According to Lee Eun Young of DBS Group Research, another way investors can get exposure to this investing theme is to invest in Hong Kong-listed MMG, which runs five mines, producing mainly copper and zinc, two metals commonly found in the same mineral deposits. MMG, with its corporate headquarters in Melbourne, is 67.5% held by China Minmetals Corporation, a state-owned enterprise.
MMG, via its five mines, generates 74% of its revenue from copper and is “strategically increasing” this pot. Its share price has been observed to be strongly correlated with copper prices, and with earnings set to increase in the near term, re-rating for this stock is “imminent”, says the DBS analyst in her May 20 report.
“It is a particularly attractive option for investors seeking increased copper exposure, especially as an alternative to gold miners, which may have already seen strong performance,” says Lee, who leads the bank’s metal and mining sector coverage.
MMG’s Las Bambas mine in Peru and the Dugald River mine in Australia are the world’s top copper and zinc mines, respectively. Scale brings about cost advantage. Lee notes that Las Bambas’s cash cost for copper was only US$3,328 ($4,295) per tonne in 2024, placing it in the 50th percentile of the global copper mine cost curve.
See also: Chinese trader who made US$1.5 billion on gold builds a giant bet on copper
According to Lee, MMG is set for an increase in sales volume, thanks to the Khoemacau copper mine in Botswana which it acquired recently. It has also done the groundwork to lift production at its own Chalco Bamba pit, Las Bambas.
In 1QFY2025, MMG grew its total copper production by 76% y-oy, “signalling a promising growth trajectory”. For the whole of FY2025, the company has guided for 24% y-o-y growth in copper sales volume to 494,000 tonnes in 2025, with sales volume at Las Bambas and Khoemacau expected to grow 18% and 55% y-o-y to 380,000 tonnes and 48,000 tonnes, respectively.
Another reason why Lee is upbeat on this stock is that operations at Las Bambas are seen to “normalise” after ties with the local community improved. In 2022, Las Bambas experienced 173 days of road blockage throughout the year due to community protests, which hurt transport and sales volumes “significantly”. Normal operations were also affected when local community members entered the mining site.
See also: Don't ignore the commodity traders in a tariff war
Since then, the company has made efforts to improve its relations with the community, says Lee. For example, MMG also provided funding to build 14 schools. Of more direct impact to the operations, a company formed by the local community was given the contract to transport copper concentrate utilising 30 new trucks, bringing the total to 155 trucks, which helped increase copper concentrate sales volume to 106,000 tonnes in 1QFY2025.
Lee estimates that with strong operating cash flow, the company is seen to reduce its net gearing to 0.62 times in FY2025 from 2.67x in FY2020. She estimates MMG’s net interest cost to be lowered at a rate of 30% CAGR by 2026 following a US$706 million reduction in net debt and falling interest rates. To this end, Lee says MMG enjoyed the support from its controlling shareholder China Minmetals, which facilitated around US$1.8 billion in loans at a fixed interest rate of 4.2% to 4.3%.
In addition, MMG’s growth potential has been enhanced by acquisitions. Last March, MMG acquired 100% of Cuprous Capital, which holds a 55% stake in the Khoemacau mine for US$1.9 billion. This mine has 940,000 tonnes of copper ore reserves, which has increased MMG’s total copper ore reserves by 16% to 6.3 million tonnes in 2024. The mine’s cash cost of US$5,560 per tonne in 2024 is deemed “competitive” and annual copper production capacity is expected to expand from around 48,000 tonnes in 2025 to 60,000 tonnes by 2026–2027 and 130k tonnes by 2028.
Besides copper and zinc, MMG has also diversified into nickel. It is acquiring 100% of Anglo American’s nickel business in Brazil and completion is seen by 3QFY2025. The target is one of the largest ferronickel operations globally, with 40,000 tonnes production capacity per year with a low cash cost of US$10,604 per tonne in 2024.
The target has two operating nickel mines at Barro Alto and Codemin with resources of 5.2 million tonnes of nickel and a mine life of 18 years. There are plans to develop a nickel greenfield project with a capacity of 150,000 tonnes per annum to help contribute to MMG’s earnings growth from FY2025 onwards.
All in all, factoring in an additional 16,000 tonnes in volume that will bring in more earnings, Lee has raised her target price for MMG from HK$2.80 to HK$3.50. She is valuing this counter at 5.3 times FY2025 EV/EBITDA, which is a 25% discount to the peer median of 7.1 times, to factor in potential risks such as operational disruptions and no dividend.
MMG is trading at the FY2025 10.7 times P/E, 1.0 times P/BV, and 4.7 times EV/Ebitda — the most attractive among peers, with their median of FY2025 17.0 times P/E, 1.6 times P/BV, and 7.1 times EV/Ebitda. “We recommend it as the sector top pick,” says Lee.
