The prospects of the Zacks Mining - Non Ferrous industry look bleak as weak demand in China has been weighing on metal prices. Industry players also grapple with inflated costs, labor shortages and supply-chain issues. However, the demand for non-ferrous metals is expected to be supported by the energy-transition trend, which should buoy the industry.
Against this backdrop, we suggest keeping an eye on companies like Freeport-McMoRan Inc. FCX, Lundin Mining LUNMF, Coeur Mining CDE, Ero Copper ERO and Centrus Energy LEU. These companies are poised to gain from their endeavors to build reserves and control costs while investing in technology and improving production efficiency.
About the Industry
The Zacks Mining - Non Ferrous industry comprises companies that produce non-ferrous metals, including copper, gold, silver, cobalt, molybdenum, zinc, aluminum and uranium. These metals are used by various industries, including aerospace, automotive, packaging, construction, machinery, electronics, transportation, jewelry, chemical and nuclear energy. Mining is a long, complex and capital-intensive process. The actual mining operations are preceded by significant exploration and development to evaluate the size of the deposit. The process is followed by the assessment of ways to extract and process the ores efficiently, safely and responsibly. Miners seek opportunities to grow their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets internally and through acquisitions.
What's Shaping the Future of the Mining - Non Ferrous Industry?
Volatility in Metal Prices is Concerning: Copper prices have been adversely impacted this year by weak demand in China due to the property crisis. Even though copper prices have picked up lately on reports that the country will be rolling out more stimulus measures to support the economy, it remains to be seen whether this will be sustained. The prolonged contraction in the U.S. manufacturing sector is concerning. Uranium prices have been on a downtrend this year and are currently near $79 per pound — the lowest since November 2023 as concerns about global supply have eased. Even though the world’s largest uranium miner Kazatomprom lowered its production guidance for the fiscal 2025, it indicates a 12% year-over-year improvement. This has led investors to maintain their view of sufficient supply in the near term. Gold has, however, fared better than other metals earlier this year, aided by increased geopolitical tensions, increasing bets for monetary policy easing and continuous purchasing by central banks. The yellow metal is currently around record highs of $2,660 per ounce and markets anticipate another rate cut in November and the risk of a broader conflict in the Middle East. Silver prices have also risen on these factors. However, the contraction in the manufacturing sector might hurt silver demand. Overall, industry players are dealing with depleting resources, declining supply in old mines and a lack of new mines. Development projects are inherently risky and capital-intensive. While demand has been strong, there will be an eventual deficit in metal supply, leading to a situation that will bolster metal prices. This, in turn, should favor the industry in the long run.
Labor Shortage, High Costs Remain Worrisome: The industry has been facing a shortage of skilled workforce lately, which has hiked wages. Labor-related disputes can be damaging to production and revenues. Industry players are grappling with escalating production costs, including electricity, water and materials, as well as higher freight expenses and supply-chain issues. Since the industry cannot control the prices of its products, it focuses on improving the sales volume, increasing the operating cash flow and lowering unit net cash costs. Industry participants are opting for alternate energy sources to minimize fuel-price volatility and secure supply. Miners are now committed to cost-reduction strategies and digital innovation to drive operating efficiencies.
Strong Demand to Support the Industry: The demand for non-ferrous metals is expected to remain high in the future, given their wide use in primary sectors, including transportation, electricity, construction, telecommunication, energy and information technology. The surging demand for electric vehicles and renewable energy is expected to be a significant growth driver for metals like copper and nickel in the years to come. The overhauling and upgrading of the nation’s infrastructure, and promoting green policies per the U.S. Infrastructure Investment and Jobs Act will also require a huge amount of non-ferrous metals.
Zacks Industry Rank Indicates Bleak Prospects
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull prospects for the near term. The Zacks Mining - Non Ferrous industry, a 12-stock group within the broader Zacks Basic Materials Sector, currently carries a Zacks Industry Rank #142, which places it in the bottom 44% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let us look at the industry’s recent stock-market performance and its valuation picture.
Industry Versus S&P 500 & Sector
The Zacks Mining- Non Ferrous Industry has outperformed its sector and the Zacks S&P 500 composite over the past 12 months. The stocks in this industry have collectively gained 43.5% in the past year compared with the Zacks Basic Materials sector’s growth of 11.6%. The S&P 500 has risen 33.9% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Mining- Non Ferrous stocks, we see that the industry is currently trading at 7.80X compared with the S&P 500’s 14.45X. The Basic Materials sector’s trailing 12-month EV/EBITDA is at 6.58X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)
Enterprise Value/EBITDA (EV/EBITDA) Ratio (F12M)
Over the past five years, the industry has traded as high as 9.36X and as low as 3.35X, the median being 6.41X.
5 Mining - Non Ferrous Stocks to Keep an Eye on
Centrus Energy: Earlier this month, the company inked a contingent supply agreement with Korea Hydro & Nuclear Power for a decade of low-enriched uranium deliveries to feed Korea's reactors. Centrus has secured a total of $1.8 billion in contingent sales commitments to date that should support the deployment of new capacity. Under a contract with the U.S. Department of Energy, Centrus has deployed a cascade of 16 centrifuges at the American Centrifuge Plant in Piketon, OH. The company started the production of High-Assay Low-Enriched Uranium (“HALEU”) at the plant in October 2023. It is the first U.S.-owned uranium enrichment plant to begin production since 1954. Subject to the availability of funding, Centrus intends to upscale the plant with additional centrifuges for large-scale production of Low-Enriched Uranium for existing reactors as well as HALEU for the next generation of advanced reactors. The U.S. Department of Energy has issued a series of requests for proposals to jump-start domestic nuclear fuel production, backed by more than $3.4 billion in appropriations from Congress, which is the largest federal investment in uranium enrichment in decades. LEU is competing for this funding.
