Scotiabank analyst Orest Wowkodaw found that copper miners are trading expensively relative to lower spot prices but remains optimistic about the outlook,
“OUR TAKE: Mixed. Given the heightened volatility in both copper (Cu) prices and the mining equities, we have revisited our implied Cu price analysis. We estimate that the large/mid-caps are currently implying an average Cu price of $5.28/lb, representing a relatively large 29% premium to spot of only $4.10/lb (vs. premiums of 26% in June and a peak 34% in April; average premium of 19% since 2023 and 7% since 2018). We believe this strong premium is being driven by robust investor appetite for Cu exposure, M&A speculation, and lower by-product prices (ex. Au/Ag). HBM ($4.42/lb), ERO ($4.48/lb), FM (at $4.50/lb due to Panama uncertainty), and MTAL ($4.74/lb), are the least expensive; conversely, SCCO ($7.35/lb), IVN ($6.70/lb), FCX ($5.69/lb), and ANTO ($5.48/lb), are the most expensive. LUN ($4.78/lb), CS ($4.80/lb), TECK.B ($5.07/lb), and GMEXICO ($5.35/lb), are priced in the middle. Overall, CS, HBM, ERO, and TECK remain our top picks for Cu exposure. We also highly recommend FCX, IVN, and MTAL. We rate ANTO, FM, and LUN as Sector Perform. Due to unattractive risk-reward profiles, we rate GMEXICO and SCCO Sector Underperform.