Shares of Lundin Mining (TSX: LUN) have been on a tear over the last year. Shares surged by over 50% on the rise in the price of copper — not to mention the increase in the company’s production.
And yet, Lundin stock fell back slightly after reporting earnings this week. So, let’s look at whether this means the company could be on a rough path or if now is the time to dive in.
About Lundin
First, let’s discuss Lundin stock. Lundin is a diversified Canadian base metals mining company that primarily focuses on the exploration, development, and production of copper, zinc, nickel, and other base metals. The company operates mines and facilities in various locations, including Sweden, Portugal, Chile, and the United States.
The company’s key operating assets include the Eagle Mine in Michigan, U.S. (nickel and copper), the Neves-Corvo Mine in Portugal (copper and zinc), the Zinkgruvan Mine in Sweden (zinc, lead, and silver), and the Candelaria Mine in Chile (copper).
You’ll notice the large focus on copper, which has been huge for the company in the last year. Copper prices have surged through high demand, with production still lower on a global scale. And given copper is needed for everything from plumbing to circuit boards, it will continue to be in high demand for the foreseeable future.
What happened?
So, if the company is so focused on copper, why did shares of the stock drop during the first-quarter earnings? To see that, let’s look first at how the company has performed over the last few quarters.
During the third quarter, Lundin stock generated revenue of $992.2 million, gross profit of $197.3 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $415.1 million. The company also produced 89,942 tonnes of copper — a new quarterly record.
By the fourth quarter, Lundin stock generated revenue of $1.06 billion, gross profit of $188.9 million, so slightly lower than the quarter before, and adjusted EBITDA of $419.7 million. Further, copper production climbed higher to 103,337 tonnes.
However, the first quarter came in far weaker. Copper production slowed to even lower than third-quarter levels at 88,013 tonnes. Revenue fell even more to $937 million, with adjusted EBITDA lower at $362.9 million. This led to lower gross profit as well at $185.4 million.
Should we worry?
First-quarter guidance led to an unchanged outlook for the full year 2024. The company still believes it can achieve copper production between 366,000 and 400,000 tonnes. The main issue will be the price of copper and whether this will lead to further growth on a quarter-over-quarter basis.
That being said, demand will remain high, and so if Lundin stock can keep up with the demand there shouldn’t be anything to slow down this stock. There are always issues when it comes to mining stocks, especially when dependent on the price of one metal. But overall, Lundin stock should continue to see growth as the price of copper continues to rise. And investors should certainly consider it then after this dip.
