Freeport-McMoRan (US:FCX), one of the world’s major copper miners, slashed its dividend this week and told investors it would start an “aggressive” review of spending to survive the Covid-19-induced downturn.
The copper spot price fell to below $5,000 (£4,355) a tonne (t), a level not seen since 2016. Back then it was part of a broader mining lull, with weak base metal, bulk and gold prices.
Copper has been a standout performer among the commodities linked to industrial demand, with iron ore sitting pretty around $90 per tonne. Freeport chief executive Richard Adkerson said the drastic measures were necessary in the face of uncertainty over a recovery.
The red metal’s price improved slightly from below $4,500/t on 23 March, but the temporary loss of production from mines in Peru and production falling in Chile did not give the metal much of a kick.
However, compared to other sectors like oil and gas, copper miners have not done badly. Antofagasta (ANTO) is down 20 per cent since the start of March, to 619p, but that is still ahead of losses sustained by the FTSE 350 during that period. While shares in low cost producers Central Asia Metals (CAML) and Kaz Minerals (KAZ) are down by around a third, and Atalaya Mining (ATYM) is down 47 per cent, that is still below declines suffered by some oil and gas producers since the start of the month.
The biggest diversified companies BHP (BHP) and Rio Tinto (RIO) are both closely linked to the iron ore price, but also have plenty of copper production. Liberum analyst Ben Davis said in a note this month the stocks had fallen much further than bulks prices. “The robustness of the bulk material [iron ore and metallurgical coal] prices has meant that earnings momentum has been relatively resilient year to date for the majors,” he said.
Mr Davis is not confident of a quick recovery, just that the drop in valuations this month (17 per cent for Rio and 24 per cent for BHP) had priced in further pain. “Finished steel consumption has collapsed, along with cement and glass, as construction work slows and this is before the rest of the world supply chains breakdown,” he said.
