Barry FitzGerald: 3 stocks, 3 different, excellent reasons to help you buy the copper dip
Link copied to
It has been painful watching the copper price implode and the subsequent trashing of ASX copper stocks.
Fear not, once the recession we might have to have is out of the way the structural supply deficit in the red metal come 2025, because of the recession-proof global decarbonisation push, will restore order in the sector.
In the meantime, the copper producers have copped 30-40% share price hits since the metal began to slide from its early-March highs to this week’s 20-month lows. As the for the explorers, look away (50% hits or more).
The optimist in Garimpeiro says the sell-off in copper equities is simply a reset ahead of the main event – the rise of a copper supply deficit come 2025 that could take decades to rectify.
And besides, the explorers are not in production so they can’t get beaten up much more, can they?
Relying on the old safety net that well-funded and active junior explorers with a modest market cap and a shot at making a game-changing discovery will perform no matter what the copper price is doing, Garimpeiro takes a look three junior copper stocks of interest:
Sunstone Metals (ASX:STM): Trading at 4.2c for a market cap of $110m. It was a 10c stock at the start of the year.
Despite the fall, Sunstone’s hunt for big gold-copper deposits in the north and south of Ecuador continues to excite. It is well funded to keep up the hunt as it is sporting around $26m in cash and equity investments.
At the El Palmar project in the north of the country, latest assay results included a 153.4m intersection grading 0.47g/t gold and 0.1% copper from surface. If Garimpeiro knew how to underline words he would have underlined “from surface”.
Sunstone managing director Malcolm Norris reckons that the latest results and a bunch of others to come from the on-going drilling program are in line with what would be expected from “large porphyry projects.”
He would know as over his career he has been associated with a number of big porphyry discoveries, including the Cascabel project near El Palmar which is owned by the London-listed SolGold and which has both BHP and Newcrest on the share register.
“The combination of scale and the grades we are getting at El Palmar shows that this is clearly becoming a very valuable project in a world which desperately needs more large discoveries,’’ Norris said.
Down in the south, three rigs are whirring away at the Bramaderos project and a new batch of assays results is not far off. A maiden resource estimate for the southern project is expected to be released by the end of the year.
Lefroy Exploration (ASX:LEX): Trading at 29c for a market cap of $42m. The stock had a huge run early last year when drilling at its Burns project southeast of Kalgoorlie hit 38m grading 7.63g/t gold and 0.56% copper.
Lefroy says Burns is unique to the Eastern goldfields in that it is a gold-copper-molybdenum porphyry system. The question is how big the system is and to find out, Lefroy has just started a 1km deep (1.2km long) drill hole.
The hole is expected to be completed in August with initial assays result possible in September. Now that Lefroy shares have come back to earth, the leverage to the deep hole returning decent hits in support of the big porphyry theory is as extreme as these things get.
It’s one to watch, remembering that Lefroy will be in a position to release a maiden resource estimate for the shallow section of the Burns system before the end of the year.
In addition, across at the Western Lefroy joint venture project area with Gold Fields (a 14% Lefroy shareholder), a full field aircore drilling program is continuing.
If he could, Garimpeiro would underline “full field”.
New World Resources (ASX:NWC): Trading at 3.1c for a market cap of $50m. It was a 7.9c stock at the start of the year and like the two stocks above, that is despite its story getting better.
If you’re going to be a copper producer the best way to produce your copper is to do so at zero cost, or less than zero cost, after counting the revenue from the co-product metals that have come along for the ride.
That’s what a just released scoping study points to at NWC’s Antler copper project near the town of Yucca in Arizona. “Less than zero cost” should be underlined.
It is not going to be the biggest copper project around but its 3.3% copper equivalent grade means it will be nice and sweet for a company with a $50m market cap.
Canaccord has a 30c spec buy on the stock, noting that what was covered in the scoping study for Antler was very much the base case as ongoing drilling has demonstrated growth in the resource base.
The content of this podcast should not be considered financial or investment advice. All interviews and discussions are opinions only and the podcast has been created without taking into consideration the listeners’ financial objectives, financial situation or needs. Listeners should obtain independent advice before making any financial decisions.