Webcast #47: Hudbay Minerals Is Up 50% Since Our July Purchase, But We’re Not Selling (6 minutes)

This past summer, we wrote to our clients and said:

“A Bank of America survey … concluded that stock allocations were at their lowest level since 2008 and that cash balances have not been this high since October 2001. With sentiment this weak and pessimism so high, we took advantage of several bargains to benefit your portfolio.”

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One of the stocks purchased was Hudbay Minerals. The company has copper and zinc assets in Peru, Manitoba, and the United States. Our block trade purchase price for suitable clients was $4.74CDN per share on July 29th and since then, we’ve added the position for new clients as well. The stock price is $7.09CDN per share at the time of this writing, a return so far of almost +50%.

There are several reasons for its appreciation.

First, the world’s largest copper consumer, China, has pursued their zero-COVID policy for almost three years now. This has accompanied economic consequences – particularly in its real estate market – and growing social frustration. Chatter that China is preparing to begin loosening its zero-COVID policy has brought life back into the industrial commodities.

Second, the company has met expectations operationally the last couple of quarters. Most recently, Hudbay reaffirmed its production and cost guidance, offering predictability that investors always like to hear. The company is working to greenlight its Copper World project in Arizona where it is currently working on permitting.

Fears that its flagship Constancia mine in Peru would become the subject of significantly higher taxes upon the election of Pedro Castillo in July 2021 proved unfounded. Castillo has faced two impeachment attempts, many resignation attempts, and constitutional change down there (or in any Latin American country for that matter) appears impossible.

In the years ahead, the demand for copper – fueled by the growing electric vehicle market — will exceed its supply. Though 9% of global passenger vehicles are presently electric, the CEO of the oil giant ExxonMobil recently predicted that by 2040, all new cars manufactured will be electric.

Once China phases out its zero-COVID policy, we expect to see the price of copper appreciate significantly and along with it the stock price of Hudbay Minerals.