HomeCommodityIs copper a good investment?

Is copper a good investment?

Copper is a versatile chemical element that can be found in virtually everything in our home. Fridges, TVs, radios and cars all have copper in them, and there is no sign that this will change anytime soon. The ubiquity and ease in storage makes this chemical element valuable. Unlike gold or silver, copper isn’t a popular commodity in FOREX for beginners, but it’s necessary to know that top copper stocks can get you a big cash infusion. 

First of all you should know how the process of copper production works. There are four stages in copper production. The first stage obviously involves geology – when analyzing a company, you should check exactly what mines it has. Earlier this year the price of a barrel of oil dropped below 10 USD. In Canada or the USA, the same companies extract oil for 15, 20 or even 25 USD a barrel. The next stages are ore extraction and ore enrichment and then we can finally start smelting. In the case of copper stock analysis, it is worth checking whether or not the company outsources the copper ore melting and if it simply sells the copper ore directly. Now that we know the basics of the process of obtaining copper, it’s time to analyze the companies that are available on the most popular stock exchange.

Copper companies – a few statistics 

Few people know that Chile is one of the countries that extract the most copper ore in the world. Peru is in second place, it is there that the Southern Copper Corporation has its mines. There are also many mines in China and the USA, but these copper mines are on a smaller scale. There is also more and more talk about exploring Africa. Countries such as Zambia and the Congo are also home to rich copper deposits. If you are thinking about investing in copper, you can look for companies that invest in Africa. Cheap labor and cheap land allow for high returns on investment. The US market also seems very interesting. Profitability is lower, but it is worth knowing that in the USA alone, an average of 4,000 tons of copper is mined per day.

Invest in copper – FAQ

How to buy copper stock? As we mentioned before, you can buy copper stock on all the most popular exchanges in the world. Check our ranking to see exactly what companies to look for.

Should I invest in copper? It all depends on your goals, one thing is important – diversification. If you put all your assets in one company, that’s a big, possibly costly mistake. Keep in mind that it is worth investing in certain sectors that are not exposed to turmoil due to pandemics, such as copper or gold stock.

Copper trading doesn’t seem very interesting, but it is very stable and I think that’s what it’s all about. The share price of copper producing companies depends on the market price of the product. In addition, there are legal issues in many countries, such as the ability to run trade unions, which may make it difficult for a company to generate large revenues.

Southern Copper Corporation

This company has been on the market for almost 70 years. Its main mines are located in Peru, where the copper deposits are really large and the prospects for the next few years are very promising.

Key information for investors:

  • the company operates on long-term contracts. Most of the contracts that have been signed are contracts for more than a year, so we are sure that the company will be financially secure for the next year
  • customer diversification (they have signed contracts in various countries and in various industrial companies, so we do not have to worry about embargo)
  • the price of raw materials depends mainly on the LME and COMEX exchanges
  • the company has had more than 3 strikes by trade unions (!)
  • the same board chairman for 15 years 

Source: southerncoppercorp.com

Southern Copper Corporation report annual

Anglo American plc

If you are looking for a company that is not only copper based, Anglo American plc seems to be a good choice. This company deals in the mining of many metals among which are copper, diamond, iron and nickel. The company is listed on the LSE, JSE and FTSE.

Key informations: 

  • according to the latest annual report, the EBITDA result increased by almost 10%
  • the margin was maintained at the same level  (currently at 42%)
  • operating profit increased by 2% during the year
  • the company’s mission is clean energy; it invests in renewable energy projects (it has signed a contract with Enel Generación Chile to provide energy from renewable energy sources)
  • dividend every six months (in 2019 it was a total of $ 1.09)

Source: angloamerican.com

lack of water in chile influences on copper mining

In the annual report it is clear that there is a problem with water in Chile and South Africa which may lead to many mining projects being exposed to production discontinuity. Although the deposits of copper itself are very large, Chile has faced its biggest problem with water in 30 years. Nevertheless, the company’s profitability in this area is at a good level and it is worth taking an interest in its shares.

Freeport McMoran

The application of copper has always been diverse. The electric car market is growing year by year as can be seen in Freeport McMoRan’s annual report. Vehicle charging stations are shaping up to be a great opportunity for copper companies. Copper and other chemical elements that have antimicrobial properties can also be used to fight against COVID-19. I believe this is a possible next step for many copper companies. 

Copper as an investment seems fine, especially as we will see with Freeport McMoRan which is one of the largest companies in the world that mines, among other things, copper. It is listed on the NYSE, it is FCX and actively conducts its operations in 5 countries. So what is the leading north american producer of copper? Freeport McMoran

Source: FCX.com

copper mining production

This year is to be a breakthrough for the company in terms of copper mining. 3292 million pounds of copper was extracted in 2019, and 3,480 million pounds of copper is expected in 2020. The company looks stable and prospective,  and we will definitely be adding it to our list of copper companies to keep an eye on.

The best way to invest in copper is to invest in stocks. Copper companies can be found on the most popular exchanges in the world, e.g. the NYSE. It is predicted that the demand for copper in the coming years will be even greater. Electric cars should be kept in mind, as they will further increase the demand for this raw material. Copper companies are not dividend companies, they usually have a low dividend of  2-3%. 

Jakub Borowiec
Jakub Borowiec
Financial markets enthusiast. I studied management at the University of Economics in Wroclaw.

Most Popular

Recent Comments