Copper production was hit seriously by the COVID-19 pandemic last year but has bounced back and is poised to grow significantly this year. However, higher demand is driving a price increase in the metal. Since copper is an important metal used in technologies for sustainable energy, it is likely to play a vital role in the global drive to fossil fuels with renewable energy sources.
According to a recently released Goldman Sachs report, an expected spike in demand and low supply could drive up the price of copper from the current approximately $9,000 per ton to $15,000 per ton by 2025. Also, President Biden’s $2 trillion-plus proposed jobs package, coupled with a global push toward a cleaner future as the Paris Agreement nears its deadline, should help the industry thrive this year and beyond. The copper mining market is expected to reach $76.76 billion by 2022.
The copper industry’s solid performance over the past year is evident in Global X Copper Miners ETF’s (COPX) 192% returns over this period versus the SPDR S&P 500 Trust ETF’s (SPY) 44.9% gains. Keeping these factors in mind, we believe BHP Group (BHP), Rio Tinto Plc (RIO), and Anglo American Plc (NGLOY) are well positioned to benefit this year and beyond.
BHP Group Ltd. (BHP)
Based in Melbourne, Australia, BHP is a leading natural resources company that operates through Petroleum, Copper, Iron Ore, and Coal segments. The company is also involved in the exploration and mining of copper, silver, zinc, molybdenum, uranium, gold, and energy coal.
This month, BHP, along with Oldendorffs and GoodFuels, conducted its first marine biofuel trial in Singapore to understand the functioning and importance of biofuel as a low-carbon fuel for BHP’s future key shipping routes. This collaboration should give BHP entry to the Asian market and drive business growth.
BHP’s profit from operations increased 17% year-over-year to $9.75 billion in the half year ended December 31. The company’s net operating cash flow increased 26% from the year-ago value to $9.37 billion, while its underlying EBITDA increased 21% year-over-year to $14.68 billion over the period.
A consensus EPS estimate of $4.91 for the fiscal period ending June 30, 2021 represents a 36.9% improvement year-over-year. The consensus revenue estimate of $55.91 billion for 2021 represents a 30.2% increase from the same period last year. The stock has gained 85.2% over the past year.
BHP’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BHP is also rated a B for Momentum, Stability, and Quality. Within the D-rated Industrial – Metals industry, it is ranked #6 of 42 stocks.
To see additional POWR Ratings for Growth, Value, and Sentiment for BHP, Click here.
Rio Tinto Plc (RIO)
Founded in 1873 and headquartered in London, U.K. RIO mines and processes mineral resources, including iron ore, aluminum, copper, diamonds, titanium and borates worldwide. In addition, the company owns and operates underground mines, mills, refineries, power stations, and service facilities.
This month, RIO entered an agreement with Turquoise Hill Resources (TRQ) on a financing plan for Oyu Tolgoi, an underground project in Mongolia, which is expected to become one of the world’s largest copper mines and a significant contributor to the Mongolian economy in the coming years. This strategic collaboration should enable RIO to create substantial value for its shareholders and deliver long-term growth.
Also, this month, RIO began the production of battery-grade lithium from waste rock at a lithium demonstration plant in the U.S., which will be run throughout 2021. The move demonstrates RIO’s innovative thinking to meet the demand for emerging commodities like lithium and to expand its reach in the Boron market.
For the year ended 2020, RIO’s net cash from operating activities has increased 6% year-over-year to $15.88 billion. Its EBITDA grew 13% year-over-year to $23.90 billion, while its sales revenue increased 3% from the year-ago value to $44.61 billion. The company’s EPS was $769.6 for 2020, representing a 21% increase year-over-year.
Analysts expect RIO’ revenue for the fiscal period ending December 31, 2021 to be $57.46 billion, representing 28.8% year-over-year growth. The company’s EPS is likely to increase 64.3% for fiscal 2021. RIO’s stock has gained 81.2% over the past year.
It is no surprise that RIO has an overall rating of A, which indicates a Strong Buy in our proprietary rating system. It is graded a B for Growth, Value, and Momentum. In the same industry, it is ranked #2.
In total, we rate RIO on eight different levels. Beyond what we’ve stated above, we have also given RIO grades for Sentiment, Stability, and Quality. Get all the RIO ratings here.
Anglo American plc (NGLOY)
Headquartered in London, U.K. , NGLOY is a mining company that explores for raw materials that include diamonds, copper, iron, nickel, polyhalite, and manganese ores worldwide.
This month, NGLOY secured 100% renewable energy across all its operations in Brazil, Chile and Peru. The company entered an agreement with Engie Energía Perú to offer 100% renewable energy to the Quellaveco copper operation in Peru, which is expected to begin production next year. The move is in line with its desire to be carbon neutral.
NGLOY’s revenue increased 3% year-over-year to $30.9 billion for the year ended December 31, 2020. The company reported EBITDA of $9.80 billion and a profit of $2.1 billion for this period. It’s free cash flow came in at $1.21 billion.
NGLOY’s revenue is expected to grow 34.3% year-over-year to $41.51 billion in the year ending 31 December 2021. Over the past year, NGLOY’s stock has gained 148.4%.
NGLOY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. The stock has a B grade for Value, Momentum, and Stability. In the same industry, it is ranked #8.
Click here to see the additional POWR Ratings for NGLOY (Growth, Sentiment, and Quality).
Click here to check out our Infrastructure Sector Report for 2021
BHP shares were trading at $72.47 per share on Tuesday afternoon, down $1.65 (-2.23%). Year-to-date, BHP has gained 16.74%, versus a 10.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Samiksha Agarwal
Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market. More…
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