Lundin Mining (TSX:LUN) has been a huge winner over the last few months. The price of copper has risen steadily higher, with shares of Lundin stock rising right along with it.
And yet, most recently shares of Lundin stock dropped down. So, let’s look at what happened and whether now could be a great time to get in on this copper producer or sign of more drops to come.
What happened?
It actually hasn’t been anything to do with Lundin stock. The company has been seeing its share price rise as the price of copper rises as well. And this has been the reverse as well.
China, the world’s biggest consumer of copper, has seen a slowdown in its economy, particularly in the construction and manufacturing sectors. This means there’s less demand for copper, which drives the price down.
What’s more, the United States dollar has been getting stronger recently. This makes copper more expensive for countries that use other currencies to buy it. As a result, some buyers are waiting on the sidelines for prices to come down.
So, could it rise once more?
Despite a recent dip, long-term copper looks quite bullish. The transition towards renewable energy sources like wind and solar power requires massive amounts of copper for wiring and electrical grids. As countries invest more in renewables, demand for copper is expected to surge.
What’s more, copper is a finite resource, and new mine discoveries have been slowing down in recent years. This means that even if demand stays flat, a lack of new supply could push prices up.
Finally, as mentioned, many countries, such as China, are in dire need of infrastructure upgrades, including power grids, transportation systems, and buildings. This will require a significant amount of copper, which could put upward pressure on prices.
The bull case for Lundin stock
So, while the price of Lundin stock is down, don’t count it out. In the long term, this could be a great stock to get in on the rise of copper prices. There are many reasons for this.
First off, Lundin Mining is a major copper producer, with copper accounting for around 60% of its revenue. The company is expecting to increase copper production in 2024 and has plans for further expansion. Lundin Mining is actively exploring for new copper deposits and investing in expansion projects at existing mines. This focus on future growth suggests confidence in the long-term copper market
What’s more, it’s a strong company. Lundin Mining has a healthy balance sheet with minimal debt and offers a dividend to investors. Add to this that insiders buying company stock in the past year suggests management’s belief in the future prospects. And, even with recent stock price increases, Lundin Mining might still be considered a value play compared to its book value.
So, shares may have come down 10% since 52-week highs, but as you’ll see, the price of copper has also dropped by 10%. So, once copper prices rise again, it’s likely Lundin stock will keep on climbing once more.
