Investors in junior copper stocks can take heart from BHP’s decision to find an extra $1.1 billion to win over its takeover target OZ Minerals.

The 13% increase in BHP’s bid from the $25 a share failed approach in August to $28.25 a share for a total of $9.6 billion says a lot about where the world’s biggest miner thinks copper prices are headed.

OZ’s eventual removal from the ASX also means that investors who had OZ as their preferred exposure to copper will have to find new investment destinations to play the copper thematic.

As reflected in BHP’s pursuit of OZ, the thematic holds that global decarbonisation and electrification is set to underpin a doubling in demand for copper in the next 30 years.

No one is too sure where the additional production will come from, setting up the stage for what BHP calls a “take-off’’ in the copper market from about 2025.

There are two sizable copper plays on the ASX that stand to benefit from the eventual departure of OZ as investors look to reinvest in the copper thematic – Sandfire (ASX:SFR) and 29Metals (ASX:29M).

But to Garimpeiro’s way of thinking, there is more fun to be had in the junior copper space. Most have struggled this year because of copper’s price retreat from last year’s average of $US4.24/lb to $US3.60/lb of late.

The price retreat – copper got as low as $US3.30/lb earlier in the year – is widely viewed as a temporary setback. Prices could come under pressure in 2023 as global output grows by more than 7%.

But then it is game on as BHP’s “take-off’’ in 2025 begins to take shape.

It stands to reason that at their lower share price levels, the copper juniors are better value than they were, given the copper thematic remains intact, as demonstrated by BHP coughing up an extra $1.1 billion to secure OZ and its South Australian copper mines.

The following are some copper names that Garimpeiro has on his radar in a post-OZ world, and the coming supply crunch in the red metal:

REX MINERALS (ASX:RXM): Trading at 23c mid-week for a market cap of $142m. Its Hillside project on South Australia’s Yorke Peninsula is home to Australia’s biggest copper reserve outside of BHP’s Olympic Dam and OZ’s Carrapateena operations, also in SA.

It is a shovel-ready project with Rex working towards making a final investment decision – subject to financing – before the end of the year. It also hinted at its recent annual meeting that it is about to release an optimisation study into the project’s development – one already described by Goldman Sachs as one of the Top 50 global copper projects.

HAMMER METALS (HMX): Trading at 6.3c for a market cap of $50m. It is active in one of the “hot’’ copper exploration regions – the Mt Isa Inlier of northwest Queensland.

It recently confirmed a high-grade discovery at its South Hope prospect (25m grading 2.41% copper and 0.47g/t gold from 74m), and a follow-up program is planned for early next year. South Hope lies about 650m south of Carnaby’s (ASX:CNB) Mount Hope project which on the strength of its own high-grade copper hits, has driven the market cap of Carnaby to $114 million.

CARAVEL MINERALS (ASX:CVV): It has been trading at 22c for a market cap of $96m. It has been mentioned in the past by Garimpeiro on the strength of its 2.84 million tonne copper resource at its namesake project near the town of Wongan Hills in Western Australia’s central wheatbelt.

It is low grade (0.24% copper) compared with the diet Aussie investors are fed but the grade is pretty much what the US industry gets by on. More to the point is the extreme leverage Caravel has to copper price moves.

A US50c increase in the copper price would add $1 billion to the project’s net present value, currently estimated at $1.3-$1.7b.

CODA (ASX:COD): Trading at 25c for a market cap of $36 million. Its Emmie Bluff copper-cobalt project is in the same neck of the woods as Olympic Dam and Carrapateena.

A mining study into a 17-year project treating 2.5mtpa of ore has just been released. It found the project was technically viable, clearing the way for Emmie Bluff to move into the scoping study phase.

Coda is well funded to keep up the pace at Emmie Bluff and continues to advance exploration for the sort of large scale IOCG-type discovery at depth the region is known for.

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.

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