Headquartered in Bethesda, MD, Centrus is a globally recognized supplier of Low-Enriched Uranium fuel. The Zacks Consensus Estimate for fiscal 2024 earnings has moved up 17% over the past 60 days. LEU has a trailing four-quarter earnings surprise of 107%, on average. The company currently carries a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price: LEU
Freeport-McMoRan: The company's efforts to expand reserves through exploration near existing mines should fuel growth. FCX is implementing the latest technologies and data analytics in leaching processes across its North America and South America operations. Initial results are providing incremental low-cost additions to FCX’s expected annual production and supporting the potential to add to its reserves. Production from Safford/Lone Star is approaching 300 million pounds of copper annually, ahead of the initial plan to produce more than 200 million pounds per year. FCX is ramping up its underground production at Grasberg in Indonesia, increasing milling rates. It is progressing well on its smelter projects in Indonesia (the Manyar smelter and precious metals refinery projects), having substantially completed the construction of the smelter in June 2024 and initiating commissioning activities. PT-FI completed a project to install additional milling facilities in December 2023 that would increase its milling capacity to roughly 240,000 metric tons of ore per day. The company’s focus on cost management and lowering debt levels is commendable.
The Zacks Consensus Estimate for the company’s earnings for fiscal 2024 indicates year-over-year growth of 4.6%. FCX has a trailing four-quarter earnings surprise of 21.7%, on average. It has a long-term estimated earnings growth rate of 9.7%. The Phoenix, AZ-based company currently carries a Zacks Rank #3 (Hold).
Price: FCX
Lundin Mining: The company increased its stake in the Caserones copper mine to 70% in July 2024, resulting in an additional 25,000 tons of copper being added to its production profile. This move added a long-life asset in a tier-one jurisdiction strategically located in the Vicu?a District, solidifying LUNMF’s position as a meaningful copper producer globally. BHP and Lundin Mining have agreed to jointly acquire Filo and form a joint venture to progress the Filo del Sol and Josemaria Projects. Filo de Sol is one of the world’s largest undeveloped copper-gold-silver deposits. The proximity of the FDS and the Josemaria projects should enable the infrastructure to be shared between the projects, with greater economies of scale and increased scope for expansions. While maintaining a focus on growth plans and capital allocation, the company is committed to optimizing assets and operational efficiencies to lower costs.
The Zacks Consensus Estimate for Vancouver, Canada-based LUNMF’s fiscal 2024 earnings suggests a year-over-year improvement of 57%. It has a long-term estimated earnings growth rate of 48.9%. The company currently carries a Zacks Rank #3.
Price: LUNMF
Coeur Mining: The company recently announced an operational update at the expanded Rochester silver-gold mine in Nevada. At Rochester, the new three-stage crushing circuit continues to provide significantly increased flexibility to serve the full range of mined ore. The three-stage crusher is now fully ramped up. With this milestone, the focus has shifted to particle sizing optimization in the second half of the year. These efforts are already exceeding expectations. sRochester is on track to achieve its full-year production targets of 4.8-6.6 million ounces of silver and 37,000-50,000 ounces of gold. It has the potential to be one of the world’s largest open-pit heap leach operations. Exploration success continues at Silvertip and Kensington, which bodes well for the company’s long-term growth. The highlights from surface and underground expansion drilling completed last year continue to support Silvertip’s status as one of the world’s highest-grade, undeveloped carbonate replacement deposits.
This Chicago, IL-based company explores, develops and produces gold, silver, zinc and lead properties, with five operations in the United States, Mexico and Canada. The Zacks Consensus Estimate for CDE’s fiscal 2024 earnings suggests a year-over-year improvement of 135%. The consensus estimate has remained unchanged in the past 60 days. The company currently carries a Zacks Rank #3.
Price: CDE
Ero Copper: The company has been progressing with its strategic initiatives, which should drive significant near-term growth. The company reached a milestone with the successful production of the first saleable copper concentrate at the Tucum? Project in the early third quarter of 2024. The ramp-up to commercial production is now underway. Copper production from the Tucum? Operations is anticipated to be in the 17,000-25,000 tons range in 2024. For 2025, production is projected to be 53,000-58,000 tons, marking Tucum?’s first full year of production. The Caraíba mill expansion, which is expected to increase mill throughput capacity from 3.2 million tons per year to 4.2 million, was completed in December 2023. The Xavantina operations continues to deliver solid results. Backed by this, ERO maintains its guidance for 2024 gold production at 60,000-65,000 ounces. ERO is on track to double copper production to more than 100,000 tons in 2025.
The Zacks Consensus Estimate for the Vancouver, Canada-based company’s fiscal 2024 earnings indicates year-over-year growth of 86%. The company engages in the exploration, development and production of mining projects in Brazil. It produces and sells copper concentrate from the Caraíba operations, located within the Cura?á Valley, northeastern Bahia state, along with gold and silver by-products. ERO has a trailing four-quarter earnings surprise of 54.3%, on average. It currently carries a Zacks Rank #3.
Price: ERO
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