Investors want copper, and will pay for it. Antofagasta (ANTO), one of the top copper-only miners in the world, trades at a far higher valuation than the diversified miners, Rio Tinto (RIO) and Glencore (GLEN). Its current enterprise value is nine times its earnings before interest, tax, depreciation and amortisation. Rio Tinto and Glencore each trade at 6.5 times, the latter having recently had a share price run-up on both higher metal prices and the news of now-aborted merger talks with Rio.
The mining rush has already seen a re-rating of stocks in the past year, as generalist investors move into the space. Company-specific changes such as Anglo American (AAL) starting to offload its less profitable or lossmaking divisions (such as De Beers) have also helped, along with a focus on the strategic importance of raw materials being in friendly hands.
How exactly investors should value these copper holdings is up for debate, even within the industry. Rio Tinto and Glencore could not find common ground over a valuation of Glencore’s shares, scuppering the fourth attempt to join the two companies together earlier this year.