Lundin Mining Stock: Buy, Sell, or Hold?

Lundin (TSX:LUN) stock saw its shares surge this last year with the price of copper, and more strong guidance could be on the way.

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While everyone else has been focused on gold and silver stocks, there are some perhaps that have noticed the rise in the price of copper. The thing is, copper isn’t exactly a safe-haven mineral; it has a purpose. Copper is used in practically everything we touch, with demand high but production lower.

This is why Lundin Mining (TSX:LUN) has been doing so well! Shares of the company are up 58% in the last year alone, rising with the price of the material. But is that all there is to it? Let’s look at whether there’s more than meets the eye when considering Lundin stock.

Buy

To see whether the company is a buy, let’s get into its recent earnings. Lundin stock’s operational and financial highlights for the first quarter of 2024 indicate robust performance. With increased revenue and copper production, the company is on track to meet its annual production and cash cost guidance. Despite challenges such as production issues at some mines, Lundin Mining’s overall operational performance remains solid. This stability is reassuring for investors concerned about the company’s ability to deliver results consistently.

What’s more, the company’s focus on resource growth through exploration activities underscores its commitment to long-term sustainability and profitability. Exploration efforts targeting in-mine and near-mine areas across various operations indicate a proactive approach to maintaining and expanding reserves. This focus on resource growth positions Lundin Mining for future success and mitigates risks associated with resource depletion. 

The broader industry outlook for base metals, including copper, zinc, and nickel, appears favourable as well. With increasing demand driven by global infrastructure development, renewable energy projects, and electric vehicle production, prices for these metals could trend upwards. As a diversified mining company with exposure to multiple base metals, Lundin Mining stands to benefit from these industry dynamics.

Sell

While earnings were certainly impressive, it wasn’t strong across the board. Lundin Mining reported solid revenue growth in the first quarter of 2024, with a 25% increase compared to the same quarter last year, but its net earnings were lower than in the prior year. This decrease in net earnings, attributed to non-cash unrealized losses and higher financing costs, raises concerns about the company’s profitability and financial health.

Furthermore, the company faced production challenges at some of its key operations, including Neves-Corvo, Eagle, and Zinkgruvan, leading to higher-than-expected cash costs per pound. Although the company expects these challenges to improve later in 2024, the uncertainty surrounding operational performance could weigh on investor confidence.

Then there is the recent dividend. While Lundin stock has declared a regular quarterly dividend, the company’s lower net earnings and free cash flow raise concerns about its ability to sustain dividend payments in the long term. Investors seeking dividend stability and growth may view this as a red flag.

Hold

In that case, perhaps it could be better to simply hold the stock, depending on your risk tolerance. The company’s operational performance, as outlined in its first-quarter financial results, indicates steady growth and adherence to production guidance. With production figures meeting expectations and revenue showing an increase, Lundin stock seems to be effectively managing its operations.

What’s more, the company’s outlook suggests that it is on track to meet its annual production and cash cost guidance, with operations performing well in the first quarter of 2024. While some production challenges were faced, particularly at Neves-Corvo, Eagle, and Zinkgruvan, these issues are expected to improve later in the year.

Finally, Lundin stock’s ongoing exploration activities, though in early stages, indicate a commitment to resource expansion and future growth. Exploration drilling at various sites, including Caserones and Josemaria, highlights the company’s efforts to extend the life of its operations and identify new mineral resources. Overall, there is certainly the potential for long-term growth—enough to keep the company at least on your watchlist.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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