Can the Global X Copper Miners ETF bank on future outlook?

While copper prices have floundered this year, the Global X Copper Miners ETF is up, with top holding Lundin announcing a majority stake in a Chilean project and Ivanhoe Mines posting record copper production.

• Global X Copper Miners ETF is up 14.6% year-to-date.
• Top holding Lundin soars by 42.9% in the same period amid new majority stake in Chilean copper mine.
• Copper demand could double by 2035, says S&P Global.

The Global X Copper Miners ETF [COPX] has slipped 3.2% in August after having gained 6.2% in the last week of July.

The fund’s recent rise may have been driven by the positive performance of its top holding Lundin Mining [LUN.TO], which on 13 July announced it had completed the purchase of a 51% majority stake in Chile’s Caserones Copper-Molybdenum Mine. Meanwhile, the fund’s third-biggest holding Ivanhoe Mines [IVN.TO] recently reported record weekly production at its Kamoa-Kakula mine in the Democratic Republic of Congo (DRC) for the second quarter (Q2) of 2023, equating to 9,710 tonnes of copper.

The COPX fund offers exposure to a range of companies in the copper mining sector Copper’s supply is an especially important factor in the energy transition, as the metal is used in everything from electric vehicles (EVs) to solar and wind power systems and batteries.

The fund has climbed 14.6% year-to-date.

Lundin and Ivanhoe stocks on the rise

Lundin Mining is COPX’s largest holding, with a 5.74% share of the fund’s portfolio as of 4 August. The metal miner is headquartered in Toronto, Canada, and has projects in Argentina, Brazil, Chile, Portugal, Sweden and US that produce zinc, gold and nickel as well as copper.

The Lundin share price has soared 42.9% year-to-date. In March, the company secured a loan of $800m for its Caserones mine in Chile while retaining the right to acquire another 19% interest for $350m over the next five years which, if realised, would bring its share in the mine to 70%.

Last week, the company announced Q2 results, posting earnings of £205.7m or $0.27 per share. This was, however, down from $292.5m in Q2 2022. Nevertheless, in a statement CEO Peter Rockandel highlighted $160m in adjusted EBITDA “despite a decline in metal prices early in the second quarter”.

The third-largest holding in the COPX fund is Ivanhoe Mines with a 5.48% weighting.

Ivanhoe recently announced strong Q2 2023 production of copper from its joint-venture Kamoa-Kakula mine, coming in at a record 103,786 tonnes, an 11% quarter-over-quarter rise.

Last week, Ivanhoe posted profits of $87m for the period, partly driven by $123m in income from the Kamoa-Kakula mine. It announced record revenues of $702m for the financial period.

The company’s share price is up 23.3% in the year to 4 August.

Analysts bullish on copper despite slowdown

In a July poll by Reuters, analysts forecast reduced prices for copper and other industrial metals due to increased supply and lower demand from China. After January’s seven-month high, copper prices slid for much of 2023.

However, the long-term outlook appears more positive. According to 2022 research by S&P Global, demand for copper could double by 2035, should global economies increasingly move towards net zero.

Research by Evelyn Partners in March cited increased demand for EVs as a central factor for an uptick in copper — the amount of copper needed for EVs is four times that of fossil fuel-powered cars.

Meanwhile, in June Citi said copper’s price might slump further in the short term, but could reach record highs over the next few years.

Lundin is rated a ‘moderate buy’ by 14 analysts polled at Tipranks, with a median price target of C$11.86 — 1.96% upside from its most recent closing price.

Ivanhoe is rated a ‘strong buy’ by five analysts, with a median 12-month price target of C$17.77 representing 34.8% gains from its recent clos