In this piece, we will take a look at the 7 best copper stocks to buy according to analysts.
Copper is one of the most important metals in the world. Without it, the global industrial and electrical infrastructure will collapse since nearly every electrical system depends on the metal. Data from the Copper Development Association shows that an average single family home covering 2,100 square feet has 439 pounds of copper. More than half of this, or 346 pounds are for wiring and plumbing fittings. Similarly, an average air conditioner has 52 pounds of copper.
At the same time, while copper’s dominance in residential and industrial use cases is permanent and is unlikely to change, its demand should grow in the future due to today’s emerging technology trends. The biggest trend right now is artificial intelligence and systems such as OpenAI’s ChatGPT use as many as 10,000 GPUs for their training. These GPUs require power, and transporting power requires wires that use copper. According to Rob Thummel, senior portfolio manager at Tortoise Capital, the demand for electrical infrastructure is an overlooked aspect of the AI boom, since he believes that there “is no AI without EI (energy infrastructure) because you need this critical infrastructure to provide the fuel to keep their lights on and electricity flowing 24 hours a day.” You can check out which stocks might benefit from the potential gold rush by reading 9 Best AI Energy Infrastructure Stocks to Buy Now.
Naturally, should this demand materialize, then global copper demand will naturally have to grow. However, since copper mining is a capital intensive activity, it takes time for the supply to catch up with demand due to the long development times for copper mines. This means that investors pile into copper stocks with the hope of catching the right picks before they take off, and as AI stocks have soared, copper has followed. Despite a global industrial slowdown led by China (one of the largest users of copper in the world) copper futures have gained 19% since ChatGPT was released. These gains come after an 8.8% drop in July after Chinese economic growth missed analyst estimates. Copper traded on the London Metal Exchange (LME) opened at $8,500 per ton in 2024, and its latest closing price is $9,213 to mark an 8% gain. Since the launch of ChatGPT, copper prices have gained roughly 12%.
So what’s driving global copper demand despite an industrial slowdown? Well, research from the commodity trader Trafigura shows that cumulatively, the growth in electric vehicles, electricity demand, and AI use cases will create an additional 10 million pounds of copper demand over the next decade. Each of these use cases will account for a third of this demand, and industry sources speaking to Reuters also add that copper supplies are tight these days. As of April 2024, copper stocks in LME registered warehouses dropped by a strong 35% since October 2023 to sit at 121,000 tons. This trend continued in June, with the latest data outlining that as of June 27th, headline LME copper stocks slid to 77,050 tons from 100,100 tons three weeks prior despite the fact that 30,000 additional tons were added. Global copper stock inventory sat at the lowest level since 2008, so it’s clear that the market is quite tight even as industrial activity in China and Europe is slow and America battles with high interest rates.
This crunch has come on the back of a broader industrial tightness as well as specific developments. Starting from the former, the S&P Global released a detailed report on the state of the copper industry in May. Its research outlines that copper in initial resources tanked by a stunning 42% in 2023 and sat at 7.6 million for a four-year low. This came on the back of reduced mining activity and lower budgets. The subsequent fall in copper prices due to lower industrial activity also led to a mere 2% growth in initial copper exploration budgets in 2023, which sat at $1.43 billion at year end.
As for the specific developments that have constrained copper supply, a major copper mine in Panama capable of producing 300,000 tons per annum was closed after a court order found that its contract violated the country’s constitution. The Cobre Panama mine accounted for 5% of the country’s GDP and 1% of global supply, and the ruling in November was followed by one of the biggest copper producers in the world cutting its 2024 production guidance. The miner shared that its 2024 production would range between 730,000-790,000 metric tons to mark a 20% cut from the previous estimate to account for disruptions in its facilities in Chile and Peru.
As copper capacity remains tight, global mining giants are already eyeing the future. They are now focusing on Argentina, where a new government is eager to invite foreign capital to stimulate the economy. While Argentina’s share in global copper production is negligible, estimates show that if just six mining projects come online then it could produce one million tons by 2035 and lead to $8 billion in exports. Copper miners have to fork out $130 billion over the next decade if they want to avoid a 7.7 million shortfall in 2034, and for their Argentinian plans, they’ll have to contend with a hostile population, geographic problems, and environmental constraints.
