Southern Copper Trades at a Premium: How to Play the Stock?

Southern Copper Corporation SCCO is currently trading at a forward price-to-sales multiple of 8.67X, a significant premium to the non-ferrous mining industry’s average of 4.48X.

By comparison, major copper peers like Freeport-McMoRan Inc. FCX, Rio Tinto Group RIO and BHP Group Limited BHP are trading at much lower price-to-sales multiples of 3.09X, 1.87X, and 3.09, respectively.

While Southern Copper’s valuation appears stretched, the stock’s performance over the past year has been impressive. SCCO shares have surged 70.7%, outperforming the industry’s 49.4% growth, the Zacks Basic Materials sector 33.6% rise and the S&P 500’s 19% return.

SCCO has also outperformed Freeport-McMoRan, Rio Tinto and BHP Group, as shown in the chart below.

Southern Copper Reports Upbeat Q3 Results, Lowers 2025 View

The company reported third-quarter 2025 earnings of $1.35 per share, which marked a 21% year-over-year increase. Sales rose 15% year over year to $3.38 billion as higher sales volumes for silver, zinc and molybdenum, and elevated metal prices were offset by lower sales volumes of copper.

Southern Copper targeted a copper production of 958,800 tons for 2025, a 2% dip from last year.

SCCO’s Capex Program Anchors Long-Term Growth

The company’s capital investment program for this decade runs to more than $15 billion, with the major portion ($10.3 billion) earmarked for Peru.

The long-awaited Tia Maria project, located in Arequipa, Peru, with an annual capacity of 120,000 tons of SX- EW copper cathodes, is expected to start in 2027. This project will use state-of-the-art SX-EW technology with the highest international environmental standards.

In Mexico, El Pilar, which is expected to start in 2028, will contribute around 36,000 tons of copper cathodes annually. This operation will use highly cost-efficient and environmentally friendly SX-EW technology. 

By 2030, El Arco in Mexico is expected to become operational. It is a world-class copper deposit located in the central part of the Baja California peninsula with ore reserves of more than 1,230 million tons with an average ore grade of 0.40% and 141 million tons of leach material with an average ore grade of 0.27%. The project includes an open-pit mine with a combined 120 ktpd concentrator and 28 ktpy SX-EW operations.

Peru’s Los Chancas project is slated to add 130,000 tons of copper starting in 2031. This will be followed by Michiquillay in 2032 with an expected 225,000 tons of copper. Michiquillay is expected to become one of Peru's largest copper mines with an expected mine life of more than 25 years. 

Southern Copper’s Output to Accelerate Sharply Post 2030

Backed by the above-mentioned projects and investments, SCCO expects production to steadily build toward 1,084,000 tons by the end of this decade. Growth is projected to accelerate meaningfully from 2031 onward, with copper output envisioned to reach 1,536,000 tons by 2034.

This indicates seeing a 5% CAGR over 2024, underscoring SCCO’s confidence in its extensive project pipeline.

Supportive Commodity Price Environment to Aid SCCO

Copper futures are currently at above $6 per pound, at record highs, amid expectations of a further tightening in global supply this year. Also, concerns that the Trump administration could impose new tariffs on refined metals have favored the metal. The long-term outlook for copper is positive, as copper demand is expected to grow, partly driven by electric vehicles, and renewable energy and infrastructure investments. 

Silver prices surged 170% in 2025, driven by the convergence of factors, including elevated geopolitical risks, economic uncertainty, resilient demand and tightening inventories. Prices are trending around $79 an ounce. The impact of U.S. intervention in Venezuela and rising tensions between China and Japan are likely to boost the prices of the metal. 

Zinc futures climbed to around $3,240 per ton, marking their highest level since January 2023, supported by tightening inventories and ongoing supply disruptions.

Southern Copper’s Earnings Estimates Indicate Y/Y Growth

The Zacks Consensus Estimate for Southern Copper’s 2025 earnings is pegged at $5.27 per share, suggesting 21.7% year-over-year growth. The same for 2026 indicates growth of 17.3%.

EPS estimates for both 2025 and 2026 have been revised upward over the past 60 days.

Rising Costs Remain a Key Watch Point for SCCO

Southern Copper saw a 3% year-over-year increase in total operating costs in 2024 and a 5.8% increase in the first nine months of 2025. The increase was mainly due to an increase in other costs of sales, including workers’ participation, repairing materials (mainly heavy equipment spare parts), inventory variance and exchange rate variance.

Also, high labor costs, along with ongoing inflation for repair materials, operating materials, inventory consumption, operation contractors and services will likely continue to weigh on Southern Copper’s margins. However, management continues to focus on cost efficiency to lessen these impacts.

SCCO’s Dividend Yield & ROE Enhance Shareholder Appeal

The company’s current dividend yield of 2.25% is higher than the industry’s 1.53% and the S&P 500’s 1.07%. Its payout rate of 60.8% is also higher than the industry’s 39.07%.

Southern Copper’s return on equity, a profitability measure of how prudently the company is utilizing its shareholders’ funds, is at 38.75%, higher than the industry average of 12.73%.

Southern Copper’s Long-Term Investment Thesis Remains Strong

SCCO holds the largest copper reserves among listed peers, totaling 51.1 million metric tons, exceeding those of Freeport-McMoRan, BHP and Rio Tinto. Its low-cost, integrated operations and deep pipeline of world-class greenfield projects further strengthen its competitive positioning. The company is poised well to capitalize on the expected surge in copper demand in the year to come, backed by the energy transition trend. 

Our Final Take on SCCO

Southern Copper’s unmatched reserve base, high-quality assets in investment-grade countries and ambitious capex-driven growth plans make it a compelling long-term play on rising copper demand.

However, given the stock’s premium valuation, new investors may prefer to wait for a more attractive entry point. Southern Copper currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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