0

Minera Cerro Verde Stock – Investment Analysis

Common Stock: Minera Cerro Verde (CVERDEC1)

Current Market Price: $25.00 USD

Market Capitalization: $8.75 Billion USD

**Note: All values in this article are expressed in United Stated Dollars (USD) unless otherwise noted.

Minera Cerro Verde (CVERDEC1) - Stock Chart
Minera Cerro Verde (CVERDEC1) – Stock Chart

Minera Cerro Verde Stock – Summary of the Company

Minera Cerro Verde is a Peruvian mining company focused on the acquisition, exploration, development, and operation of mineral properties in Peru. The company is currently focused entirely on the Cerro Verde mine in Peru, which is one of the largest copper mines in the world. The mine also produces relevant amounts of molybdenum. The Cerro Verde mine has a long history of production, it was first exploited by the Spanish in the 1800’s. Minera Cerro Verde was founded in 1993 and is headquartered in Arequipa, Peru. The company employs around 4,600 people.

Revenue and Cost Analysis

Minera Cerro Verde had revenue of $2.5 billion in 2020, a decrease from $2.9 billion in 2019. Their COGS was $1.8 billion in 2020, representing a gross margin of 28.7%, also a decrease compared to 32.2% the previous year.

The company was profitable in each of the last two years. Minera Cerro Verde had net income of $274.5 million in 2020, representing a profit margin of 10.8%, a decrease compared to 13.5% in 2019.

Minera Cerro Verde - Revenue by Country
Minera Cerro Verde – Revenue by Country

Balance Sheet Analysis

Minera Cerro Verde has a strong balance sheet. They have a good base of long term assets and a sound near term liquidity position. The company is not leveraged and has reasonable liability levels.

Minera Cerro Verde – Debt Analysis

As of year-end 2020 the company has $602.7 million in total debt outstanding, $10.2 million of which is classified as current.

Minera Cerro Verde Stock – Share Dynamics and Capital Structure

As of year-end 2020 the company has 350 million common shares outstanding. The company’s 3 largest shareholders own a combined 94% of the company, with the remainder being held by smaller shareholder with an ownership position of less than 5%.

Minera Cerro Verde Stock - Ownership Structure
Minera Cerro Verde Stock – Ownership Structure

Minera Cerro Verde Stock – Dividends

The company did not pay a dividend in 2020 due to the uncertainty caused by the coronavirus shutdowns. In 2019 the company paid total dividends of $0.43 cents per share.

Minera Cerro Verde Stock – 3 Metrics to Consider

Debt to Equity Ratio

Total Liabilities/Total Share Holder Equity

$2.1 billion / $5.6 billion = .38

A debt to equity ratio of .38 indicates that Minera Cerro Verde uses a mix of debt and equity in its capital structure. But that the company is not leveraged, and relies mostly on equity financing for funding.

Working Capital Ratio

Current Assets/Current Liabilities

$1.8 billion / $450.7 million = 3.9

A working capital ratio of 3.9 indicates a strong liquidity position. Minera Cerro Verde should not have problems meeting its near term obligations.

Price to Book Ratio

Current Share Price/Book Value per Share.

$25.00 / $16.10 = 1.55

Minera Cerro Verde has a book value per share of $16.10. At the current market price this implies a price to book ratio of 1.55, meaning the company’s stock currently trades at a premium to the book value of the company.

Minera Cerro Verde Stock – Summary and Conclusions

Minera Cerro Verde is a fascinating company. They own and operate one of the largest copper mines in the world, with a history dating back to the Spanish settlers of Peru. The company is in a sound financial position, with a profit and strong near term liquidity position.

Given the company’s sound financial position and the Cerro Verde mines long history of production, I believe Minera Cerro Verde stock is a sound investment opportunity for investors looking for long term copper exposure.

Investors can compare Minera Cerro Verde stock to other copper stock, such as the exploration company Regulus Resources.

Disclaimer

This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.

This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.

Patrick Flood, CFA

Leave a Reply

Your email address will not be published. Required fields are marked *