Amerigo Resources is a shining exception to almost all other penny stocks thanks to its stellar and lasting returns.
The firm has returned a solid 69.7% gain to investors over the last 3 years. Compare that to the benchmark S&P Global Natural Resource index, up a mere 12.1% over the same time. (The S&P itself gained 24.8% over the last three years.)
Even more unheard of is the copper producer’s high and sustainable 9.3% dividend yield. We expect this well-resourced junior miner to add significantly to investor gains as the global economy rebounds from inflationary pressures and sluggish growth.
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AMERIGO RESOURCES LTD. (Symbol ARG on Toronto) processes copper and molybdenum from the waste rock of the El Teniente mine in Chile. That site is the world’s largest copper operation. Amerigo also has other deals to process material at the nearby Colihues and Cauquenes tailings ponds.
Amerigo has continued to buy back a lot of its shares. Share buybacks reduce the number of shares outstanding. That boosts earnings per share since profit is divided among fewer shares. The improved per-share ratio makes the stock more attractive to investors.
This further spurs the share price.
The company completed its 2022 share-repurchase plan well ahead of schedule.
Under that plan, Amerigo was authorized by the Toronto exchange to purchase up to 10.75 million common shares (representing 6.14% of the common shares outstanding) over a period of 12 months starting December 2, 2021, and ending no later than December 1, 2022.
Amerigo bought back all 10.75 million shares at an average cost of $1.62.
Meantime, Amerigo returned $3.7 million to shareholders in the 2023 third quarter in dividend payments. Amerigo’s shares yield a high 9.3%.
Penny Stocks: Long-term copper demand is a major driver going forward for Amerigo Resources
Amerigo currently gets 94% of its revenue from processing copper. The remaining 6% comes from its output of molybdenum, which is used in steelmaking.
Amerigo recently reported lower copper production in the latest quarter. The company’s copper production fell 30.6%. Specifically, output for the three months ended September 30, 2023, dropped to 11.1 million pounds (at a production cost of $2.44 per pound) from 16.0 million pounds (at a cost of $1.93) a year earlier. Copper production in the latest quarter was sharply lower due to severe rain in central Chile, which temporarily affected operations in two separate events. Amerigo fully resolved these disruptions and resumed normal operations and production levels on September 21, 2023.
After dropping to as low as $2.17 U.S. per pound in mid-March 2020, copper rose steadily to a record price of $5.02 on March 6, 2022. Fears of supply chain disruptions and historically low stockpiles amid rising copper demand drove prices higher.
However, copper prices have since pulled back to $3.82. That’s mostly on concerns that rising interest rates will continue to slow global economies. As well, investors worry about the pace of China’s economic recovery.
Longer term, the outlook for copper looks positive. From a supply standpoint, due to a lack of new mines, long-term copper shortages could result. And as economies recover, it will push up demand—and that includes demand from segments such as electric vehicles (EVs) and green-energy related operations.
Copper market fundamentals suggest continued strength going forward. The copper supply/demand imbalance also presents an investment opportunity for those interested in copper-mining stocks.
All these factors bode well for the company and its share price going forward.
Recommendation in Power Growth Investor: Amerigo Resources Ltd. is a buy for aggressive investors.
We hope you benefited from this analysis of Amerigo Resources Ltd. The company is just one of the top-performing stock picks of our Power Growth Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
Thanks for your questions. As part of our three-part philosophy, we think investors should spread their money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
That includes Resources—and while we think that conservative investors should focus their stock picks in that segment on larger stocks such as, say, Teck—more aggressive stocks such as Amerigo could fit into a portfolio.
Amerigo is a play on copper, and as such, moves up and down in large measure with the price of copper. And while we see the longer-term outlook for copper as positive, in the short term it’s being hurt by slower economic growth in China.
Meanwhile, Amerigo pays a high dividend which appears sustainable.
All in all, we still see Amerigo as a buy—but for aggressive investors willing to accept the risk of copper price fluctuations.
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You recommend ARG so highly. But I have lost 15% on this stock in the last 3 months. Should I hold on? Or sell?
Thanks for your questions. As part of our three-part philosophy, we think investors should spread their money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
That includes Resources—and while we think that conservative investors should focus their stock picks in that segment on larger stocks such as, say, Teck—more aggressive stocks such as Amerigo could fit into a portfolio.
Amerigo is a play on copper, and as such, moves up and down in large measure with the price of copper. And while we see the longer-term outlook for copper as positive, in the short term it’s being hurt by slower economic growth in China.
Meanwhile, Amerigo pays a high dividend which appears sustainable.
All in all, we still see Amerigo as a buy—but for aggressive investors willing to accept the risk of copper price fluctuations.