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Copper trades near historical highs at about USD 6.50 per pound, up 10% since our July 2026 update, given mine supply disruptions and tariff-related trade distortions. Zinc and aluminum prices are also stronger, though near-term iron ore futures are little changed.

Why it matters: We update our iron ore and base metals mining coverage fair value estimates for our latest commodity price assumptions.

The bottom line: No-moat Anglo American's fair value and Teck's fair value increase 13% to GBX 2,600 and USD 40.50, respectively, driven by stronger copper prices and a rise in our terminal EV/EBITDA multiple to 6, from 5.5. No-moat Freeport-McMoRan's fair value rises 7% to USD 32. No-moat South32's fair value increases 5% to AUD 4.30 on stronger base metals prices. The higher copper price drives the 4% rise in no-moat BHP's fair value to AUD 48. Along with stronger aluminum and alumina prices, it also sees no-moat Rio Tinto's fair value up 4%, to AUD 130. But the stronger copper price is broadly offset by lower iron ore earnings on rising freight rates for no-moat Vale, whose fair value remains USD 15. Wide-moat Deterra and no-moat Fortescue and Mineral Resources' fair values are also maintained at AUD 4.40, AUD 15.50, and AUD 74, respectively.

Key stats: Mineral Resources' shares are in 4-star territory after pulling back on the weaker lithium price. It also drives Deterra shares' 10% discount. But we view this as a short-term blip, immaterial to both miners' fair values, with our medium- and long-term assumed lithium prices retained. Vale shares also trade about 10% below our intrinsic assessment. But we think elevated freight rates reflect temporarily rising fuel prices given the Iran war. Uncertainty over the result of the Brazilian presidential election also weighs. While Fortescue is fairly valued, positive copper sentiment driven by optimism over the energy transition and AI sees miners with significant copper exposure overvalued by between 15% and 120%.

Looking at the futures curve, our assumed average copper price from 2026 to 2029 is now about USD 6.50 per pound, up from around USD 6.00. We also now assume average aluminum prices of around USD 1.60 per pound from 2026 to 2029, up from about USD 1.50 previously and based on higher near-term futures since our July 2026 update.

Mine supply issues and solid demand support the zinc price. We now assume around USD 1.80 per pound from 2027 based on spot prices, up from USD 1.60.

Anglo's merger with Teck is dependent on China regulatory approval, which we think will likely be forthcoming over the next six months. Anglo Teck's copper mines led by Quellaveco, Collahuasi, Los Bronces, and Quebrada Blanca 2 mean its copper business will likely be placed around the middle of the second quartile of the industry cost curve. Copper will account for a majority of the combined group's earnings.

Given Anglo has sold or agreed to sell most of its lower-quality assets, including metallurgical coal, platinum group metals, and nickel—and with diamonds likely to follow shortly—we think Anglo Teck is deserving of a higher terminal multiple than we have assigned to both Anglo and Teck previously.

But this is partially offset by Anglo's lower-quality iron ore business, which will likely comprise most of the rest of Anglo Teck's earnings and which is located in the fourth quartile of the industry cost curve. As such, Anglo Teck will likely remain a lower-quality business overall than BHP and Rio Tinto, given their generally higher-quality assets led by their iron ore mines in Western Australia and stakes in the Escondida copper mine. Rio's hydro-powered aluminum smelters in Canada are also located in the bottom decile of the industry cost curve.

We raise our fair value estimate for Teck to USD 40.50 per share, from USD 36.00, driven by stronger copper prices and an increase in our terminal enterprise value/EBITDA multiple to 6.0, from 5.5.

Looking at the futures curve, our assumed average copper price from 2026 to 2029 is now about USD 6.50 per pound, up from around USD 6.00. Based on our estimate of the long-run marginal cost of production, we assume a midcycle price of about USD 3.80 per pound from 2030.

We also assume zinc prices of about USD 1.80 per pound midcycle from 2027, based on spot.

Our Teck valuation is based on an 8.6% weighted average cost of capital and a 6.0 terminal enterprise value/EBITDA multiple.

We assign Teck Resources a no moat rating. As a commodity producer, Teck is a price taker and needs low-cost mines with long lives and a low installed capital base to support the longer-term excess returns needed to justify an economic moat.

With a few notable exceptions, including Quebrada Blanca 2, or QB2 (copper) and Antamina (copper/zinc), most of its mines aren’t low enough on their respective cost curves to be considered moatworthy assets. Much of its operations also have elevated invested capital bases, including QB2, which came in significantly over budget and requires additional investment to ramp it up to full capacity.

The company generated average return on invested capital of around 5% for the five and 10 years ended 2025. We estimate that Teck will generate midcycle returns in the midsingle digits, well below its weighted average cost of capital of 8.6%. Accordingly, we don’t assign a moat to Teck.

In terms of commodity prices, our midcycle assumption for copper is about USD 3.80 per pound from 2030 based on our estimate of the long-run marginal cost of production. We also assume zinc prices of about USD 1.80 per pound from 2027 based on spot.

In calculating ROIC, we have added back to invested capital CAD 10.5 billion in asset and goodwill write-downs taken over the past decade on the basis that these amounts relate to assets developed or acquired in the ordinary course of business and so should be included when calculating ROIC. Some of the more material amounts we have added back include CAD 6.2 billion in relation to oil sands investments in Canada (since sold), CAD 2.1 billion relating to the company’s steelmaking coal mines (also since sold), and CAD 1.3 billion relating to its zinc business. Even if we instead chose not to add back any write-downs, Teck’s midcycle ROIC would still be materially below its WACC.

Teck is materially increasing its copper production to take advantage of increased demand due to trends including decarbonization and electrification.

Teck's extensive copper growth pipeline is the main driver of its so-called merger of equals with Anglo American.

Once its 60%-owned Quebrada Blanca 2 mine reaches full production, Teck’s copper business in aggregate will likely sit around the bottom of the second quartile of the industry cost curve.

The sale of its metallurgical coal business in mid-2024 means Teck is less diversified by commodity, with copper representing the vast majority of midcycle EBITDA.

Capital expenditure to develop Quebrada Blanca 2 in Chile is dramatically over budget, with additional investment needed to finally get the mine to full capacity.

Teck lacks the scale of larger peers, such as BHP and Rio Tinto. With an increasing focus on leveraging technology to lower unit costs, Teck may be disadvantaged given its lack of relative scale.