Southern Copper's assets are good, but shares look significantly overvalued in a world of $2 copper.
Buoyed by higher copper production and lower costs, Southern Copper was able to increase profits in the second quarter, despite a big year-over-year decline in copper prices. We're  raising our fair value estimate to $12 per share from $11 on copper prices that have tracked ahead of our expectations so far this year. Over the long run, we still hold a bearish view of copper prices compared with consensus, and we think Southern Copper remains significantly overvalued. Our no-moat rating is intact...Southern Copper is a copper producer. The company's mining, smelting and refining facilities are located in Peru and Mexico and the company conducts exploration activities in those countries and in Argentina, Chile and Ecuador. The company's Peruvian copper operations involve mining, milling and flotation of copper ore to produce copper concentrates and molybdenum concentrates, the smelting of copper concentrates to produce blister and anode copper, and the refining of anode copper to produce copper cathodes. The company's Mexican operations are conducted through its subsidiary, Minera Mexico, S.A. de C.V., which engages primarily in the mining and processing of copper, molybdenum, zinc, silver, gold and lead.
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