Before we get to the top copper stocks that analysts are optimistic about, fund L1 Capital shared quite a bit of relevant insights for the industry in its Q1 2024 investor letter. It pointed out that by 2027, new data centers could add as much as 1 million tons of additional copper demand per annum, and added that supply needs to grow by quite a bit:
Market supply has tightened into 2024 as existing mine production downgrades and suspensions flowed into the physical markets. The most notable event here was the Cobre Panama mine (~400kt p.a.), which was placed into suspension by the local authorities in November 2023. Other major producers such as Anglo American have also significantly reduced near-term production guidance (Figure 10). While these disruptions provide a catalyst for supply tightness, the industry is structurally challenged in the longer term by a declining existing asset base, as the geological characteristics (i.e. mine grades) deteriorate over time (Figure 11). Escondida, the world’s largest copper mine, has seen copper grades decline from ~3% in the 1990’s to ~0.5% today. This means to produce the same amount of copper, roughly six times the material is required to be mined than at the start of the mine’s life.
While supply growth has been robust over the last three years with numerous projects commissioned (10 projects, bringing ~2Mt of incremental supply), this is largely already factored into current supply estimates, as incremental new project growth slows from 2025. Going forward, BHP estimates the world may need incremental supply of ~10 Mtpa of copper by 2030 (7 Mt to meet growth and 3 Mt to offset projected decline at existing operations), while in 2023 only 340kt of new supply was sanctioned (Figure 12). BHP further estimates the capital requirement to achieve the 10Mtpa production is a staggering US$250b, of which a small amount has been committed today (Figure 13). For context, Sandfire is the largest listed ASX copper producer – the capital requirement to meet market demand represents ~100x their current market cap (i.e. the world needs 100 more Sandfires spent)
With these details in mind, let’s take a look at the best copper stocks to buy according to analysts.
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Our Methodology
To make our list of the best copper stocks to buy according to analysts, we ranked all publicly traded companies on US exchanges engaged in copper mining by their average analyst percentage share price upside and picked out the top stocks.
We also mentioned the number of hedge funds that had bought these stocks during the same filing period. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7. Teck Resources Limited (NYSE:TECK)
Number of Hedge Fund Investors in Q1 2024: 61
Analyst Average Share Price Target: $59.13
Upside: 26.40%
Teck Resources Limited (NYSE:TECK) is a Canadian metals and mining company. A diversified company that mines other materials such as zinc as well, the firm seems to be aware of the growing shortfall in the copper industry. Teck Resources Limited (NYSE:TECK) just sold its Elk Valley coal site for $9 billion in order to concentrate its focus on copper. Additionally, while some copper miners are reducing their guidance, Teck Resources Limited (NYSE:TECK)’s first quarter earnings came with good news for copper investors. This is because the company guided its 2024 production to range between 465,000 tons to 540,000 tons. The midpoint of this guidance is 502,500 tons which is significantly higher than Teck Resources Limited (NYSE:TECK)’s 2023 production of 296,500 tons. Teck Resources Limited (NYSE:TECK) is also busy expanding its copper production at its QB2 project in Chile. Through the project, it expects to produce 285,000 to 315,000 tons of copper annually, and it expects to grow its production quarter over quarter, consecutively, this year.
On this front, here’s what Teck Resources Limited (NYSE:TECK)’s management had to say about QB2 production during its Q1 2024 earnings call:
As I mentioned earlier, we completed all outstanding major construction in the first quarter. At the ports, we achieved construction and completion in Q1, consistent with our guidance and successfully loaded our first vessel of QB concentrate using the shiploader. The mobilization of the construction workforce is substantially advanced and the operational ramp-up is continuing. We are on track to complete ramp- up of the molybdenum plant in the second quarter. Our QB2 project capital cost guidance of $8.6 billion to $8.8 billion is unchanged. We produced higher QB copper in concentrate quarter-over-quarter at 43,300 tonnes and we continue to expect progressively stronger production in each quarter throughout the rest of the year. Our full- year copper in concentrate guidance for QB is unchanged at 230,000 tonnes to 275,000 tonnes. QB unit costs are expected to remain elevated this year, particularly in the first-half, consistent with our guidance. This is driven by the cost of alternative logistics, limited molybdenum production in the first-half of the year, continued ramp-up and inflationary pressures. Our full-year guidance for QB net cash unit cost is unchanged at $1.95 to $2.25 per pound.
6. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Investors in Q1 2024: 37
Analyst Average Share Price Target: $83
Upside: 30.13%
Rio Tinto Group (NYSE:RIO) is one of the biggest mining companies in the world, which provides it with significant resources to rapidly invest in new projects at a time when other firms might be struggling to raise funds. Rio Tinto Group (NYSE:RIO) is also aware of the rising supply crunch in the copper industry, and on this front, it aims to increase its production to sit at one million tons by 2029. Rio Tinto Group (NYSE:RIO)’s current copper production is 700,000 tons, and to expand its output, it has entered into partnerships in Chile and grown production in Mongolia and the US. This shift comes as iron, which accounted for 80% of Rio Tinto Group (NYSE:RIO)’s operating income in 2023 is struggling worldwide due to dropping industrial activity. In fact, slow iron demand has also impacted the firm’s valuation, as it trades at 4.5x of its forward EBITDA which is lower than the sector average of 5.5x. Additionally, Rio Tinto Group (NYSE:RIO)’s aggressive approach to copper is also reflected in the value of its reserves, which currently sit at a whopping $25 billion.
Rio Tinto Group (NYSE:RIO)’s management shared key details for its copper plans during its Q1 2023 earnings call. According to them, the rise in prices helped offset the negative impact of falling aluminum prices:
Turning now to the EBITDA movement, in aggregate, commodity prices lowered EBITDA by $1.5 billion, primarily driven by aluminium. Weaker currencies in Australia and Canada offset this by about $600 million. The real positive in the period though was the 3% rise in copper equivalent production. The increase in Pilbara output was a big factor behind this growth, and added $600 million. In copper, we benefited from the Oyu Tolgoi underground ramp-up, but there was some offset at Kennecott due to a conveyor failure in the first half, and the planned rebuild of the smelter in the second and third quarters.
5. Metals Acquisition Limited (NYSE:MTAL)
Number of Hedge Fund Investors in Q1 2024: N/A
Analyst Average Share Price Target: $17.60
Upside: 38.26%
Metals Acquisition Limited (NYSE:MTAL) is a pureplay copper and silver miner with operations in Australia. It’s one of the younger copper stocks on our list, and the shares were listed on the NYSE in June 2023 through a SPAC deal. As such, Metals Acquisition Limited (NYSE:MTAL)’s shares hinge on its future production and asset development. The firm raised A$325 million through its ASX listing earlier this year to fund operations for its mine in New South Wales, Australia. Metals Acquisition Limited (NYSE:MTAL) expects that this mine has a life of 11 years, and for 2024, the firm aims to produce 38,000 to 43,000 tons from the site, which it estimates has proven copper reserves of 293 tonnes. However, as Metals Acquisition Limited (NYSE:MTAL) is an upstart, it has to remain well financed to keep funding operations. In today’s environment, as raising debt financing is expensive, Metals Acquisition Limited (NYSE:MTAL) might issue more shares or exercise existing warrants – both of which will dilute equity and potentially impact the stock price.
Metals Acquisition Limited (NYSE:MTAL)’s management commented on these key liquidation issues during its Q1 2024 earnings call where it shared:
On Slide 12, here I wanted to take you through a high-level liquidity update as at the end of March 2024. As you can see, we started off the year with liquidity of around $32 million, which included the drawdown of our revolving facility of $25 million. We then completed a very successful oversubscribed equity raise on the ASX, which brought us in so much needed liquidity of around $215 million or AUD325 million before cost.
Almost immediately, we paid a deferred Glencore consideration of around $83 million, which was one of our higher debt costs on our balance sheet as it carries the same interest as the mxx debt facilities, so immediately accretive to earnings. Alternatively, this liability could have been converted to shares, which would have been RDWS [ph], so paying that back as soon as possible was the best thing to do for us there. We then reduced further some additional interest-bearing liabilities by repaying the revolving facility of $25 million and reducing some of our principal on our senior facility as well of around $8 million. We ended up the quarter with around $100 million of liquidity, which is around that AUD155 million Mick has outlined as well.
