A Copper Mining Stock You Shouldn’t Miss

Copper prices might have taken a tumble this year on account of the U.S.-China trade war, but that hasn’t stopped Ero Copper from having a great time on the stock market. Shares of the copper miner are up more than 70% in 2019 despite taking a tumble of late, and that can be attributed to its efforts of increasing production and setting itself up for long-term growth.

Let’s take a look at the recent developments at Ero Copper and see if it is worth your money.

Ero’s Operations are Gradually Improving

In the first six months of 2019, Ero Copper has delivered production of 21,118 tonnes as compared to 10,530 tonnes in the prior-year period. This increased production can be attributed to the nice bump in the company’s grade profile last quarter. Ero reported a copper grade of 1.86% in the first half of 2019 as compared to 1.51% in the year-ago period.

Thanks to the higher grade, the company was able to boost its output and reduce costs simultaneously. Ero’s cash cost of copper produced per pound fell to $0.97 in the first half of the year as compared to $1.55 per pound in the same period a year ago.

As a result, the company was able to post a net income of $0.34 per share as compared to a loss of $0.23 in the year-ago period. Adjusted net income in the first six months of 2019 came in at $31 million, up from a small loss that was seen a year ago.

So, Ero Copper’s favourable production base has allowed it to offset the impact of negative copper prices. Higher grades helped the company derive stronger production from its assets at lower costs, and that has positively impacted its bottom line.

The good part is that Ero Copper could continue improving as its guidance suggests.

Better Times Ahead for Ero Copper

Ero Copper now anticipates that its copper grades for 2019 will come in at 1.95% as compared to the earlier estimate of 2%. However, Ero’s recovery rate is expected to go up to 90% from 88%. As a result, the company now anticipates production between 38,000 tonnes and 40,000 tonnes of copper for the year, up from its earlier range of 36,000 tonnes to 38,000 tonnes.

Ero Copper could prove to be a nice investment because of its potential growth and affordable valuation.

What’s worth noting is Ero plans to achieve this extra production at no additional cost. The company anticipates its full-year cash cost guidance to remain stable at $1.00-$1.10 per pound.

Not surprisingly, analysts are anticipating strong growth from the company. Its revenue is expected to jump nearly 20% this year, while earnings are projected to jump from $0.03 per share to $0.73 per share. The momentum is expected to continue next year with top-line growth of 12% and earnings of $1.08 per share.

So, Ero Copper could prove to be a nice investment because of its potential growth and affordable valuation. The company is trading at 15 times next year’s earnings, so it would be a good idea for investors to go long Ero Copper.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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