Summary of Conference Call Notes on Metals & Mining Industry Industry Overview - The copper equities have experienced a significant rally of **58% YTD** (COPX), driven by increased investor confidence regarding tighter supply and demand dynamics due to mine disruptions and resilient demand from China, alongside a weaker USD and expectations of a FED rate cut cycle [1][33]. Key Companies and Their Ratings - **First Quantum, HudBay Minerals, and Ero Copper** are rated as **Buy**, indicating attractive risk-reward profiles despite the recent rally [2]. - **Grupo Mexico** is rated **Neutral**, trading at a historical discount to NAV, suggesting a balanced risk-reward scenario [2]. - **Capstone Copper** is rated **Neutral**, with limited upside potential after a significant price increase since April [2]. - **Southern Copper (SCCO)** is rated **Sell** due to high valuation, despite being well-positioned to benefit from rising copper prices [2]. Valuation Methodology Adjustments - The valuation methodology for copper coverage has been adjusted to reflect increased confidence in short-term supply/demand tightness and structural deficits. The new approach is a **50/50 blend of EV/EBITDA and DCF**, with EV/EBITDA multiples at **+1 standard deviation** above the 5-year historical average [3]. Company-Specific Insights Capstone Copper - **3Q25 Forecast**: EBITDA expected at **$205M** (-5% q/q; +70% y/y), impacted by lower production and higher unit costs [51]. - **Production and Sales**: Total copper production forecasted at **12kt**, with C1 cash cost at **$3.81/lb** [52]. Ero Copper - **3Q25 Forecast**: EBITDA expected at **$81M** (-2% q/q; +30% y/y), with production growth offset by cost increases [55]. - **Production and Sales**: Copper production forecasted at **10kt**, with C1 cash cost at **$2.35/lb** [56]. First Quantum Minerals - **3Q25 Forecast**: EBITDA expected at **$512M** (+28% q/q; -2% y/y), driven by higher shipments from Cobre Panama [57]. - **Production and Sales**: Copper production forecasted at **45kt**, with C1 cash cost at **$1.7/lb** [59]. HudBay Minerals - **3Q25 Forecast**: EBITDA expected at **$167M** (-32% q/q; -19% y/y), affected by lower shipments due to operational challenges [60]. - **Production and Sales**: Copper production forecasted at **20kt** [62]. Southern Copper - **3Q25 Forecast**: EBITDA expected at **$1,907M** (+7% q/q; +13% y/y), with stable copper price realization [64]. Market Dynamics - The copper market is perceived to be in a **small surplus** for 2025, with expectations of flat global mine production and challenges in supply growth [33][34]. - Concerns regarding **China's domestic demand** have emerged, with a reported **-2% y/y** decline in September [39][41]. - The **COMEX-LME arbitrage** is expected to create temporary upside risks to copper prices, with forecasts ranging between **$10,000-$11,000** for 2026/2027 [42][44]. Conclusion - The copper market is currently characterized by a strong rally in equities, driven by supply constraints and demand dynamics. Key players are adjusting their strategies and valuations in response to these market conditions, with varying outlooks based on company-specific factors and broader economic indicators.