Southern Copper Corp (SCCO), Freeport-McMoRan Copper & Gold Inc. (FCX): Buy This Copper Producer on Lack of New Discoveries

Southern Copper Corp (NYSE:SCCO) operates ten facilities in Mexico and three in Peru with a primary focus on copper. During its second quarter, the company listed a copper cash cost of $1.30 per pound. Though the amount has moved upwards due to rising costs, the company has one of the lowest costs in the industry.

ETN?
The iPath copper ETN is designed to mimic the price of copper so an investor would need to choose whether to invest in the commodity or the miner. While a lot of investors prefer the commodity since it reduces the risk of subpar performance from a miner or government seizing of assets, an ETN or ETF doesn’t provide the ability to produce profits or grow.

The iPath Dow Jones UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC) only has a listed asset base of nearly $100 million so it isn’t widely held or followed. Over the last year, the ETN is down only about half the 20% loss of Freeport. An ETN provides an excellent alternative to the risk of an individual stock.

Bottom line
The lack of new discoveries of copper make the major miners of the commodity very attractive. Though Southern Copper Corp (NYSE:SCCO) has higher margins, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) remains the more transparent stock and the proxy for copper in the U.S. The ownership of Southern Copper by Grupo Mexico makes the stock less attractive, not to mention it trades at a higher earnings multiple. Even with the new oil and gas business, Freeport remains a great way to play the long-term demand for copper and the lack of new discoveries.

The article Buy This Copper Producer on Lack of New Discoveries originally appeared on Fool.com and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors have no positions in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold.

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