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Why Southern Copper Stock Jumped 15.6% in October

By Neha Chamaria – Updated Nov 4, 2020 at 11:10AM

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The copper miner fired on all cylinders last month.

What happened

The stock of Southern Copper (SCCO 4.23%) jumped 15.6% in October, according to data provided by S&P Global Market Intelligence. Shares of the copper miner, in fact, shot up to prices not seen in more than two years, and continue to rally. They've gained another 3% this month, as of this writing.

So what

As one of the world's largest copper miners, Southern Copper depends a great deal on copper prices. Thanks to China's swift recovery after the coronavirus lockdowns and a tight global copper supply, prices of the metal surged in October to multiyear highs, and Southern Copper shares rallied along.

A stack of copper pipes.

Image source: Getty Images.

Investor sentiment was lifted further in the last week of October when Southern Copper delivered solid numbers for its third quarter on Oct. 26. Here are some of the notable year-over-year numbers for the quarter:

  • Sales rose 14.5% to $2.1 billion.
  • Copper production was down 2.3%.
  • Copper sales volumes and average prices were up 2.1% and 12.5%, respectively.
  • Among by-products, molybdenum volumes rose 10.7% and silver prices were up 44.8%.
  • Net income jumped 29.9% to $506 million on higher sales.

To add to those encouraging numbers, Southern Copper announced a quarterly dividend of $0.50 per share, up 25% from its July quarterly dividend and more than twice its April quarterly dividend. Southern Copper had, in fact, slashed dividends by 50% in April, so the increase in October reflected the company's improved cash flow and prospects last quarter, further fueling the stock price.

Now what

Investors may not want to read much into Southern Copper's dividend raise since the company reviews its dividends quarterly based on its cash flows and financial position. Copper markets, however, appear strong, primarily because of demand from Asia, particularly China. Investors bullish on Southern Copper stock should keep an eye on the copper market and metal prices.

Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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