Southern Copper (PCU) is a long-time favorite company of mine. I like this Arizona-based producer of South American copper, molybdenum, zinc and silver because it has strong fundamentals and several growth plans in its pipeline.

While Southern Copper mines and processes a number of different metals, it is primarily a copper producer -- 76% of 2006 revenues were from the production of this reddish metal. And with copper prices surging over the past three years, Southern Copper has reported spectacular results. Just as an example, in the most recent third-quarter, net income increased 20.4% over last year, rising to $627.8 million from $521.6 million. This amounted to earnings per share of $2.13, up from $1.77 the prior year. Strong demand for copper in India and China also helped boost net sales up to $1,606.4 million, a 13.8% increase and $194.2 million higher than the third quarter of 2006.

Plus, the company is continually striving to keep costs down in order to maintain profitability. It does this through its world-class, low-cost portfolio of mines in Peru and Mexico that have benefited from improved economies of scale. Beyond exploration activities, Southern Copper plans to leverage its advantage in the metals sector by increasing the annual copper production at its existing mines over a three-tiered time frame. An increase of 110,000 tons is expected by 2009, with additional increases ranging from 280,000 and 360,000 tons over the coming decade. A new $2.1 million investment program will also increase copper production by 270,000 tons per year by 2011. These projects alone would represent a 39% increase in PCU's current copper production level.

Strikes at three of the company's mines in Mexico, though, have put a cap on recent progress towards its production goals. But the company has been able to offset this loss of revenue with additional volumes of molybdenum and copper from other mines and better molybdenum prices. Together the three mining units on strike contribute less than 14% to the company's revenues, so it shouldn't have any drastic effects on PCU's bottom line. Plus, Mexican labor authorities recently said that progress is being made on a settlement between Southern Copper and the disgruntled workers, and renewed talks are aiming to have new labor contacts in place soon.