The Bright Future of Copper Mining: Small Cap Stakes and Predicted 120% Upside for Freeport-McMoRan (NYSE:FCX) and Ivanhoe Electric (AMEX:IE)

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By Ronald Tech

The copper market’s global dynamics are anticipated to stabilize as the Rest of the World (RoW) demand revives and supply tightens, according to a recent report from JPMorgan.

Key indicators reveal a 1.2% year-to-date increase in global output through November. Additionally, strong December data from Chile offers indications of robust 2023 production.

Also Read: Experts Predict Copper Prices Set To Soar Over 75% By 2025, Thanks To Renewable Energy Transition, Supply Disruptions

Positive Forecast Bolstered By Recovery in RoW

Despite weak RoW demand, vigorous consumption in China has offset the equilibrium. Spot treatment charges have plummeted from $90/t in August 2023 to below $30/t, signaling a constricted concentrate market.

Copper inventories continue to linger at multi-year lows. JPMorgan foresees a balanced market in 2024, transitioning to a deficit in 2025 following recent supply disruptions, such as those from Cobre Panama.

While copper fundamentals improve, recent copper prices have remained stagnant owing to a lackluster macroeconomic backdrop. JPMorgan’s optimistic outlook hinges on a 3.5% growth in China’s demand, further buoyed by a recovery in the RoW in the latter half of 2024.

Impact on Investors

Investors are presented with a promising landscape. The prevailing market conditions, characterized by tightening supply and rebounding demand, hint at a favorable climate for potential returns. The sector’s appealing valuations and dividend yields serve to further enhance the allure for investors seeking exposure to the encouraging copper market dynamics.

Equity Opportunities: JPMorgan’s global copper miner stock ratings align with a positive bias based on the sanguine copper outlook. The sector’s attractive valuation is underscored by a 2025E EV/EBITDA of 5.6x and a 2025E dividend yield of 5.1%. Notably, two U.S. traded stocks outlined in the report stand out:

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  • Freeport-McMoRan Inc FCX — Analyst Bill Peterson envisions an 11% potential upside for this stock. Presently trading at approximately $38.7, Peterson has set a price target of $43 for the stock.
  • Ivanhoe Electric Inc IE — Analyst Bill Peterson foresees a substantial 120% potential upside for this small-cap copper entity. Ivanhoe Electric boasts a market cap of just under $1 billion and trades at around $8.2. Peterson has affixed a price target of $18 for the stock.

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