Wednesday 16 January 2013

SCCO - relentlessly higher

Southern Copper (SCCO) closed moderately lower by 0.35% @ $40.36. Yet the multi-month trend is starkly higher. If Copper prices can start to climb into the spring, then SCCO - along with most of the mining sector, will likely continue upward.


SCCO, daily



Copper, weekly, 2yr


Summary

Southern Copper is my second favourite miner (the first being FCX), but unlike FCX - which purchased two Oil/Gas servicers, SCCO is keeping it simple, and this is seen in the recent price action.

Whilst FCX dropped because of the new share issue, SCCO is relentlessly climbing.

SCCO is now valued at almost $35bn, has a moderate cash pile of 1.5bn, and only 2.7bn in debt. Profit margins are very good, and SCCO has a dividend yield (trailing) of 9%.

On any basis, its still somewhat undervalued with that level of dividend.

see Key stats @ yahoo! finance


Price action

SCCO could comfortably fall from the 40s, down to the 37/36s, and this would not do any damage to the mid-term rising trend. The rising (at an accelerated rate) 200 day MA in the 31s will offer very strong support if Mr Market is spooked by the debt ceiling this Feb/March. I don't expect any move <35 though this spring.


SCCO is of course heavily dependent on Copper prices....

Dr Copper - where next?

It would appear Copper is in yet another tiny down move, but I do expect the rising trend - seen on the weekly chart, with support around 3.50 will hold.

First upside would then be 3.85, and then 4.10. It will be fascinating this spring to see if Copper can break over $4.20 or so, that would be a pretty important move, and suggest new inflationary pressures - as opposed to the 'deflationary doom' that many are still forecasting.
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SCCO, next earnings Feb'4