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Copper just hit an ATH – here are the ASX small caps setting sail
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The copper price has reached an all-time high (ATH) of US$10,420/tonne after rising by 3.2% late Friday. This puts the price of the red metal at more than double its March 2020 lows.
Dr Copper is in the house.
What’s driving demand?
The red metal is referred to as Dr Copper because it’s said to have a PhD in economics. This is due to the copper price’s ability to predict turning points in the global economy.
While the post-pandemic reopening of major industrial economies is sparking a surge in demand for many commodities, copper has widespread applications in most sectors of the economy such as electronics, power generation and transmission. In short, anything that has an on-off switch needs copper due to the metal’s conductivity superpower.
Another catalyst for the sharp rise is the realisation that copper is essential for a ‘green transition’. An electric vehicle, for example, typically contains about four times as much copper as a conventional internal combustion engine (ICE) model.
Copper is also helping to power the switch to net zero emissions.
QMines executive chairman Andrew Sparke quoted Goldman Sachs as saying that the critical role copper would play in achieving decarbonisation and the Paris climate goals could not be understated, with the leading investment bank believing copper is on a path to $15,000/t in 2025.
“The simple fact is that electricity generation, transmission infrastructure, energy storage and consumption are all copper dependent,” Sparke said.
Sticky supply and the copper ATH
Mines in Chile and neighbouring Peru represent approximately 40% of the world’s copper supply but face supply constraints including:
- Lower grades from deepening mines in challenging operating environments
- Water and power issues associated with being high up in the Andes
- Labour issues associated with COVID-19 and a heavily unionised workforce; and
- Increasing resource nationalism rhetoric.
In relation to this last point, in the world’s top copper producing nation Chile, the Parliament’s lower house last week approved a progressive tax on copper sales. This move could stall investment in copper projects and further bolster prices.
Copper plays on ASX
While the yellow and red metal are often found together, copper plays are rarer than gold-focussed stocks on the ASX.
Pure copper plays account for just 1% of ASX listed metals and mining stocks by market capitalisation, according to exchange data, compared to 17% in gold, suggesting robust potential upside.
Here’s a roundup of what’s been happening in ASX-listed copper stocks in the past week.
QMines listed last Thursday (May 6) after attracting more than $12 million in subscriptions, beating its minimum IPO target of $10m. The company will add just over $11.5m to the coffers after scaling.
The newcomer has 100 per cent ownership of four advanced copper-gold projects spanning 978sqkm in Queensland. The area includes the high-grade historical Mt Chalmers copper-gold mine. QMines will be one of only a handful of listed copper companies on the ASX with a brownfield copper asset in a Tier 1 jurisdiction such as Australia.
It plans to restart Mt Chalmers, which was mined sporadically between 1898 and 1982, producing 1.24 million tonnes at 2 per cent copper, 3.6 grams per tonne (g/t) gold and 19g/t silver.
According to Hong Kong-based Orior Capital analyst Simon Francis, the market was valuing a group of QMines’ copper and gold explorer and developer peers at around $350 per tonne of copper equivalent resources.
Since then, both copper and company valuations have soared. Copper has risen 25 per cent on the London Metal Exchange and peer valuations are now around $620 per tonne, up 77 per cent in the first four months of the year, according to Francis.
CEO Andrew Stewart said that copper’s new record high should help draw attention to Xanadu’s flagship Kharmagtai project in Mongolia, which continues to emerge as one of the premier undeveloped copper-gold assets globally.
“The company’s exploration has been very efficient, driven by the robust geological model of the deposit and we have now entered an exciting period of cost-effective discovery and growth,” Stewart said.
“Recent drilling has registered some of the best intercepts to date on the project with intervals of 200m or greater at +1% copper equivalent. This compares favourably to some significant copper-gold discoveries in recent history, including the neighbouring Oyu Tolgoi project and Cadia-Ridgway deposit in Australia.”
In late March, Xanadu reported extremely wide hits in drilling at its flagship Kharmagtai copper-gold project in Mongolia.
The Kharmagtai resource currently stands at 600 million tonnes at 0.49% copper equivalent for 2.9 million tonne copper equivalent in contained metal.
At this size, it is already one of the largest copper-gold resources owned by an ASX-listed company and one of the few large porphyry deposits on the doorstep of the world’s largest consumer of copper, China.
Kincora made its debut on the ASX at the end of March, making it a dual-listed company in Canada and Australia. It is currently drilling the only brownfield project (the Trundle project) held by a listed junior in what is now known as Australia’s foremost porphyry district – the Macquarie Arc of the Lachlan Fold Belt central west of NSW.
Notably, Trundle project is in the same region as Newcrest Mining’s (ASX:NCM) mammoth 50 million oz operating Cadia mine and Alkane Resources’ (ASX:ALK) expanding Boda prospect.
It also shares the same mineralised system as the Northparkes mine, which is Australia’s second-largest porphyry mine and hosts 4.5 million tonnes of copper and 5.5 million oz of gold.
Kincora controls a 1,649sqkm, eight-licence project pipeline.
A mammoth 170m hit of copper got investors opening their wallets last Thursday for Hillgrove Resources.
Mamba announced last week it will look to progress its Kimberley projects. Drill holes and surface sampling has revealed high-grade copper, from an area covered largely by exploration licence applications.
Mamba also detected an exciting mineral target on an underexplored project in the red-hot Darling Range district of WA. The project is close to the expanding and company-making Chalice Mining (ASX:CHN) Julimar nickel-copper-platinum group element project, only 70km northeast of Perth.
Managing director and CEO Errol Smart spoke with Stockhead’s Barry Fitzgerald last week in an episode of The Explorer’s Podcast.
Orion also appeared in an article in February looking at the junior mine developers best placed to ride the copper supercycle.
And briefly:
– Peel Mining (ASX:PEX) directors who traded over $100,000 in shares included a trio from this NSW-focused copper explorer.
– Redbank Copper (ASX:RCP) is targeting big copper deposits in the Northern Territory’s McArthur River Basin.
– Aeris Resources (ASX:AIS) recorded in March a 260 per cent increase in net profit to $45.9m – back when copper prices were ~$9,909/t.
At Stockhead we tell it like it is. While Mamba Exploration is a Stockhead advertiser, it did not sponsor this article.
