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How Electric Vehicles Should Give a Jolt to Copper Miners

Copper prices have dropped 18% in recent weeks, creating a long-term opportunity to get in on some cheap copper-mining giants with generous dividend payouts. Their prospects will depend on a major technological transition: the move from gasoline-powered to electric vehicles.

“If you’re bullish on global growth over the next 18 to 24 months, you have to own copper-related assets, especially since current prices aren’t high enough to fund new-mine development,” says Adam Johnson, founder and author of the Bullseye Brief financial newsletter. “Longer term, and this is key, rising electric-vehicle production will shift the entire demand curve since EVs require multiple times the copper content of internal-combustion engines.”

Investors should consider buying shares of a handful of European-based miners: Rio Tinto(RIO), Glencore(GLEN.UK), and Anglo American(AAL.UK). All are diversified, but they are also among the largest copper miners. Better yet, they have hefty dividends of 5%, 5.1%, and 4.7%, respectively.

The stocks are cheap relative to the main U.S. competitor, Freeport-McMoRan(FCX), which trades at almost 14 times next year’s earnings and has a measly 1.8% dividend. Rio Tinto shares trade at a P/E around 11; Glencore’s and Anglo American’s at less than 10. And Rio Tinto announced a $3.2 billion share buyback earlier this month. That news “reinforces our positive view of Rio’s capital returns potential,” said a recent report from British broker J.P. Morgan Cazenove.

Meanwhile, New York research firm CFRA says it expects the return on equity for Glencore to move above its recent average level. The firm also sees the potential for meaningful cost reductions to improve margins at Anglo.

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Name Last Change
DOW 25286.50 0.40%
S&P 500 2722.18 0.15%
NASDAQ 7200.88 0.00%
TSX 15131.78 0.16%
TSX-V 626.42 0.00%

Resource Commodities

Name Last Change
Gold 1202.61 0.02%
Silver 14.01 0.00
Copper 2.69 0.000
Platinum 837.50 0.05%
Oil 55.69 7.61%
Natural Gas 4.10 7.63%
Uranium 29.15 0.00%
Zinc 1.15 0.00%

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