Mining for Profits: 3 Chinese Stocks to Buy Before Copper Prices Shine Again

These stocks could be worth buying at the dip if you're betting on copper for growth.
Anthony RussoApr 02,2021,19:14

Lately, big Chinese tech stocks have been tumbling in trading as tensions between Beijing and Washington have scared investors away.

While now might be a good time to buy at the dip, volatility could continue, at least for the short term.

Instead, it may be time to look at the mining space, which China has continued to be a major player in. As of 2018, China was the leading producer in gold, aluminum, lead, steel, zinc, as well as other types of metals, according to data posted by Commodity.com.

Last year, China produced roughly half the global steel, while importing above 70% of the global seaborne iron ore. Also, China dominates the rare earth mineral space, producing roughly 90% of the world’s total.

Meanwhile, the price of copper, a metal that could play an important role in the future, has dropped after hitting its highest levels in nearly a decade in February, as the global economy recovers. Copper prices have retreated on spiking exchange inventories and weakened demand for imported metal to China.

In the beginning of the year, some analysts were bullish on copper before it jumped to its February heights.

"While we have factored in an increase of mine production and also scrap supply this year, this is unlikely to be sufficient to prevent the copper market flipping into a deficit," Bank of America said, as cited by S&P Global in January.

Further, "We lift price forecasts especially for copper, which we see averaging $9,500/mt ($4.31/lb) in 4Q21, with the market likely flipping into a deficit, as inventories are low."

Copper plays a key role in the renewable energy space, and should prosper as the world makes efforts to meet emission standards.

Below are three Chinese mining stocks trading over-the-counter. All these produce copper and pay out small dividends to shareholders.

1. Jiangxi Copper Co. (OTC: JIAXF)

Market Capitalization: $9.75 billion

Based in Nanchang, the company is one of biggest producers of copper in China. With mining bases in China, Peru, Albania, and Afghanistan, Jianxi Copper also operates in the industries of gold, silver, rare earth, lead and zinc metals, according to the company.

In the first six months of 2020, Jiangxi posted revenues of nearly 146.63 billion yuan ($23.33 billion), up 40% from the same period of the preceding year. Net profit in the first six months of the year slipped 43% year-over-year to 745.30 million yuan.

To begin the year, Jianxi’s stock was off to a good start. But since peaking at $3.10 per share on Feb. 22, shares have fallen 38% to date. Currently, the stock’s PE ratio sits just under 19.

Jianxi’s dividend yield is 0.80%.

2. Zijin Mining Group Co (OTC: ZIJMF)

Market Capitalization: $36.47 billion

Another miner looks like it is set for rapid profit growth for the first three months of the year.

According to preliminary estimates posted late last month in a regulatory filing, Zijin expects its net profit to come in the range of 2.3 billion yuan to 2.5 billion yuan ($380.67 million) for the first quarter. That would represent a year-over-year gain of between 121% and 140%.

Founded in 1986, Zijin claims to be the largest mine-producer of zinc and copper in China, as well as a “leading” producer of gold in the country. According to the company, its gold resource reserve volume reached roughly 57.2542 million tonnes in 2020, accounting for around 50% of the total in China.

By 2030, Zijin is aiming to transform into an “extra-large scale international mining group with high technology and efficiency.”

Currently, the stock’s dividend yield sits at 1.12%.

With shares down 33% since Feb. 22 , now might be a good time to buy.

3. China Molybdenum Co. (OTC: CMCLF)

Market Capitalization: $16.72 billion

China Molybdenum describes itself as a company that focuses on “non-ferrous metal mining.”

In business for more than 50 years, China Molybdenum is the world’s largest producer of tungsten, the second biggest of cobalt and niobium, and a leading producer of molybdenum and copper, according to the company. It mostly operates in five continents including Asia, Africa, Europe, South America, and Oceania.

In 2020, China Molybdenum generated 113 billion yuan ($17.21 billion) in revenues, a 65% increase from a year earlier. Last year, its profits jumped 25% to 2.33 billion yuan.

Its dividend yield is 0.96%.

Shares of China Molybdenum are down 32% since Feb. 22.

CapitalWatch Disclaimer

CapitalWatch has no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only and does not constitute financial, legal, or investment advice.

Topics:Jiangxi Copper, Zijin Mining, China Molybdenum, Copper
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