There are so many types of mining companies that finding the best fit for your portfolio may require some research, and Southern Copper is on the shortlist of mining companies

Introduction to Southern Copper

The first difference between Southern Copper and many other mining stocks is its involvement in the South American mining industry.

The company's shares are traded in the same way as other stocks, but the complex corporate structure suggests that the majority stake in the company is owned by the Mexican group (Grupo México), which holds Southern Copper 88..9% of the stock。Southern Copper's headquarters are in Phoenix, Arizona and Lima, Peru, and most of its mining activity is in Mexico and Peru.

Historically, geopolitical uncertainty has led many U.S. investors to favor companies that have a strong foothold in the U.S. or Canada.。Attitudes toward political risk are changing, though, especially in Peru, home to the world's largest copper mines

Southern Copper is one of the largest copper mining companies in the world.。It operates mining, smelting and refining facilities in Mexico and Peru.。Its main mining operations include the Toquepala and Cuajone mines in Peru and the Buena Vista del Cobre (formerly Cananea) and La Caridad mines in Mexico.

Other materials mined, refined and processed by the company include molybdenum concentrate, refined silver, gold and other materials, and its shares are listed on the Lima Stock Exchange and the New York Stock Exchange under the ticker symbol SCCO

In terms of size, Southern Copper is on the same level as some of the world's biggest players。Its mining resources may be geographically concentrated, but the amount of copper mining rights it owns is particularly attractive to many investors.。The company has a very positive net income and cash flow chart and is able to pay a healthy dividend

Southern Copper Share price (End of 2023）

Short-term price volatility in mineral markets is mainly driven by demand factors。Changes in perceptions about the health of the global economy can lead to a sudden rise or fall in copper demand, and as new supplies take years to come online, metal prices can soar as manufacturers scramble to maintain inventory levels.。Since most of the revenue of SCA is based on copper demand, SCA's stock price is closely related to metal prices on global commodity exchanges.

One factor to consider is global economic growth。growth has indeed picked up since COVID-19, and while there have been other headwinds over the past year or so, the picture looks positive at the moment。One source of growth is the electric vehicle industry, which is constantly looking to expand demand for copper.。A report states that electric cars use four times as much copper as regular gasoline cars

Looking at the 12-month time horizon, mining companies have more opportunities to adjust their supply capacity in order to grasp the direction in the changing commodity price level

The mining network operated by Southern Copper is concentrated in certain areas and existing mines。This means that raising production levels is based on an expanding infrastructure, a business model that can take advantage of soaring copper prices faster than a business model based on expanding the supply of new or virgin mines.

But much still depends on various demand factors.。Inflationary pressures have already emerged this year。Meanwhile, commodity assets have historically been seen as a hedge against inflation, which is a boon to Southern Copper's share price

However, according to TipRanks, Wall Street analysts currently have a neutral to bearish rating on Southern Copper's stock, with two analysts giving the stock a "hold" rating and one a "sell" rating.。In addition, 67.$33 average price target implies 18% potential downside

Southern Copper Long-term projections

Any Southern Copper's long-term forecast will still largely depend on global economic conditions.。Copper industry is currently one of the hot markets in the world。The construction and electronics industries were long-term buyers of the metal, but they now have to compete with EV makers, battery makers and renewable energy companies.。The last three sectors of the economy are all growth industries.

A stronger commodity price, in the case of Southern Copper, a stronger copper price, would give mining company stocks an index-level gain。Like other companies of its kind, Southern Copper's cost base consists largely of fixed costs rather than variable costs.。Investment expenditure on exploration projects and the establishment of the infrastructure needed to extract minerals is largely an upfront investment.。Once the mine is opened, a small increase in the price of mining materials will lead to a significant increase in the company's share price.

Currently, SCCO's dividend yield is high, but has recently declined slightly。Many are speculating and will wait to see if the payout ratio will climb again。If payout rates climb again, buy-and-hold interest from large funds is expected to support SCCO's share price

Predictability of earnings can be an advantage in certain industries (such as insurance and banking) and can attract investors。Because the mining industry is more speculative, many investors are looking for more surprises, which explains why SCAs are sometimes overlooked by many potential buyers

Corporate Social Responsibility (CSR) is an increasingly important issue for mining companies。Mining companies will never rank high among green investors, but those that are best at limiting damage can attract the attention of more large institutional investors。In the case of Southern Copper, corporate social responsibility issues can partly explain the company's relatively poor performance, but can also be a catalyst for improving future returns.

Southern Copper's CSR ranking at CSR Hub has recently risen to over 60%, but is still below many of its peers.。Newmont Corporation has a corporate social responsibility rating of 85%, and large funds that are obliged to invest in basic materials but also focus on ethical issues will be attracted to the company.

Mining can be dangerous。Finding new ore reserves to replace depleted ore reserves is becoming increasingly difficult。Exploration costs, availability of technical resources, infrastructure constraints, and political risks threaten future production pipelines and drive up near-term costs。However, investors are confident in the company's recent performance, which is also reflected in the company's share price so far this year.

Is Southern Copper worth buying?

Southern Copper is different from some other companies in the industry。Southern Copper's strong presence in Latin America is seen by some as a negative factor in terms of political risk and staying away from the North American market.。Correspondingly, however, Southern Copper's region appears to be more promising than the US in terms of future supply channels.

A bull market in the copper market could be a long-term trend, and if a commodity supercycle is about to take shape, any copper company would be a good proposition。However, many market analysts are not convinced, and at the moment, SCCO's brokerage rating lags behind the rest of its peers.