Copper producers like Teck Resources (TSX: TECK.B) have benefitted from rising copper prices. In fact, in the last 10 years, the price of copper has increased 84% to approximately US$5.10 per pound. This is no surprise since copper is considered to be one of the purest economic indicators.
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Why copper?
Copper is one of the most versatile and durable base metals. It’s used in many different industries and applications. This includes the construction industry, the electrical and electronic industries, and the renewable energy industry. Electric vehicles, for example, require almost three times the copper than conventional vehicles.
Given this, it’s clear to see why copper producers are enjoying a secular growth trend that will likely provide long-term demand growth.
Why Teck Resources?
Given the positive industry backdrop, it’s clearly a good idea to consider getting exposure to mining stocks that have exposure to copper. This is where a mining stock like Teck Resources comes in.
As a mining company with world-class copper and zinc operations, Teck Resources has a bright future. Its industry-leading copper growth portfolio accounts for 61% of revenue and 65% of the company’s gross profit, with its zinc portfolio accounting for the remainder.
Teck Resources is a $30 billion mining giant with an attractive risk profile and strong operational and financial performance. For example, Teck’s balance sheet is one of the best in the industry, with a debt-to-total capitalization ratio of 27% and $7 billion of cash. This is due to the sale of its coal business last year, as well as its strong operating cash flow performance.
All of this is reflected in Teck’s stock price performance in the last 10 years. As you can see from the graph below, the stock has a 10-year return of 260%.
Right now, Teck’s performance is being driven by its Quebrada Blanca mine, which was ramping up strong in 2024. In fact, the fourth quarter of 2024 was the mine’s strongest quarter ever, with throughput rates that hit design rates toward the end of the year. Looking ahead, we can expect to see continued production growth along with increases in ore grades and lower costs driving cash flows.
First Quantum
The other mining stock to consider is First Quantum Minerals (TSX: FM). First Quantum is also a producer of copper and other metals. However, it’s a different beast. Higher debt levels and major political problems in Panama have made this stock a high-risk one.
The company’s Cobre Panama mine is a world-class mine in Panama that has fallen victim to government problems and civil unrest. Production has been stopped at the mine, and the focus is now on asset preservation maintenance work. This has been a big blow to First Quantum, and it’s a real-life reflection of the risk that comes with operating in unstable countries.
Not surprisingly, First Quantum’s stock price has been hit hard recently — in fact, it’s down almost 40% from its 2023 highs. While the stock has almost doubled in the last 10 years, it has drastically underperformed Teck Resources stock’s performance.
The bottom line
In conclusion, I favour Teck Resources stock for exposure to the strong long-term fundamentals of copper. It simply has a much better risk/reward profile.
Also, First Quantum trades at 20 times next year’s estimated earnings, while Teck trades at 22 times. Given Teck’s more attractive profile, the valuation discrepancy should be greater. In my view, it will move in this direction, making Teck Resources stock a much better mining stock to buy today.
