Copper Prices May Offset Production Decline for Southern Copper

Sean Brodrick, editor of Wealth Megatrends, calls copper 'the new oil' because it's so crucial to green technologies. Goldman Sachs also refers to copper as the new oil due to its importance in these emerging sectors. Copper is not only a vital component for renewable energy systems but also an essential material for the production of electric vehicles.

Southern Copper (SCCO), a leading copper producer, mines and processes copper and other minerals in several countries across South America. The company has the world's largest copper reserves, with 67.7 million tons in the ground as reported at the end of 2020. Copper accounts for 84% of Southern Copper's sales, making it the core product.

Last year was a strong one for Southern Copper, with net sales reaching a record high of $10,934.1 million, representing a 36.9% increase from 2020. This growth was driven mainly by higher market metal prices for copper (+51.1%), molybdenum (+81%), zinc (+32%), and silver (+22.1%). Net income in 2021 was 116.3% higher than in 2020, and cash flow from operating activities reached an all-time high.

This year, Southern Copper's copper production is forecast to fall by another 3.7%, primarily due to lower ore grades at some of its mines. However, if prices increase by around 5-7% as predicted, the company should benefit significantly, similar to what happened in 2021.

The Mexican parent company, Americas Mining Corporation, owns 88.9% of Southern Copper, and public shareholders hold the remaining 11.1%. The interests of both parties align with those of individual investors, aiming to maximize profits.