Stock Analysis & Valuation Southern Copper Corporation (SCCO)

• Previous Close: $190.34
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	74.29	-61
Intrinsic value (DCF)	55.09	-71
Graham-Dodd Method	1.85	-99
Graham Formula	99.02	-48

Strategic Investment Analysis

Company Overview

Southern Copper Corporation (NYSE: SCCO) is a leading integrated copper producer with extensive mining, smelting, and refining operations across Peru, Mexico, Argentina, Ecuador, and Chile. The company specializes in the extraction and processing of copper, molybdenum, zinc, lead, silver, and gold, operating key assets such as the Toquepala and Cuajone mines in Peru and La Caridad and Buenavista mines in Mexico. With a vertically integrated business model, SCCO controls the entire production chain from exploration to refined metal, enhancing cost efficiency and supply chain stability. As one of the lowest-cost copper producers globally, the company benefits from high-grade ore deposits and long mine lives. Southern Copper plays a critical role in the global copper market, supplying essential materials for infrastructure, renewable energy, and electrification trends. Backed by its parent company, Americas Mining Corporation, SCCO maintains a strong balance sheet and commitment to shareholder returns through consistent dividends.

Investment Summary

Southern Copper Corporation presents a compelling investment case due to its low-cost production, vertically integrated operations, and exposure to long-term copper demand driven by electrification and renewable energy growth. The company’s strong margins, supported by high-grade reserves and efficient operations, position it well in cyclical commodity markets. However, risks include geopolitical exposure in Latin America, copper price volatility, and regulatory challenges in mining jurisdictions. SCCO’s high dividend yield (currently ~5%) and disciplined capital allocation add appeal for income-focused investors, though capex requirements for expansion projects may pressure free cash flow in the near term.

Competitive Analysis

Southern Copper Corporation benefits from a competitive advantage rooted in its low-cost production profile, driven by high-quality ore grades and operational efficiency. Its vertically integrated model—spanning mining, smelting, and refining—reduces reliance on third-party processors and enhances margin stability. SCCO’s reserves are among the industry’s best, with a reserve life exceeding 50 years, ensuring long-term production visibility. The company’s geographic diversification across Latin America mitigates country-specific risks, though Peru and Mexico remain dominant contributors. Compared to peers, SCCO’s cost leadership (cash costs ~$1.20/lb copper) allows resilience during price downturns. However, its growth pipeline is less aggressive than some competitors, with expansion projects like Tía María facing permitting delays. ESG risks, including water usage and community relations, are notable challenges in its operating regions. SCCO’s parent company support (Grupo México) provides financial flexibility but also ties its performance to broader conglomerate dynamics.

Major Competitors

• Freeport-McMoRan Inc. (FCX): Freeport-McMoRan (NYSE: FCX) is a global copper giant with significant operations in the U.S. (Morenci), Indonesia (Grasberg), and South America. Its Grasberg mine is one of the world’s largest copper-gold deposits, offering diversification. FCX’s scale and gold byproduct credits provide cost advantages, but geopolitical risk in Indonesia and higher leverage than SCCO are drawbacks. FCX is more growth-oriented, with active expansion projects.
• BHP Group Limited (BHP): BHP (NYSE: BHP) is a diversified mining leader with major copper assets in Chile (Escondida) and Peru. Its superior scale and balance sheet strength allow aggressive investments in future-facing commodities. However, BHP’s broader diversification (iron ore, coal) dilutes its copper focus compared to SCCO. BHP’s ESG practices are more advanced, but its copper reserves are lower grade.
• Rio Tinto plc (RIO): Rio Tinto (NYSE: RIO) operates the Oyu Tolgoi copper-gold mine in Mongolia and has interests in Chile’s Escondida. Its technological leadership (e.g., autonomous haul trucks) and strong ESG profile differentiate it, but copper is a smaller part of its portfolio (vs. SCCO’s pure-play focus). Rio’s growth projects (e.g., Resolution Copper) face regulatory hurdles.
• Glencore plc (GLNCY): Glencore (OTC: GLNCY) combines mining and trading, with copper assets in Africa and South America. Its marketing division provides hedging benefits, but operational risks in the DRC (Congo) and weaker cost metrics than SCCO are concerns. Glencore’s coal exposure contrasts with SCCO’s cleaner metal focus.
• Teck Resources Limited (TECK): Teck (NYSE: TECK) operates the Highland Valley copper mine in Canada and Quebrada Blanca in Chile. Its QB2 expansion boosts growth, but high capex and debt are headwinds. Teck’s coal business adds volatility, whereas SCCO’s pure-play copper model offers clearer commodity leverage.