52.1||396.4||22.7|
|Anglo American PLC||47,342||3.5||59.0||15.7||262.8||22.3|
|MMC Norilsk Nickel PJSC||47,479||5.1||27.1||13.5||191.1||20.6|
|Rio Tinto PLC||98,497||3.6||39.5||15.8||149.2||11.5|
Source: Bloomberg and Saxo Group
* EBITDA contribution as Glencore does not breakdown revenue split on metals
As the table also show, there is no such thing as pure exposure to copper except for futures, options and CFDs on the underlying copper. The miner with the highest revenue exposure to copper is Antofagasta with 84.8% revenue share from copper extraction and refining. Most copper miners also extract gold and silver as part of their copper operations. Out of the 16 copper miners in our list, only 6 of these miners have more than 50% of revenue coming from copper extraction and refining.
Outlook and risks
High grade copper futures have been range trading for more than half a year as slowing demand out of China due to a slowdown in housing construction has weighed on the demand side. On the positive side inventories have been tight in copper which has helped support the copper price and the global pipeline of new copper mines, but also potential tax charges in Chile and Peru (roughly around 40% of global supply) could negative impact supply and keep copper prices high. The annualized growth rate in global refined copper demand has been around 3% in the period 2009-2020.