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Alberto Abaterusso
Alberto Abaterusso
Articles (582) 

Copper Producers to Benefit From Hurricanes

5 stocks whose share prices may surge because of storms

September 13, 2017 | About:

The cost to restore Texas to what it was before Hurricane Harvey and to recover from all the damage caused by the violent tropical cyclone is estimated at $180 billion. And the amount is bound to increase with the passage of time.

Unfortunately, we also must add casualties and damage to properties and infrastructure caused by Hurricane Irma in Florida, leaving half of the population without electricity.

From the consequences of these storms there are industries that will have negative impacts and industries that will benefit. Read here.

Among the industries that are sure to benefit from these storms is the basic materials industry, especially those companies that produce and sell copper. Why?

With the need to rebuild houses, businesses and infrastructures the demand for wiring and plumbing made of copper will surge as these two components are essential to heating, appliance and cooling systems as well as telecommunication networks, which are used daily by people in their homes and businesses not to mention the vast number of vehicles that have been destroyed by the storms since copper is used to produce a lot of spare parts.

Here is a list of companies that produce and sell the red metal and that are traded on the U.S. stock market.

Turquoise Hill Resources is a mining company for the production and sale of copper, silver, gold and molybdenum. The primary resource for revenue and income for the company is represented by the sale of the red metal that is mostly produced at Oyu Tolgoi copper-gold mine, which is located in the southern part of Mongolia.

The Canadian mining company is trading at $3.19 per share and about 60 cents below the 52-week high of $3.80 (the 52-week low is $2.44). The company has a market capitalization of $6.43 billion, a price-book (P/B) ratio of 0.67, a price-earnings (P/E) ratio of 57.11, a price-sales (P/S) ratio of 6.80 and an EV-EBITDA ratio of 22.04. One analyst has assigned a target price of $4 per share.

Turquoise Hill Resources has $1.38 billion in cash on hand and securities or 69 cents per share as of the most recent quarter. The total debt-equity ratio is 52.28 versus an industry average of 113.26. Total debt amounts to $4.15 billion.

GuruFocus gives Turquoise Hill Resources a financial strength rating of 5 out of 10 and a profitability and growth rating of 5 out of 10.

Nevsun Resources is a Canadian mining company that holds operations in Africa. The company is also engaged in acquisition of mineral properties, exploration activities and development of mineral projects. The company mainly produces copper and zinc thanks to the open pit mining operations it runs at its high-grade copper and zinc Bisha mine in Eritrea. The company is also advancing the Timok project in Serbia. Here Nevsun Resources is laying the foundations for a prolific gold and copper high ore grade deposit.

As of the most recent quarter the company has an estimated $171.37 million in cash on hand and securities and without any long-term financial obligations, analysts believe Nevsun has plenty of financial capabilities to bring the Timok project to operation. This means that the company will add a sizable amount of high ore grade reserves to the company’s total amount. That’s why a target price of $3.06 per share has been assigned to Nevsun, which is a 38% upside in the current market value of this stock.

Nevsun Resources is trading at $2.22 per share, which is only a few cents above its 52-week low of $1.96. The 52-week high is $3.52 per share. The market capitalization is $655.69 million, the P/B ratio is 0.67, and the P/S ratio is 3.03. The EV-EBITDA ratio is -23.99.

GuruFocus gives Nevsun Resources a financial strength rating of 7 out of 10 and a profitability and growth rating of 4 out of 10.

Hudbay Minerals is a Canadian mining company engaged in the discovery of mineral resources, the production of copper concentrates. The company’s American assets include four metallic mines, where the company produces copper, gold, silver and zinc from copper concentrate, and a facility where the miner produces zinc. The company also holds a copper project in Arizona.

Most of the company’s production comes from the Canadian assets, which are located in Northern Manitoba and Saskatchewan.

The company is trading at $7.8 per share with a market capitalization of $1.87 billion. The P/B ratio is 0.94, the P/S ratio is 1.40, and the EV-EBITDA ratio is 5.89. The 52-week low and high range is $3.57 to $9.35. The analysts’ average target price is $9.61, which is a mean of a $9-to-$10.64 range and is a 23.2% upside from the current share price.

GuruFocus gives Hudbay Minerals a financial strength rating of 4 out of 10 and a profitability and growth rating of 7 out of 10.

Freeport-McMoRan is a U.S. mining company with producing assets in the U.S., South America – Chile and Peru – and Indonesia. The company’s portfolio of assets also includes exploration activities for copper concentrate, cathode and rod but also for molybdenum, gold, silver and other base metals. Freeport-McMoRan is also engaged in the exploration for oil and gas resources.

As of the end of fiscal 2016, the U.S. mineral mining and exploration company has an estimated 86.8 billion pounds in proven and probable copper reserves. The company also holds about 26.1 million ounces of proven and probable gold reserves and therefore positions itself at the same level of Canadian mining companies such as Agnico Eagle Mines Ltd. (NYSE:AEM) and Eldorado Gold Corp. (NYSE:EGO), who make the production and the sale of the yellow metal their primary income source. The U.S. mining and explorer company also holds proven and probable reserves of molybdenum for 2.95 billion pounds and of oil and natural gas for a total of 18 million barrels of oil equivalent. The latter reserves are on a proven basis.

Freeport-McMoRan is trading at $14.30 per share with a market capitalization of $20.7 billion. The P/B ratio is 3.09, the P/S ratio is 1.33, and the EV-EBITDA ratio is 8.09. The 52-week low and high ranges between $9.24 and $17.06 per share.

The average target price is $15.35 per share, and the recommendation rating is 2.9 out of 5.

GuruFocus gives Freeport-McMoRan a financial strength rating of 4 out of 10 and a profitability and growth rating of 5 out of 10.

Southern Copper is a U.S. mining company engaged in the production of copper and molybdenum concentrates, in smelting and refining operations to produce blister, anode copper from concentrates and copper cathodes. The company also produces sulfuric acid and refined precious metals such as gold and silver. The company’s portfolio of assets also includes the mining and the processing of basic metals such as lead and zinc, plus several hectares in concessions in Peru, Mexico, Argentina, Ecuador and Chile. Southern Copper’s mines and facilities are in South America, Peru and Mexico.

Southern Copper is trading at $40 per share with a market capitalization of $30.92 billion. The 52-week low and high range is between $25.01 per share and $42 per share. The P/B ratio is 4.88, the P/S ratio is 5.23, and the EV-EBITDA ratio is 14.01.

The average target price is $36.73, and the recommendation rating is 3.4 out of 5.

GuruFocus gives Southern Copper a financial strength rating of 5 out of 10 and a profitability and growth rating of 6 out of 10.

Disclosure: I have no position in any stock mentioned in this article.

About the author:

Alberto Abaterusso
Alberto Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds a MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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GuruFocus has detected 6 Warning Signs with Turquoise Hill Resources Ltd $TRQ.
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