4. Vale S.A. (NYSE:VALE)
Number of Hedge Fund Investors in Q1 2024: 34
Analyst Average Share Price Target: $15.22
Upside: 38.26%
Vale S.A. (NYSE:VALE) is another global mining giant that mines copper along with other industrial metals. Just like its peer Rio Tinto, the firm also relies on iron for a large portion of its earnings. And just like Rio, Vale S.A. (NYSE:VALE) is also pivoting towards metals that are being used in electrification – copper and nickel. Its Salobo mines in Brazil are the largest copper deposits in Brazil, and they allow Vale S.A. (NYSE:VALE) the opportunity to rapidly capture a piece of the global copper pie as other miners gradually invest in new sites. Salobo also contributed to a hefty growth in Vale S.A. (NYSE:VALE)’s copper production in Q1. During the quarter, it produced 81.9 kilo tons of copper which marked a 22% annual growth. Similarly, its copper sales also jumped by 22.5% during the quarter and sat at 76.8 kilo tons. The Q1 figures built on strong copper production in Q4 and full year 2023. During Q4, Vale S.A. (NYSE:VALE) produced 99,100 tons of copper (50% annual jump) and it ended the year by producing 326,000 tons for a 29% annual growth. Not looking to slow down, Vale S.A. (NYSE:VALE) aims to spend $3.3 billion in its Brazilian and Canadian mines to expand annual production to 500,000 tons by 2028.
Commenting on these developments and how they’re leading to lower costs as well, Vale S.A. (NYSE:VALE)’s management shared during its Q1 2024 earnings call:
Our copper all-in costs decreased by 26% year-on-year driven by continued successful ramp-up of Salobo 3 and improved operational performance at Salobo 1 and 2. The higher proportion of Salobo 3 volumes in the product mix has also contributed to an increase in unit by product revenues with higher gold sales. Nickel all-in costs were down 14% year-on-year supported by higher unit by product revenues. The unit COGS increase was expected and largely related to the furnace rebuild at Onça Puma. I would like to also mention that Mark Cutifani and the VBM team continue to make significant progress on the asset review. The Vale unlock opportunities are being assessed and designed for implementation over the next two to three years with some benefits already being captured in the shorter term.
3. Hudbay Minerals Inc. (NYSE:HBM)
Number of Hedge Fund Investors in Q1 2024: 31
Analyst Average Share Price Target: $12.13
Upside: 50.31%
Hudbay Minerals Inc. (NYSE:HBM) is a Canadian mining company that focuses on mining copper, zinc, and gold. It has a sizeable copper portfolio, which includes impressive names such as the Copper World project in the US which is one of the highest grade open pit mining projects in this part of the world. Phase 1 of this site has an expected life of twenty years, and it can produce 92,000 tons per year. Additionally, Hudbay Minerals Inc. (NYSE:HBM) also acquired Copper Mountain in 2023 to create what it terms the third largest copper producer in Canada. The deal added six new copper production sites to its portfolio and set Hudbay Minerals Inc. (NYSE:HBM) as a long term copper producer. The firm is also aided by the fact that it generates healthy cash flow by mining gold, which helps its cash position to finance the copper mining projects. Raising capital is key for Hudbay Minerals Inc. (NYSE:HBM)’s success, as phase one of Copper World will cost $950 million. The firm is interested in selling a minority stake in the site to interested parties to help offset some of the costs.
Hudbay Minerals Inc. (NYSE:HBM)’s management commented on the costs and future copper production during its Q1 2024 earnings call. Here is what they said
. . .Copper World is the next promising greenfield copper development project in our growth pipeline. As we progress towards making the sanctioning decision, we will continue to be prudent with our financing plans for Copper World by remaining focused on meeting all of the prerequisites outlined in our 3-P Plan that we introduced in late 2022. Copper World is one of the highest grade open pit copper projects in the Americas with proven and probable reserves of 385 million tonnes at 0.54% copper in Phase 1. There is roughly 60% of the total contained copper remaining in the measured and indicated resources excluding reserves, which provides significant upside potential for Phase 2 expansion and mine life extension beyond 20 year.
