Copper Producer Has Strong Dividend Yield

Source: Ben Pirie 01/15/2025

According to Atrium Research, Amerigo Resources Ltd. (ARG:TSX; ARREF:OTCMKTS) has a strong dividend yield and leverage to copper prices. Read on to see why else they gave this company a Buy rating.

In a January 15, 2025 research note, Atrium Research analysts Ben Pirie and Nicholas Cortellucci initiated coverage on Amerigo Resources Ltd. (ARG:TSX; ARREF:OTCMKTS) with a Buy rating and CA$2.50 target price, highlighting the company’s strong dividend yield and leverage to copper prices.

The company processes fresh and historical tailings from Codelco’s El Teniente mine in Chile, which is the world’s largest underground copper mine. The report notes that Amerigo has “returned CA$0.62/share in the form of dividends and buybacks to shareholders since 2021″ and currently offers a 7.4% dividend yield.

The company has demonstrated consistent growth, increasing copper production from 41 million pounds to 65 million pounds over the past decade. With growth capital expenditures now complete and copper prices stabilized, the company is focusing on shareholder returns.

Amerigo maintains a strategic relationship spanning over 30 years with El Teniente, which is expected to operate until 2082. The analysts note this partnership reduces geopolitical and jurisdiction risk given Codelco’s state-owned status and importance to Chile’s economy.

On the financial front, the company has strong leverage to copper prices, with guidance indicating that “a 24% increase in the copper price would result in a 46% increase in EBITDA.” The company currently trades at 2.4x/2.5x 2024E/2025E EBITDA compared to metals processing peers at 5.6x/4.7x.

The company has a solid shareholder base, with Aegis Financial holding 13%, other institutions owning 53%, and management and board holding 14%. Key catalysts include ongoing performance dividends, debt paydown in 2025, and potential increases in copper and molybdenum prices.

The share price at the time of the report of CA$1.62 represents a potential return of 61.7% to Atrium’s CA$2.50 target price, including the 7.4% base dividend yield.

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Disclosures for Atrium Research, Amerigo Resources, January 15, 2025

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( Companies Mentioned: ARG:TSX; ARREF:OTCMKTS, )

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