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For those of you who hate heavy metal:
We can talk about a metal that everyone will love:
Once again, the fearless Copper comes to the rescue….giving me a prelude to the next $$$MR. MARKET$$$ winner.
Today I bought Southern Copper (PCU) at 85.57. I will sell it in 4 to 6 weeks at 99.26. Here is why I love PCU.
First of all, look at this chart:
This stock price is going up up up up. It’s up almost 100% the last 12 months, or a pace of 8% a month. One of the world's largest copper producers, it rode the metal all the way up. It’s PE is only 11.60. Lots of room to grow…if..and it’s a big if…copper prices don’t crater. Among publicly listed companies, it owns the second largest copper reserves in the world.
Southern Copper Corporation is an integrated producer of copper, molybdenum, zinc and silver. All of its mining, smelting and refining facilities are located in Peru and in Mexico, and it conducts exploration activities in those countries and Chile. The Company operates in three segments: Peruvian operations, Mexican open-pit operations and Mexican underground mining operations. Peruvian operations includes the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities, which service both mines. Mexican open-pit operations includes La Caridad and Cananea mine complexes, and the smelting and refining plants and support facilities, which service both mines. The Mexican underground mining operations include five underground mines that produce zinc, copper, silver and gold, a coal and coke mine, and several industrial processing facilities for zinc and copper.
Southern Copper is a company based in Peru with tremendous sales growth, as the demand for copper continues against a limited supply. Do the math. Copper prices are already well up into the clouds. And while the metal's supply-and-demand picture is bullish, prices have risen to such lofty heights that some ANAL-ysts wonder how much more upside is left. Still, most don't foresee any likelihood of a free fall, since global inventories are declining and Chinese demand is strong.
I’m not going to lie to you. Buying this company is a completely naked play on copper prices. Not sure about what’s going to happen to copper prices? Don’t think Chinese demand is enough to pick up the slack? I don’t give a crap…I can’t keep my eyes off the fact that this company pays a whopping 7% dividend. In essence PCU is paying all of their excess cash in terms of dividends and trying to avoid a negative carries. Nevertheless they still have approximately $1.3 billion net in terms of cash at the end of the first quarter minus the dividend.
In the last 3 years, PCU’s revenues have grown almost 600% and its earnings are up 900%. Ridiculous right? Well over the last 3 years, people kept saying that copper prices couldn’t get any higher. I think I can wait another 6 weeks. Earnings aren’t expected until late June.
In 2006 sales reached $5.460 million and net earnings were $2,038 million, an increase of 33.5% and 45.6%, respectively, as compared with 2005. These record results are mainly due to the higher metal prices.
In 2006, average market prices for copper and our principal byproducts, except for molybdenum, increased significantly from 2005 prices. The average COMEX copper price was $3.09 per pound, compared to $1.68 per pound in 2005, an increase of 83.9%. The zinc average price was $1.49 per pound, 136.5% higher than the $0.63 per pound, in the previous year. The average silver price was $11.54 per ounce, 57.7% higher than the $7.32 per ounce in the previous year. The gold average price was $604.34 per ounce, a 35.8% increase compared with $444.88 per ounce in 2005. The molybdenum average price was $24.38 per pound, 21.5% less than the $31.05 per pound in 2005.
Southern Copper Corporation continues with an intensive exploration program to find new mineral deposits and to increase reserves at operating mines in Mexico and Peru, as well as at exploration projects in Chile. In 2006, $22.7 million were invested in exploration programs, compared to $24.4 million in 2005, and $15.6 million in 2004.
First quarter 2007 net sales increased by $237.0 million when compared to the first quarter of 2006 and amounted to $1,358.3 million, an increase of 21.1%. First quarter 2007 net income increased to $563.5 million from $421.6 million in the first quarter of 2006, an increase of 33.7% and amounted to $1.914 per fully diluted share, compared to $1.432 per fully diluted share for the first quarter of 2006, due principally to higher copper prices.
Copper production in the first quarter of 2007 increased by more than 6% compared to first quarter of 2006. The LME and COMEX copper price averaged $2.69 and $2.70 per pound in the 2007 first quarter, respectively, compared to $2.24 and $ 2.25 in the first quarter of 2006. Metals Week dealer oxide molybdenum price for the first quarter of 2007 averaged $25.81 per pound, compared to $22.25 per pound in the first quarter of 2006.
