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The prospects of the Zacks Mining - Non-Ferrous industry look bleak as weak demand in China has weighed on metal prices. Industry players have also been grappling with inflated costs, labor shortages, and supply-chain issues. However, the demand for non-ferrous metals is expected to be supported by the energy-transition trend, which should buoy the industry.

Against this backdrop, we suggest keeping an eye on companies like Southern Copper Corporation (SCCO - Free Report), Coeur Mining (CDE - Free Report), and Energy Fuels (UUUU - Free Report). These companies are poised to gain from their endeavors to build reserves and control costs while investing in technology and improving production efficiency.

About the Industry

The Zacks Mining - Non-Ferrous industry comprises companies that produce non-ferrous metals, including copper, gold, silver, cobalt, molybdenum, zinc, aluminum, and uranium. These metals are used by various industries, including aerospace, automotive, packaging, construction, machinery, electronics, transportation, jewelry, chemical, and nuclear energy.

Mining is a long, complex, and capital-intensive process. The actual mining operations are preceded by significant exploration and development to evaluate the size of the deposit. The process is followed by the assessment of ways to extract and process the ores efficiently, safely, and responsibly.

Miners often seek opportunities to grow their reserves and resources through targeted near-mine exploration and business development. They strive to upgrade and improve the quality of their existing assets internally and through acquisitions.

What's Shaping the Future of the Industry?

Volatility in Metal Prices is Concerning: Copper prices have been adversely impacted this year by weak demand in China due to the property crisis. The economic uncertainty in China and the absence of detailed policy plans have raised concerns about future demand.

The Fed delivered a widely anticipated quarter-point rate cut this week but signaled fewer reductions in 2025 due to persistent inflation. The looming threat of higher U.S. tariffs under the Trump administration adds further uncertainty to the market outlook. The prolonged contraction in the U.S. manufacturing sector is concerning as well.

Uranium prices have fallen 18.9% this year and have been hovering near $73 per pound, the lowest in a year due to expectations of an increase in supply. Gold and silver prices have dipped lately on the Fed’s hawkish signal of fewer rate cuts in 2025.

Despite this dip, gold has fared better than other metals this year, gaining 26% year-to-date, aided by rising geopolitical tensions, increasing bets for monetary policy easing, and continuous purchasing by central banks. Silver prices have also risen 21% so far this year due to these factors. However, the contraction in the manufacturing sector might hurt silver demand.

Overall, industry players are dealing with depleting resources, declining supply in old mines, and a lack of new mines. Development projects are inherently risky and capital-intensive. While demand has been strong, there will be an eventual deficit in metal supply, leading to a situation that will bolster metal prices. This, in turn, should favor the industry in the long run.

Labor Shortage, High Costs Remain Worrisome: The industry has been facing a shortage of skilled workforce lately, which has hiked wages. Labor-related disputes can be damaging to production and revenues. Industry players are grappling with escalating production costs, including electricity, water and materials, as well as higher freight expenses and supply-chain issues.

Since the industry cannot control the prices of its products, it focuses on improving the sales volume, increasing the operating cash flow, and lowering unit net cash costs. Industry participants are opting for alternate energy sources to minimize fuel-price volatility and secure supply. Miners are now committed to cost-reduction strategies and digital innovation to drive operating efficiencies.

Strong Demand to Support the Industry: The demand for non-ferrous metals is expected to remain high in the future, given their wide use in primary sectors, including transportation, electricity, construction, telecommunication, energy, and information technology.

The surging demand for electric vehicles and renewable energy is expected to be a significant growth driver for metals like copper and nickel in the years to come. The overhauling and upgrading of the nation’s infrastructure and promoting green policies per the U.S. Infrastructure Investment and Jobs Act will also require a huge amount of non-ferrous metals.

The Zacks Industry Rank Indicates Bleak Prospects

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull prospects for the near-term. The Zacks Mining - Non-Ferrous industry, a 12-stock group within the broader Zacks Basic Materials Sector, carries a Zacks Industry Rank #135, which places it in the bottom 46% of 249 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks that you may want to consider for your portfolio, let's look at the industry’s recent stock-market performance and its valuation picture.

The Industry Versus the S&P 500 & Sector

The Zacks Mining - Non-Ferrous Industry has outperformed its sector but underperformed the Zacks S&P 500 composite over the past 12 months. The stocks in this industry have collectively gained 1.2% in the past year against the Zacks Basic Materials sector’s decline of 10.5%. The S&P 500 has risen 25.7% in the same time frame.

