Barry FitzGerald: There's no stopping copper, and this near-term junior producer will drink to that

The equity markets might have got the wobbles mid-week but over in the metals market, copper continued to push higher.

The red metal, which is critical to decarbonisation through the electrification of everything, was testing two-year highs of $US4.60/lb, or $US10,135/t if you prefer.

That’s up 19% on copper’s average for CY2023 of $US3.85/lb. The reason for copper’s strength is well understood by Stockheaders.

But Garimpeiro was particularly taken by the following commentary on copper’s outlook reported in recent days by an equally august publication, The Times.

The commentary was from Saad Rahim, chief economist at the savvy commodities trading firm Trafigura.

He said a lack of spending on new copper mines and booming demand from the energy transition and the rise of artificial intelligence could leave a supply gap of up to 35% by the end of the decade.

“There will be a 4.5 million tonne supply gap by the end of this decade,” Rahim said.

“That is like blowing a 20 million barrel-a-day hole in the oil market and yet we keep adding new sources of demand and reducing the amount of supply.”

It is why BHP is angling to get hold of Anglo American’s Latin American copper mines in its $US39 billion tilt, a follow up if you like to its $A9.6 billion acquisition of OZ Minerals last year for its South Australian copper mines.

There is clearly something big building in copper and it could be wow, wow sort of stuff. Having said that, copper breaching $US4.50/lb is enough in itself to get the ASX-listed copper sector excited.

Garimpeiro’s focus in recent weeks has been on what the booming copper price means for juniors with bulk tonnage/low grade projects that require big capital expenditure commitments. They will be needed all right to deal with the looming supply deficit.

But their first production, while large scale, is years away. So Garimpeiro went looking during the week for a near-term copper producer in the junior space, and one without monster capex requirements ahead.

He zoomed in on Anax Metals (ASX:ANX), trading at 2.7c for a market cap of $16 million. Clearly the excitement over copper equities has not made its way down to the near-term producers in the junior space.

Garimpeiro says that Anax’s current modest market cap is not doing justice to its potential to become a 20,000-30,000tpa copper equivalent producer in relatively quick fashion in the Pilbara.

Subject to securing financing, it is well on its way to becoming a 12,000tpa copper equivalent producer within 18 months or so from a final investment decision on its 80% owned Whim Creek project (Bill Beament’s Develop owns 20%), roughly half-way between Port Hedland and Karratha.

The push out to seriously meaningful levels of 20,000-30,000tpa – for a company with a $16 million market cap at any rate – would be achieved by leveraging off Whim Creek’s potential to become a central processing hub in the region.

Whim Creek was a copper producer from a heap-leach operation back in the 1990s and still has most of the kit to get back in to production. To become a true consolidator and a processing hub, though, Anax is planning to add a concentrator to treat polymetallic ores.

Garimpeiro reckons that there is at least a half a dozen or so “stranded’’ deposits within trucking distance of Whim Creek. There is lots of work to do in rounding up a couple of additional ore sources, either of the heap leachable type, or the polymetallic type.

But regional consolidation always works best when the underpinning commodity is on fire as is the case with copper. It could well be that the oxide/transitional ore at Develop’s Sulphur Springs copper/zinc project could become part of the Whim Creek story.

Anax and Develop have said previously they are looking in to that potential.

As an aside, the return and expansion of the Whim Creek project would be good news for the shuttered and famously pink Whim Creek Hotel that fronts on to the North West Coastal Highway.

The mining project is a couple of kilometres out the back of the pub which had an accommodation block for the mine back in the day. But a cyclone came through some years ago and knocked out the pub and accommodation.

Owned by the local traditional land owners, there is a hope that the pub can be reopened at some point, with Anax expressing an interest in helping out as much as it can once mining returns to the Whim Creek project.

To Garimpeiro’s way of thinking, returning opening hours at the pub is a project of State significance. And given the potential scale of Anax’s copper production plans, so too is its regional consolidation ambition.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.