Southern Copper Rises as Citigroup Lifts Forecasts

Southern Copper Corp. rose the most in two weeks after Citigroup Inc. boosted its 2009 and 2010 profit forecasts for the world’s seventh-largest copper producer, citing the company’s efforts in cutting costs.
Southern Copper climbed 4.6 percent to $14.93 in New York trading for the biggest gain since Jan. 21. Grupo Mexico SAB, which owns 75 percent of Southern Copper, jumped 9.6 percent to 8.71 pesos in Mexico City trading.
“Southern Copper’s board has taken proactive steps to manage for cash -- a wise move, in our view,” Citigroup analyst Alexander Hacking wrote in a note to clients today. “Growth capex is suspended with a sharp dividend cut. The company is sitting on a comfortable $800 million cash balance.”
Hacking raised his 2009 earnings forecast for Southern Copper to 21 cents per share from a previous estimate of a 21- cent loss. He also boosted his 2010 profit estimate to 59 cents from 29 cents per share.
Southern Copper on Jan. 30 posted its first quarterly loss in at least a decade and halted spending on mine expansion as metal prices plunged. The net loss of $124.7 million, or 14 cents a share, compares with a profit of $310.9 million, or 35 cents, a year earlier.
Plans Postponed
The mining company said it halted or is reviewing all its investments, including development of its new Tia Maria copper mine in Peru and expansion projects at its Peruvian Cuajone and Toquepala mines. The company said it postponed plans to build the El Arco copper mine in Mexico and the Los Chancas mine in Peru.
The company also said it will cut its regular quarterly cash dividend to 11.7 cents a share. The dividend will be payable on March 30 to shareholders of record on March 11.
“We like Southern Copper’s long-life, low-cost assets and strong balance sheet,” Hacking wrote. He reiterated his “hold” rating on the stock.
Separately, Southern today agreed to buy Frontera Copper Corp., a Canadian mining exploration company, for about C$42 million ($34.2 million). Southern Copper offered to acquire 100 percent of the company for 65 Canadian cents a share, Toronto- based Frontera said today in a statement.