. . .We expect to launch the formal Joint Venture process later this year, after we secure our permits and prior to commencing a definitive feasibility study, which would allow the potential Joint Venture Partner to participate in the funding of definitive feasibility study activities as well as in the final project design for Copper World. We have seen strong initial interest from potential Joint Venture Partners, as many industry participants are focused on increasing copper exposure. Securing copper supply becomes a growing global concern, as evidenced by BHP’s recent bid by Anglo American in an effort to increase their copper exposure. Copper World will be a key contributor to the domestic US supply chain, with our intention to produce made-in-America copper cathode by building a concentrate leach processing facility in the fourth year of operations.
2. Taseko Mines Limited (NYSE:TGB)
Number of Hedge Fund Investors in Q1 2024: 8
Analyst Average Share Price Target: $3.36
Upside: 52.04%
Taseko Mines Limited (NYSE:TGB) is another Canadian copper producer. The firm’s claim to fame comes from its Gibraltar mine, which it claims is the second largest open pit copper mine in Canada. Its other two copper projects are the Yellowhead mine in Canada and the Florence property in the US. Taseko Mines Limited (NYSE:TGB) is priming itself for future growth, and in March 2024, it acquired an additional 12.5% in the Gibraltar property to own 100% of the site at a price of $117 million to be paid over the next decade. Similarly, the firm kicked off the construction of commercial production facilities at the Florence site this year, and it expects to start copper output from the site in Q4 2025. Through Florence, Taseko Mines Limited (NYSE:TGB) expects to have an annual production capacity of a whopping 85 million pounds and a mine life of 22 years. However, financing for growth isn’t cheap and it necessitates a look at Taseko Mines Limited (NYSE:TGB)’s balance sheet. It has C$1.3 billion in total liabilities and a debt to equity ratio of 1.13 hinting that future debt financing without retiring existing debt might prove to be troublesome. This means that along with copper production and project timeline execution, Taseko Mines Limited (NYSE:TGB)’s share performance is also dependent on its ability to raise capital and manage its debt.
Taseko Mines Limited (NYSE:TGB)’s management remains upbeat though, as it shared during the Q1 2024 earnings call:
We’ve completed a number of key financings in recent months, and we consider the Florence project to now be fully funded.
The remaining project costs can be funded by our available liquidity through the remaining installments coming from Mitsui and of course, cash flow from Gibraltar. Our hedging program has also been extended recently to secure a minimum copper price of $4 a pound for 2025, and that gives us additional protection through the Florence construction period as well. Last but not least, I wanted to make a few comments on our bond refinancing that was just completed in April. We’re very happy with the results and believe it was a significant derisking event for the Company. It was something we wanted to complete this year and bond market conditions were such that it made sense to move forward with the refinancing immediately following our — the announcement of our Gibraltar transaction.
Upsizing the senior notes from $400 million to $500 million provides additional proceeds that can replace more costly bank debt alternatives at Florence, and pushing out the maturity date from early 2026 out to 2030 gives us plenty of time to generate cash flow from Florence and Gibraltar so we can look to delever our balance sheet in the future. And with that, I’ll pass the call over to Bryce.
1. Ivanhoe Electric Inc. (NYSE:IE)
Number of Hedge Fund Investors in Q1 2024: 13
Analyst Average Share Price Target: $16.88
Upside: 67.13%
Ivanhoe Electric Inc. (NYSE:IE) is an American gold and copper company headquartered in Tempe, Arizona. Its flagship copper project is the Santa Cruz mining project in Arizona. Through this site, the firm aims to produce 1.6 million tonnes of copper over 20 years. However, since Ivanhoe Electric Inc. (NYSE:IE) is a small company that made just $260,000 in revenue during its March quarter, the firm has a long way to go before it can start to generate cash from its copper mines. Additionally, it has $111 million in total liabilities, and its overall profile makes Ivanhoe Electric Inc. (NYSE:IE) a risky play. However, this hasn’t stopped the firm from expanding its copper footprint, and in March 2024 it announced that it had completed an earn in agreement to acquire a 60% stake in a copper site in the Ivory Coast. Earn in agreements involve buyers setting the terms of their payments based on the seller’s performance. This site aims to produce 38,627 tons of 28% copper concentrate annually, according to the preliminary evaluation.
IE is a copper stock with a high upside according to analysts. However, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Ivanhoe Electric but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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