Some of the major Aussie miners are picking up strategic nickel and copper assets, expecting good things out of the future-facing industrial metals just as China pulls the the handbrake on zero-COVID.

VP Capital co-founder and portfolio manager John So is here for it. He says copper and nickel could go gangbusters as China will likely stimulate its economy; and that means construction.

“We have probably seen the worst of all the weak construction and manufacturing data out of China,” he said.

“Major companies like BHP (ASX:BHP) and Andrew Forrests’ investment vehicles have been taking stakes in copper and nickel companies like OZ Minerals (ASX:OZM) and Mincor (ASX:MCR) – despite weakness in the commodity price.

“The major miners are getting these strategic assets on the cheap, positioning themselves for this battery minerals cycle that is going to play out for the next three to five years.

Looking at the rest of the world, increasing electric vehicle (EV) adoption is going strong in Europe and is expected to pick up in the US with the Inflation Reduction Act.

“I think these commodities are going to trend up in the next 12 months,” So added.

“It is time for investors to get positioned in them.”

 

Sandfire Resources (ASX:SFR)

Sandfire own a large 37.1Mt copper asset (the Matsa mining complex) in southwestern Spain, which is prime position for European EV supply chains.

“[The company has] come off a little bit from its highs at the start of the year, and is lower than its price a couple of years ago, but the company has recently fixed up its balance sheet by undertaking a capital raising which puts it in a very good position to convert its substantial resources in Matsa into reserves,” So says.

t“This also puts Sandfire on a good path to expand its mine life from the current five to six years to 10 years plus and once we see that, there should see a strong re-rating in Sandfire’s share price.”

 

IGO (ASX:IGO)

So says investors should lean more towards established nickel producers like IGO Group.

“Like a lot of its peers in the battery metals space, IGO has come off 20pc from its peak and it is inexpensive given the nickel price has retraced around 30pc. IGO continues to trade on an undemanding cashflow multiple of close to 10 times,” he says.

“Once we see [nickel shortages come into play], the price is going to see upside and IGO Group – which holds the Nova Bollinger Mine (one of the more higher grades and consistent long life assets in Australia) — is going to put it in good stead, and presents a good opportunity for investors as getting it 20pc cheaper than two months ago.”

 

Core Lithium (ASX:CXO)

So also threw lithium player Core into his stock picks – a company who just announced its first shipment of spodumene from the Finnis Mine in the NT.

“I … like Core because it is a near term producer trading on much lower cashflow multiples in terms of the next two years cash flows compared to some of the more diversified companies like Allkem and IGO Group,” he said.

“I think the question on whether the [Core] valuation is reasonable at the moment hinges on whether you believe lithium prices will continue to stay high.

“My view is that they will. There is a shortage of projects coming online and secondly over the last two years, spodumene has been considered a more superior product for making lithium hydroxide as opposed to brine operators in South America.”

 

Tony Sycamore

IG Markets

Sycamore has an eye on Chinese tech stocks, which are back in the spotlight for traders as growth in China is expected to rebound above 5% in 2023.

Alibaba (NYSE:BABA)  is one of the world’s largest retailers and e-commerce platforms.

The share price of Alibaba has fallen dramatically in recent years from a high of $319.32 to a low of $58.01 in October, partially due to a crackdown on Chinese internet giants by regulators. However, with supportive economic policy in place and Chinese authorities pivoting to a pro-business stance, the share price of Alibaba has an upside towards the $125.84 high from July last year.

Baidu (NASDAQ:BIDU) is a massive Chinese technology company often described as ‘the Google of China’ with an AI arm attached.

The share price of Baidu has suffered as part of the global rerating of tech stocks in 2022 and as sluggish Chinese growth weighed on advertising revenues. Based on an expected pickup in China’s growth trajectory, and supported by cashed-up Chinese consumers, the share price of Baidu could rally back towards its early July 2022 high of $156.77.

HSBC (LON:HSBA) is the largest bank in Hong Kong by assets and is well positioned to leverage off the reopening in China, which should feed through into the bank’s revenues in 2023. If the share price of HSBC can see a sustained break above resistance at $48.00, there is little in the way of resistance until the sequence of highs around $52.00 from the middle of this year.

 

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