Report by Global Mining Research

David Radclyffe's copper coverage totals ~63% of global mine production. Copper supply continues to wrestle with many legacy headaches from 2025, mixed with the Iran conflict and its implications for diesel and sulphuric acid supply. There is therefore downside supply risk. However, the current oil disruption has implications for global growth and copper demand. Worryingly, David points out that copper inventories are rising rapidly. His coverage universe implies 0.9% annual contraction in refined copper supply in 2026, following a strong 2025. Weak supply growth for 2026, even with moderate demand growth, is at odds with strongly rising terminal market inventories, now at 1,267kt, adding to price risk. Copper is a crowded long trade, with caution warranted. The sector is not particularly cheap at spot 1.6x P/NPV10 and 9x EV/EBITDA. Antofagasta PLC is cut to HOLD. Preferred stocks include Lundin Mining Corp, KGHM Polska Miedz SA, Ivanhoe Mines Ltd, Grupo Mexico SAB de CV, Hudbay Minerals Inc and Teck Resources Ltd.

Report by Global Mining Research

The US-Israeli war with Iran and oil shock has resulted in some of the most volatile markets of recent times. Higher oil prices are clearly inflationary; however, the larger short-term risk for the miners is arguably the supply of liquid fuel. Slowing global growth could erode copper demand; the copper sector P/NPV10 and +1 year P/CF is trading close to previous tough levels with a spot FCF yield of 5.2% being attractive. Gold equities are still attractive with the market imputing lower spot prices today. The shares are cheap on a cash flow basis with a 6.9% spot FCF yield. Gold sector margins are still robust with better balance sheets compared to peers. Copper and gold equities have corrected, and value opportunities have emerged. Preferred coppers are Antofagasta PLC, Lundin Mining Corp and Ivanhoe Mines Ltd, whilst least preferred are First Quantum Minerals Ltd and Southern Copper Corp. Preferred golds are Barrick Gold Corp, Agnico Eagle Mines Ltd and Kinross Gold Corp.

Report by Global Mining Research

With the metal starting 2026 with strong price momentum, David Radclyffe’s team examines the “what if” upside for the nine senior copper pure plays. In the year ahead, David estimates a 410kt copper deficit, as Grasberg and other issues feed through, and that is before production guidance downgrades are announced for some. The copper market is tight. Best leverage to higher copper prices is with First Quantum Minerals Ltd and Teck Resources Ltd, showing high EPS upside near term and with long-term upside to NPV assuming copper stays at US$7/lb indefinitely. Least upside is with Grupo México S.A.B. de C.V. and Ivanhoe Mines Ltd, albeit still good. GMR’s quality vs value screen highlights Grupo México S.A.B. de C.V. and Freeport-McMoRan Inc. as offering better value, although not with the best leverage. The chief risk is the obvious one, that copper is near-term overbought with long-term prices expected lower.

Materials

Report by Global Mining Research

A 2026 copper turnaround story - IVN is now producing from all 3 of its core and globally significant mining assets. However, this has not been reflected in the share price following the seismicity event at Kakula in May 25. The market is focused on short term risks, but Kakula’s recovery is being managed and 3Q25 volumes (annualised at 285kt/yr) likely marks the bottom. With the 3 operating assets contributing in 2026 and a new smelter set to lower costs, GMR sees next year as the inflection point. IVN also offers major exploration upside - its 100%-owned Makoko district alone has 9.2Mt of copper identified, with additional drilling across Angola, Zambia and Kazakhstan providing further optionality not priced in. Trading at 1.4x P/NPV10, IVN’s growth, scalability and asset quality make the risk/reward compelling.

Report by Global Mining Research

As Sellside and Buyside set expectations for 2025, Global Mining Research examines the recent history of the leading miners. Interestingly, only Agnico Eagle Mines Limited, Albemarle Corporation, Ivanhoe Mines Ltd, and Northern Star Resources Limited are estimated to have materially grown through investment and M&A over 2020-2025E. In fact, most miners have shrunk in terms of Cu Eqv. Production, and exiting coal was a clear trend. The copper miners have outperformed, despite iron ore miners clearly returning the most cash to shareholders in dividends. Buybacks should have helped the share price return but there is little evidence this works. For over half the group, a ‘buy and hold’ strategy has not generated a robust return over the period. This reinforces the view that miners are to be traded.

Report by Global Mining Research

As expected, the first half of the year was met with weaker production, with companies in Global Mining Research’s coverage reporting flat figures of +1.5% and low capex. Costs increased some 4.8%, but this was offset by a ~US$0.60/lb increase in copper prices in the latest quarter. 60% of producers are expecting stronger H2 volumes, but Antofagasta, Ero Copper, Ivanhoe Mines and Capstone Copper are most at risk of missing 2024 guidance. Following the recent pullback and ahead of seasonally stronger Q4 prices, GMR continues to see the sector as attractive. Ratings have been raised for leveraged plays KGHM (to buy) and MMG (to hold).

Report by Global Mining Research

For 2024, David Radclyffe forecasts copper to enjoy an average ROCE of 11.1%. The standout is Southern Copper Corp, helped by some very low cost and long-lived assets. Relatively new to the market Ero Copper Corp does well, while at the lower end sit Ivanhoe Mines and Sandfire Resources. When it comes to gold, the forecasted average ROCE for 2024 is at 8.3%, with Gold Fields coming out on top and Lundin Gold close behind. The copper sector as a whole continues to generate better real returns on capital than the gold sector, with gold miners continuing to suffer from shorter mine lives and a commitment to M&A to create growth.