Most ANAL-ysts have shied away from Southern because of a strike. With regard to the situation regarding the strikes in Peru. Management has taken the proper precautions so that the impact of these illegal work stoppages are not material to the company. They expect the authorities on a federal level to declare the strike illegal in a short period of time maximum a couple of weeks by which time they hope that everyone returns to work and disruptions are minimized at that time. Labor problems are common in the industry. Miners see the high price of copper and demand more pay. Who doesn’t?
Consumption in China increased during the first quarter substantially and that
led to significant draw downs in terms of inventory but also there is a significant amount of hedge fund activity that drives these metals prices up and down and a lot of volatility in the medium and short term. The company expects and continues to believe that there will be very strong copper prices going forward and thereby allowing Southern Copper to continue to deliver very strong value to their shareholders visa via dividends and share price increases.
Copper is in high demand largely due to rapid development in emerging countries such as China. Growing fast, these countries are building up infrastructure. That means a strong need for copper wiring, cables and pipes.
Producers of commodities get cold feet when it comes to re-investment of capital when they have been burned once by reduction in commodity prices. The same thing that has happened in the oil industry are the same economic dynamics that created systematic underinvestment in the mining industry. This causes production problems and supply disruptions. Now that prices are higher, companies are looking to re-invest but it will take some serious lag time to ramp up production to exceed the demand spike.
In 2006, PCU discovered exploration at one Peruvian mine showed 83% more copper underground than previously thought. Oh ho ho feels so good spork spork. Existing PCU reserves will last over 50 years anyway.
World demand for copper is at record highs. Inventories are low. And mines should find it hard to boost supply. So why would anyone think copper prices are going to drop dramatically? Copper is in every piece of electronics, and it's also used widely in construction, plumbing and wiring. Global demand, especially in India and China, is rising faster than production.
The quality of the ore in big mines is declining a little bit. This will make it harder for an oversupply of copper to emerge, because of the lack of quality ore. I think the quality of all hockey players has declined since Bobby Orr played for the Bruins:
So take a penny and flip it. Heads, copper prices go up. Tails, copper prices do not go up. In the meantime, keep the penny in your pocket, because with copper prices so high, your penny is worth more than one cent.
I am HUGE!
$$$MR. MARKET$$$
PS..did you like this write up? If so, please let me know!
We can talk about a metal that everyone will love:
Once again, the fearless Copper comes to the rescue….giving me a prelude to the next $$$MR. MARKET$$$ winner.
Today I bought Southern Copper (PCU) at 85.57. I will sell it in 4 to 6 weeks at 99.26. Here is why I love PCU.
First of all, look at this chart:
This stock price is going up up up up. It’s up almost 100% the last 12 months, or a pace of 8% a month. One of the world's largest copper producers, it rode the metal all the way up. It’s PE is only 11.60. Lots of room to grow…if..and it’s a big if…copper prices don’t crater. Among publicly listed companies, it owns the second largest copper reserves in the world.
Southern Copper Corporation is an integrated producer of copper, molybdenum, zinc and silver. All of its mining, smelting and refining facilities are located in Peru and in Mexico, and it conducts exploration activities in those countries and Chile. The Company operates in three segments: Peruvian operations, Mexican open-pit operations and Mexican underground mining operations. Peruvian operations includes the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad and port facilities, which service both mines. Mexican open-pit operations includes La Caridad and Cananea mine complexes, and the smelting and refining plants and support facilities, which service both mines. The Mexican underground mining operations include five underground mines that produce zinc, copper, silver and gold, a coal and coke mine, and several industrial processing facilities for zinc and copper.
Southern Copper is a company based in Peru with tremendous sales growth, as the demand for copper continues against a limited supply. Do the math. Copper prices are already well up into the clouds. And while the metal's supply-and-demand picture is bullish, prices have risen to such lofty heights that some ANAL-ysts wonder how much more upside is left. Still, most don't foresee any likelihood of a free fall, since global inventories are declining and Chinese demand is strong.
I’m not going to lie to you. Buying this company is a completely naked play on copper prices. Not sure about what’s going to happen to copper prices? Don’t think Chinese demand is enough to pick up the slack? I don’t give a crap…I can’t keep my eyes off the fact that this company pays a whopping 7% dividend. In essence PCU is paying all of their excess cash in terms of dividends and trying to avoid a negative carries. Nevertheless they still have approximately $1.3 billion net in terms of cash at the end of the first quarter minus the dividend.
