Investing in Copper Stocks

Copper demand is on track to double from 2022 to 2035, driven by the transition to a lower-carbon economy. Copper is crucial for electrifying the transportation sector and producing renewable energy.

This outlook bodes well for the copper industry. It suggests that copper prices could be much higher in the coming years. Here's a closer look at some of the top copper stocks that could benefit from the transition.

Top copper stocks

Top copper stocks to buy in 2024

Copper is the third most-consumed industrial metal in the world behind iron ore and aluminum, according to the U.S. Geological Survey. Because of its importance to the economy, many mining companies operate copper mines.

However, while many companies produce copper, only a few can expand their copper production because they have reserves and commercially viable expansion projects. These resources position them to capitalize on the industry's growth. Top copper stocks include:

Here's a closer look at these five leading copper company stocks.

1. BHP Group

1. BHP Group

BHP Group is a leading global natural resource producer based in Australia. It mines copper, iron ore, nickel, metallurgical coal, and potash.

BHP operates several copper mines in South America and one in Australia. Its business produced 1.6 million tons of copper in 2022. It's investing heavily to expand its copper production at existing mines to meet growing demand.

BHP is also a co-owner of Resolution Copper with Rio Tinto (45%/55%). Located in Arizona, Resolution Copper is among the world's largest undeveloped copper projects. It could take eight to 10 years to build the mine at an estimated total cost of $64 billion. It could produce 40 billion pounds of copper over the course of 40 years, about a quarter of the projected U.S. copper demand.

The company's growing copper production should support higher dividend payments. BHP aims for a minimum dividend payout ratio of 50% of its cash flow. It often pays out additional dividends from its excess cash and repurchases shares.

2. Freeport-McMoRan

2. Freeport-McMoRan

Freeport-McMoRan is one of the world's largest publicly traded copper producers. It also produces gold and molybdenum, an element used in high-strength steel alloys.

The crown jewel of Freeport's portfolio is the Grasberg mine in Indonesia, one of the world's largest single copper and gold sources. Freeport also operates large-scale mines in Arizona and Peru. The company produced 4.2 billion pounds of copper in 2022.

Freeport's extensive organic development pipeline could add significant copper production in the coming years. Initiatives to improve leaching (a chemical process used to extract copper from ore) and a potential change in leaching technology could add 800 million pounds to its annual production capacity in the near and medium terms. Meanwhile, several potential expansion projects could add significant production capacity over the medium and long term.

The mining company's growing copper production should support increasing cash returns to shareholders. Freeport has set a framework to use as much as 50% of its excess cash flow for shareholder returns, including dividends and share repurchases.

3. Teck Resources

3. Teck Resources

Teck Resources is a diversified mining company based in Canada. It produces copper, zinc, and steelmaking (metallurgical) coal. It had investments in oil sands mining projects but sold them in 2023.

Also in 2023, the company unveiled plans to spin off its met coal business to shareholders. The transaction would have created two independent public companies. Teck Metals would focus on energy transition metals (copper and zinc), while Elk Valley Resources would produce steelmaking coal.

However, the company scuttled those plans after leading diversified mining and commodity trading company Glencore (GLNCY -0.92%) proposed a different transaction. After lots of back and forth, Teck was still reviewing its strategic options for its steelmaking coal business as of mid-2023, including acquisition proposals from Glencore and others.

Potential sale aside, Teck Resources has the resources to grow into a significant copper producer. The company has an industry-leading copper growth pipeline. It completed its Quebrada Blanca Phase 2 (QB2) project in northern Chile in 2023. It anticipated ramping up to full production by year-end. The mine will add 320 million tons to its annual production capacity, doubling its copper output. The company has the resources to expand to as much as 1.9 billion tons of annual copper production over the next decade.

4. Southern Copper

4. Southern Copper

Southern Copper is one of the largest integrated copper producers in the world. It operates copper mines in Mexico and Peru. The company is majority-owned by Grupo Mexico (GMBXF 2.58%), a conglomerate focused on mining, transportation, and infrastructure.

Southern Copper is currently the fifth-largest copper producer in the world. In addition, it holds the biggest copper reserves, providing it with ample opportunity to expand its copper output.

Southern Copper sees significant production growth ahead. By 2032, it anticipates increasing production by 84% from its 2022 levels. The company has approved several large-scale expansion projects that should drive long-term copper growth. It expects to invest an average of $1.8 billion annually over the coming decade to increase its copper production.

Its strong copper growth pipeline puts Southern Copper in an excellent position to capitalize on rising demand.

5. Rio Tinto

5. Rio Tinto

Rio Tinto is a diversified global mining company based in the U.K. It produces aluminum, copper, diamonds, gold, industrial minerals, iron ore, and uranium. It also produces other basic materials, including borates, lithium, salt, and titanium dioxide.

The company's copper business consists of two large-scale mining operations:

• Rio Tinto operates the Kennecott mine in Utah. The world-class copper mine also produces silver and gold.
• The company has a 66% interest in Oyu Tolgoi in Mongolia, one of the biggest known copper and gold deposits in the world. Rio Tinto boosted its share in late 2022 by acquiring the rest of Turquoise Hill Resources that it didn't own for $3.3 billion. The acquisition should significantly increase its copper production. By 2030, Oyu Tolgoi should be the world's fourth-largest copper mine.

Rio Tinto has several copper-related growth projects in the pipeline, including Resolution Copper in the U.S. and Winu in Australia. Discovered in 2020, the Winu copper and gold resource has the potential to become a large-scale mining operation.

Rio Tinto's growing copper production should enable it to continue paying attractive dividends. The company aims to return 40% to 60% of its earnings to investors via dividends each year.

Related investing topics

Copper-driven growth

The world needs more copper to support its transition to lower-carbon renewable energy. Demand for the metal should rise considerably in the coming years. The increased demand should support additional copper expansion projects from the world's top mining companies, allowing them to increase production and capitalize on higher prices.

The combination of rising production and prices should enable copper miners to increase their cash flow, providing more money to pay dividends, repurchase shares, and boost total returns. The upside potential makes the copper industry attractive for investors to consider.

In addition to copper mining stocks, investors could also consider investing in an exchange-traded fund (ETF) focused on copper. There are several top copper ETFs worth considering. ETFs provide similar upside exposure to rising copper prices. They're also less risky than investing in a single copper mining company that could underperform due to a number of issues.