Base Metal Earnings Previews: Here’s What to Expect

Base metal producers and miners are preparing to release their third-quarter earnings results, and the sector should display strong free cash flow. Copper miners should benefit due to the metal’s average price of $4.25 per pound during the quarter.

Piece of copper set against black background

Source: Coldmoon Photoproject/

Some themes expected in the miners’ earnings reports this time around include capital allocation, shareholder returns, accelerated projects, and the possibility of merger in the space.

Copper Prices Drive Attractive Valuations

However, copper miners will also face some challenges, according to RBC Capital Markets analysts Sam Crittenden and Alexander Jackson. They expect cost inflation and issues with the copper supply chain to negatively impact their results. The RBC team also noted that copper prices have remained range-bound around $4.25 a pound after hitting $4.86 a pound in the middle of May.

They expect copper prices to weaken going into next year and look for an average price of $3.75 per pound for 2022 amid slowing demand in China due to increased supply. However, the RBC team noted that low inventories and expectations of deficits in the medium term should support copper prices.

They believe valuations among North American base metal producers are attractive after plunging about 30% since mid-May, especially at current spot prices and an average free cash flow yield of 27%. Thus, the RBC team continues to see opportunities in some base metal stocks.

Commodity Strength to Drive Improvements in Earnings

Crittenden and Jackson noted that commodity prices have been strong, and they expect those strong prices to drive improved earnings, although cost inflation will likely offset the positive impact from commodity prices. Base metals were mixed quarter over quarter as copper fell 3%, zinc rose 2%, and nickel climbed 10%. Gold held steady with a 1% decline, while silver tumbled 9%.

Bulk metals were the most volatile of the bunch as iron ore prices plunged 18% quarter over quarter, and met coal climbed 89%. The RBC team expects cost escalation to continue in oil, with WTI up 6% quarter over quarter and global steel prices up from already-elevated levels.

Out of the base metal universe, they have several preferred names, including Teck Resources (NYSE:TECK), First Quantum, Ivanhoe Mines, Capstone Mining, HudBay Minerals and Champion Iron.

Favored Names

The RBC team said Teck Resources, which is expected to report its third-quarter earnings on Oct. 26, will benefit from record-high coal prices and a 60% increase in copper production by 2023. They don’t expect any surprises from the company due to the recent investor day and guidance update. However, they do expect to see the beginning of benefits from higher coal prices. The RBC analysts peg coal at $226 per ton in the third quarter, compared to $144 per ton in the second.

They expect First Quantum, which is slated to release its next earnings report on Oct. 26, to generate strong free cash flow amid the ramp-up of Cobre Panama to a top 10 copper mine. Other potential impacts on First Quantum’s earnings report include changes to the tax regime in Zambia, which could clear the path for expansion at Kansanshi and the Enterprise nickel project at Sentinel. The RBC team looks for another solid operating quarter from the company, although it could be overshadowed by an update on the Panama tax and royalty negotiations. They warned that the reaction could be mixed or negative.

Ivanhoe, which is expected to report its third-quarter results on Nov. 15, is close to demonstrating the potential of its Kamoa-Kakula copper mine. Meanwhile, Capstone could see a meaningful catalyst in the form of a Santo Domingo partnership. However, the RBC team also warned that Capstone’s results could be negatively impacted by heavy rain in Arizona. Capstone is expected to release its earnings on Oct. 26.

They added that HudBay, which is scheduled to release its earnings on Nov. 4, is at an inflection point for free cash flow after completing investments in Peru and Manitoba. The analysts look for a modest improvement in the company’s results due to the ramp of gold production in New Britannia and contributions from Pampacancha. However, they look for a larger impact from these factors in the fourth quarter and next year.

The RBC team sees strong growth potential for Champion Iron due to contributions from the phase two project in the middle of next year. They expect a solid operating quarter from the company with positive free cash flow generation, although they expect weaker results on a quarter-over-quarter basis due to lower iron ore prices. Champion Iron is expected to release its next earnings report on Oct. 28.

Other Names

The RBC team said Lundin Mining, which is expected to release its next earnings report on Oct. 27, could see some relief if it can update investors on potential improvements at its Candelaria asset. However, they warned that investors may have to wait for the full details until the company provides its three-year guidance update late next month.

Turquoise Hill Resources (NYSE:TRQ) is expected to report its third-quarter results on Nov. 11. The RBC team warned that those results could be negative as the company deals with border closures in Mongolia. Additionally, the start of the block cave is still on hold pending negotiations with the government.

Warrior Met Coal’s (NYSE:HCC) union is still on strike, but the RBC analysts believe the recent settlement at the nearby Shoal creek mine could lead to a resolution for the six-month strike. They expect strong earnings results from the company due to much higher met coal prices, although they warned that there could be a lag in realizing the higher prices. Warrior Met Coal is expected to release its results on Nov. 2.

Labrador Iron Ore is expected to report its third-quarter results on Nov. 4. The RBC team expects a neutral reaction to those earnings results, which they expect to increase sequentially due to higher sales volumes. However, they said that could be partially offset by lower iron ore prices.

On the date of publication, the author did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Michelle Jones is editor-in-chief for and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at

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