Barry FitzGerald: All is forgiven, Goldman Sachs – if $US100K/t copper is real, these are the juniors to watch
Garimpeiro wasted no time taking Goldman Sachs off his Christmas card list for the damage its call on lithium caused during the week.
It’s not every day that a research note from an investment bank of some note swings a wrecking ball through a sector.
But that what Goldman’s did with its call that lithium prices were peaking and the bull market in the battery material was “over for now.’’
The ASX lithium sector tanked 15-20% in response, prompting Garimpeiro to remove Goldman from his Christmas card list, primarily because industry experts reckon it was a flawed bit of research.
But it’s back on the list anyway! Not because of anything it has said about lithium. It’s back on the list because of its super-bull call on copper.
Garimpeiro is as bullish as can be on copper. But Goldman has taken it to another level by suggesting a fantastical $US100,000/t copper is possible.
The red metal last traded at a none too shabby $US9,450/t, so Garimpeiro is prepared to overlook Goldman’s wrecking ball call on lithium to focus on its nirvana call on copper.
Goldman’s near-term $US15,000/t call on copper prices has been around for a while. But suggesting $US100,000/t is a possibility is new.
The suggestion came from the firm’s top metals strategist Nicholas Snowdon in a podcast with Bloomberg posted on June 1.
In summary, Snowdon said that there is no decarbonisation without copper and that because of a lack on new copper mines in the development pipeline, “impossibly large (supply) deficits will develop over the course of the next 3, 5 and 10 years.’’
“By the middle of this decade, we’re forecasting the largest ever deficit in the copper market. So just two years away from now. And by the end of the decade, the largest ever long term deficit,’’ Snowdon said.
“So we don’t rule out the copper could, could be $US50,000/t, could be a $US100,000/t commodity.’’
Snowdon said it, not Garimpeiro.
Garimpeiro will settle for a steady build towards $US15,000/t over the next couple of years. Such an outcome alone will turbo-charge the market’s reaction to discoveries by the junior explorers.
Garimpeiro takes a look this week at some juniors busy working away in the copper space in response to Goldman’s super-bull call on the metal, and thanks it for making the lithium stocks cheaper than they were.
ENCOUNTER RESOURCES (ASX:ENR): Trading at 13.5c for a market cap of $43m. A technically savvy explorer with prime exposure to the big shift in copper exploration in Australia to the hunt for sedimentary-hosted deposits.
Its Elliott copper project in the Northern Territory’s Beetaloo Basin has attracted no less than BHP as a joint venture partner, with BHP to earn an interest by spending $25m on exploration. Watch for some action on the ground in the second half of the year.
Garimpeiro also sat up when he saw Encounter’s announcement on its Sandover copper project in the Georgina Basin of the NT where company believes “evidence is mounting’’ it could be on to a big sediment-hosted copper system at the old CRA (now Rio Tinto) property.
Early stage stuff but definitely one to watch given the NT’s Geological Survey reckons the upside potential is strong enough to warrant a $100,000 grant to complete a gravity survey at the property in coming weeks.
LEFROY (ASX:LEX): Trading at 28.5c for a market cap of $42m. Burst on to the scene early last year with its exciting Burns gold-copper discovery in WA’s Eastern goldfields.
Enthusiasm for the discovery hole – 38 metres grading 7.63 grams of gold a tonne and 0.56% copper – took the stock to more than $1.50 a share but here we are and Lefroy is back at 28.5c.
The funny thing is that Lefroy’s understanding of what is a unique Archaean-aged gold-copper porphyry system for WA is greater than ever. So much so it is preparing to send down a deep (1.2km) hole to confirm it is on to a big porphyry system.
Drilling the hole has attracted co-funding support from the WA government’s Exploration Incentive Scheme, such is the potential significance of Lefroy confirming a big and new style of mineralisation for the Eastern goldfields and elsewhere in WA.
If the hole hits some good stuff, it will be off to the races. Drilling is planned to start in the next month or so.
Beyond Burns, Lefroy has Gold Fields – owner of the 10m ounce St Ives gold camp near Lake Lefroy to the west of Burns – spending $15m by 2024 on their Western Lefroy joint venture for the region’s next big gold deposit.
It is also planning a spin-off of its Lake Johnston nickel-gold exploration ground, 120km west of Norseman, into a separately listed ASX company.
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