In the last 3 years, PCU’s revenues have grown almost 600% and its earnings are up 900%. Ridiculous right? Well over the last 3 years, people kept saying that copper prices couldn’t get any higher. I think I can wait another 6 weeks. Earnings aren’t expected until late June.
In 2006 sales reached $5.460 million and net earnings were $2,038 million, an increase of 33.5% and 45.6%, respectively, as compared with 2005. These record results are mainly due to the higher metal prices.
In 2006, average market prices for copper and our principal byproducts, except for molybdenum, increased significantly from 2005 prices. The average COMEX copper price was $3.09 per pound, compared to $1.68 per pound in 2005, an increase of 83.9%. The zinc average price was $1.49 per pound, 136.5% higher than the $0.63 per pound, in the previous year. The average silver price was $11.54 per ounce, 57.7% higher than the $7.32 per ounce in the previous year. The gold average price was $604.34 per ounce, a 35.8% increase compared with $444.88 per ounce in 2005. The molybdenum average price was $24.38 per pound, 21.5% less than the $31.05 per pound in 2005.
Southern Copper Corporation continues with an intensive exploration program to find new mineral deposits and to increase reserves at operating mines in Mexico and Peru, as well as at exploration projects in Chile. In 2006, $22.7 million were invested in exploration programs, compared to $24.4 million in 2005, and $15.6 million in 2004.
First quarter 2007 net sales increased by $237.0 million when compared to the first quarter of 2006 and amounted to $1,358.3 million, an increase of 21.1%. First quarter 2007 net income increased to $563.5 million from $421.6 million in the first quarter of 2006, an increase of 33.7% and amounted to $1.914 per fully diluted share, compared to $1.432 per fully diluted share for the first quarter of 2006, due principally to higher copper prices.
Copper production in the first quarter of 2007 increased by more than 6% compared to first quarter of 2006. The LME and COMEX copper price averaged $2.69 and $2.70 per pound in the 2007 first quarter, respectively, compared to $2.24 and $ 2.25 in the first quarter of 2006. Metals Week dealer oxide molybdenum price for the first quarter of 2007 averaged $25.81 per pound, compared to $22.25 per pound in the first quarter of 2006.
Most ANAL-ysts have shied away from Southern because of a strike. With regard to the situation regarding the strikes in Peru. Management has taken the proper precautions so that the impact of these illegal work stoppages are not material to the company. They expect the authorities on a federal level to declare the strike illegal in a short period of time maximum a couple of weeks by which time they hope that everyone returns to work and disruptions are minimized at that time. Labor problems are common in the industry. Miners see the high price of copper and demand more pay. Who doesn’t?
Consumption in China increased during the first quarter substantially and that
led to significant draw downs in terms of inventory but also there is a significant amount of hedge fund activity that drives these metals prices up and down and a lot of volatility in the medium and short term. The company expects and continues to believe that there will be very strong copper prices going forward and thereby allowing Southern Copper to continue to deliver very strong value to their shareholders visa via dividends and share price increases.
Copper is in high demand largely due to rapid development in emerging countries such as China. Growing fast, these countries are building up infrastructure. That means a strong need for copper wiring, cables and pipes.
Producers of commodities get cold feet when it comes to re-investment of capital when they have been burned once by reduction in commodity prices. The same thing that has happened in the oil industry are the same economic dynamics that created systematic underinvestment in the mining industry. This causes production problems and supply disruptions. Now that prices are higher, companies are looking to re-invest but it will take some serious lag time to ramp up production to exceed the demand spike.
In 2006, PCU discovered exploration at one Peruvian mine showed 83% more copper underground than previously thought. Oh ho ho feels so good spork spork. Existing PCU reserves will last over 50 years anyway.
World demand for copper is at record highs. Inventories are low. And mines should find it hard to boost supply. So why would anyone think copper prices are going to drop dramatically? Copper is in every piece of electronics, and it's also used widely in construction, plumbing and wiring. Global demand, especially in India and China, is rising faster than production.
The quality of the ore in big mines is declining a little bit. This will make it harder for an oversupply of copper to emerge, because of the lack of quality ore. I think the quality of all hockey players has declined since Bobby Orr played for the Bruins:
So take a penny and flip it. Heads, copper prices go up. Tails, copper prices do not go up. In the meantime, keep the penny in your pocket, because with copper prices so high, your penny is worth more than one cent.
I am HUGE!
$$$MR. MARKET$$$
PS..did you like this write up? If so, please let me know!
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