Wells Fargo Flags 5 Mining Stocks, Reveals its Top Pick

Investing.com -- Wells Fargo has initiated coverage on five major mining stocks with primary U.S. listings, positioning Freeport McMoRan (NYSE:FCX) as their top pick in the sector.

The bank’s analysts have updated forecasts to reflect recent commodity price strength, with estimates well above consensus for the remainder of 2025.

The analysis comes as copper market dynamics shift toward potential deficits in 2026, driven by supply constraints at large mines.

Freeport McMoRan (FCX): Despite a September 2025 mudslide at its Grasberg operation that reduced output by 35% (approximately 650,000 tons or 2.5% of global copper production), Wells Fargo expects investors to look beyond this disruption.

The bank views FCX as particularly attractive given the broader context of production challenges across the industry, as open-pit mines increasingly convert to underground operations to maintain production levels.

In recent developments, Freeport McMoRan has agreed to divest a 12% stake in its Indonesian entity to the country’s government at no cost. The company also received several analyst rating changes, including an upgrade to Buy from UBS and a downgrade to Hold from Freedom Capital Markets.

Southern Copper Corporation (NYSE:SCCO): The company’s attractive reserves, low-cost mining operations, and elevated dividend explain its historically higher valuation multiples compared to peers.

However, analysts question how much further rerating is possible, especially with lighter volumes and higher production costs expected in 2026. Wells Fargo prefers FCX on valuation but acknowledges SCCO’s strong free cash flow will likely continue supporting its 50/50 stock and cash dividend.

Southern Copper has seen recent analyst rating changes, with Morgan Stanley upgrading the company to Equalweight before later downgrading it to Underweight on valuation concerns. BofA Securities also upgraded the stock to Neutral, citing diminishing risks.

Century Aluminum (NASDAQ:CENX): Identified as the biggest beneficiary of Trump’s Section 232 tariffs among covered stocks, Wells Fargo sees no imminent material change to these aluminum tariffs.

The bank believes that even if tariffs on Canadian aluminum were reduced, the Midwest premium would likely remain strong due to U.S. demand requirements. This situation positions CENX for sharply improved profits and free cash flow, providing growth options.

Century Aluminum reported a revenue beat but an earnings per share miss for its second quarter of 2025. The company also signed a power agreement extension to restart idle capacity at its Mt. Holly smelter.

Alcoa (NYSE:AA): The higher Midwest premium now more than covers the tariff cost to ship Canadian aluminum to the U.S. Wells Fargo anticipates potential positive catalysts from Alcoa’s upcoming investor day in late October, including details on emerging technologies, updates on cash deployment, and information about potential asset sales.

While these positives appear underappreciated in the share price, analysts expect a "messy" Q3 report due to weaker quarter-over-quarter alumina realizations.

For its second quarter of 2025, Alcoa Corporation reported a 10% sequential decrease in revenue to $3 billion and a net income of $164 million.

Vale (NYSE:VALE): Wells Fargo maintains caution on iron ore market fundamentals but views the company’s cost-cutting initiatives and copper growth plans favorably.

Analysts suggest it’s premature for shares to rerate as copper supply additions will be gradual, though declining dam reparation payments after peak spending in 2025 could fuel greater shareholder returns and potentially improve valuation multiples.

Vale and BHP have proposed a settlement of approximately $1.4 billion to resolve a UK lawsuit related to the 2015 Mariana dam collapse. Additionally, Scotiabank upgraded Vale’s stock to Sector Outperform, while RBC Capital reiterated its Sector Perform rating.

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