Most of 25 major miners beat EPS estimates in Q1 2023 amid strong gold earnings

Seventeen of 25 major miners that report quarterly earnings beat S&P Capital IQ consensus normalized EPS estimates in the first quarter of 2023, as low copper prices boosted Chinese demand and the US banking crisis sent gold prices higher.

Southern Copper Corp.'s normalized EPS of $1.05 beat analysts' expectations by 2.9%. It jumped ahead of Freeport-McMoRan Inc. in the quarter to be the largest miner in the group by market capitalization at $58.95 billion.

Each company in the S&P Global Market Intelligence analysis had a market cap of at least $5.01 billion as of March 31.

Southern Copper reported higher sales of copper, silver and zinc in the first quarter and cost-control efficiencies that contributed to 44.4% higher cash flow from operating activities compared with a year earlier. First-quarter copper production from the Cuajone mine in Peru jumped 48.5% year over year, driven by higher ore grades and a return to full operating capacity in 2023, the company said April 27.

Copper demand drivers

Freeport-McMoRan's normalized EPS of 52 cents beat the consensus estimate by 15.6%.

"Copper markets continue to be supported by low levels of inventories, China's accelerating economic recovery and the ongoing positive global demand drivers for copper," Richard Adkerson, Freeport-McMoRan's chairman and CEO, said on an April 21 earnings call. "Our customers continue to buy all the copper we can produce and seek more."

Freeport-McMoRan expects copper demand to double by 2035 on requirements for electrification and renewable power, along with the growing demand drivers of connectivity, data and artificial intelligence, President Kathleen Quirk said on the same call.

– See the latest forecast for copper supply and demand. – Read how gold prices are responding to US Treasury yields and the stronger dollar.

Citi Research expects copper, battery metals and precious metals to rally in the medium term and to be the outliers in its neutral-to-bearish outlook for 2023 commodity markets.

"Real Chinese commodities consumption appears weak for metals, energy, and grains, and is unlikely to rebound in the short-term," Aakash Doshi said in a June 12 note.

Weak rare earths prices

Pan American Silver Corp. had the biggest beat among the 25 miners by percentage, with its 10-cent EPS crushing analysts' expectations of a loss of 1 cent per share. The miner completed the acquisition of Yamana Gold Inc. in March.

Ternium SA nearly doubled the consensus estimate, earning $1.91/share. The steelmaker expects to increase shipments in the second quarter on restocking by the US and Mexican commercial property markets.

"Our customers today are working with [an] outlook that they expect a softening, but they don't expect a huge recession," CEO Maximo Vedoya said in an April 26 earnings call.

Kinross Gold Corp. and rare earths producer MP Materials Corp. both beat estimates by at least 40% with EPS of 7 cents and 27 cents, respectively.

Kinross' first-quarter gold production rose 23% year over year to 466,022 gold-equivalent ounces, putting it on track to meet full-year guidance, the company said May 9.

MP Materials benefited from a recovery in rare earths prices from December 2022 to February, but first-quarter prices were still down 32% year over year, CFO Ryan Corbett said in a May 4 earnings call. Shares of rare earth miners fell in March after Tesla announced that the automaker's next drive unit would have a motor that does not contain any rare earth metals.

The biggest miss was by China Northern Rare Earth (Group) High-Tech Co. Ltd., which reported EPS of 4 cents, missing the consensus by 43.2%. The miner owns the world's largest lanthanides project, Bayan Obo.

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