One-Year Price Performance

Image Source: Zacks Investment Research

The Industry's Valuation

Based on the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Mining - Non-Ferrous stocks, we see that the industry has been trading at 8.13X compared with the S&P 500’s 24.78X. The Basic Materials sector’s forward 12-month EV/EBITDA is at 7.63X. This can be seen in the charts below.

Enterprise Value/EBITDA (EV/EBITDA) Ratio (Forward 12-Month)

Image Source: Zacks Investment Research

Enterprise Value/EBITDA (EV/EBITDA) Ratio (Forward 12-Month)

Image Source: Zacks Investment Research

Over the past five years, the industry has traded as high as 8.876X, as low as 5.68X, and with the median being 6.41X.

3 Mining - Non-Ferrous Stocks to Keep an Eye On

Here is a brief look at the previously-mentioned stocks in the space to consider.

Coeur Mining

The recently expanded Rochester silver-gold mine in Nevada is on track to achieve its full-year production targets of 4.8-6.6 million ounces of silver and 37,000-50,000 ounces of gold. It can potentially be one of the world’s largest open-pit heap leach operations. Exploration success has continued at Silvertip and Kensington, which bodes well for the company’s long-term growth.

The highlights from surface and underground expansion drilling completed last year continue to support Silvertip’s status as one of the world’s highest-grade, undeveloped carbonate replacement deposits.

The company recently announced an agreement to acquire SilverCrest Metals in an all-stock transaction with an implied value of $1.7 billion. The acquisition is anticipated to close in the first quarter of 2025, and is expected to materially enhance its cost and cash flow profile and accelerate its de-leveraging initiative. Coeur Mining stock has gained 63% in a year. 

The Zacks Consensus Estimate for the company's fiscal 2024 earnings indicates year-over-year upsurge of 165%. The estimate has moved up 88% in the past 90 days. The stock has a trailing four-quarter earnings surprise of 46%, on average. The company currently sports a Zacks Rank #1 (Strong Buy) rating.

Price & Consensus: Coeur Mining

Image Source: Zacks Investment Research

Southern Copper

This company has the largest copper reserve in the industry and operates world-class assets in investment-grade countries, such as Mexico and Peru. Southern Copper expects copper production to rise 7% year-over-year and reach 975,000 tons in 2024. This will be driven by recovery at SX-EW facilities at Buenavista, higher production in Peru, and production from the new Buenavista zinc concentrator.

The company’s capital investment program for this decade exceeds $15 billion and includes investments at the Buenavista Zinc, Pilares, El Pilar, and El Arco projects in Mexico and the Tia Maria, Los Chancas, and Michiquillay projects in Peru. Given its constant commitment to increasing low-cost production and growth investments, the company is well-poised to continue delivering an enhanced performance. Southern Copper stock has gained 8% in a year. 

The Zacks Consensus Estimate for the Phoenix, AZ-based company’s fiscal 2024 earnings indicates year-over-year growth of 19%. The estimate has moved up 5% over the past 90 days. The company has a long-term estimated earnings growth rate of 14.4%. Additionally, the company currently carries a Zacks Rank #3 (Hold) rating.

Price & Consensus: Southern Copper

Image Source: Zacks Investment Research

Energy Fuels

Backed by its debt-free balance sheet, Energy Fuels is ramping up uranium production while advancing rare earth element (REE) capabilities to capitalize on the surge in demand for both in clean energy technologies. The recent acquisition of Base Resources Limited will support its target to become a leading global producer of REEs.

Energy Fuels’ industry-leading mineral resources and pipeline of high-quality, large-scale development and exploration projects provide a competitive edge. With the acquisition of RadTran LLC, the company recently made its foray into the medical isotope market. These play a crucial role in cancer treatment, and there has been a global scarcity of these isotopes.

Also, the Madagascar government recently lifted the suspension on its 100%-owned Toliara project, which is a major development. Toliara is expected to play a key role in the company's strategy to diversify beyond uranium and become a leading supplier of critical minerals. Energy Fuels stock has lost 28.6% in a year mainly due to the decline in uranium prices. 

The Zacks Consensus Estimate for the company’s fiscal 2024 earnings is pegged at a loss of 10 cents per share, indicating a turnaround from the loss of 12 cents per share reported in fiscal 2023. The estimate has moved up from an estimated loss of 11 cents per share 90 days ago. The company currently carries a Zacks Rank #3 (Hold) rating.

Price & Consensus: Energy Fuels

Image Source: Zacks Investment Research 

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