Barry FitzGerald: Four base metal juniors poised to benefit from the sector’s summer days
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The power squeeze in Europe and Asia has got end users worried about future supplies of base metals.
They are real concerns too.
Power shortages are leading to widespread smelter curtailments as skyrocketing power prices makes it unprofitable to produce finished metal.
And in parts of China, power is being rationed ahead of the winter chill setting in, the idea being it is best to stop people freezing to death rather than letting industrial power supplies continue unfettered.
But it is summer days for the ASX base metal producers, developers, and explorers.
The concerns around physical metal supplies – at a time when world economies are in COVID recovery mode thanks to new freedoms and monster stimulus packages – has powered up prices for the base metals.
Copper has climbed back to a four-month high of more than $US4.50/lb while zinc has taken off to seven-year highs. They are the two base metals that matter most for the junior end of the market.
Copper has averaged $US4.16/lb so far this year compared with last year’s $US2.80/lb average. It was last quoted at $US4.58/lb which is well ahead of the $US3.20/$3.60/lb investors like to see before diving into the sector.
Zinc has been on the tear in recent days. It has averaged $US1.31/lb so far this year compared with last year’s average of $US1.03/lb. It was last quoted at $US1.60/lb. Normally, anything above $1.10/lb excites.
Europe and Asia’s power issues aren’t going to go away in a hurry. So elevated base metals pricing is here to stay for the near future. It means better profits for the producers, easier financing for the developers, and a more leveraged market response to decent exploration results.
Against that backdrop, Garimpeiro has sought out four base metal juniors that are poised to benefit from the sector’s summer days:
Anax Metals (ASX:ANX, 9.5c): Anax sits in the junior copper-zinc developer category courtesy of its 80% owned Whim Creek project in the Pilbara region of WA. The project has been around before but Anax is bringing it back with some tweaks, most notably ore sorting technology.
A recent scoping study pointed to an economically robust and low capex project producing 11,900tpa of copper equivalent metal in its first 4.5 years at an average total cash cost of $A3.09/lb ($US2.30/lb).
Veritas Securities has a 22c valuation on the stock. On its numbers, Whim Creek could be in production in January 2023 , with Anax’s share of earnings in the first full year of production (FY2024) put at $51m.
Venturex (ASX:VXR): Now headed up by Bill Beament of Northern Star fame, and known as Develop Global (ASX:DVP), it’s the 20% partner and mining giant Anglo American is standing by with a potential project level debt facility as part of Whim Creek’s financing package.
Valor Resources (ASX:VAL, 1.6c): George Bauk became executive chairman in the 2020 December quarter and has managed to fire up interest in the company on the strength of high-grade uranium exploration in Canada.
But Valor’s Picha copper/gold project in Peru which pre-dated Bauk’s arrival is coming into its own after rock chip sampling of targets confirmed widespread copper/silver mineralisation.
Garimpeiro’s brothers in Peru reckon it is one to watch when Valor gets to drill the targets after some geophysical definition work. The same goes for the uranium hunt in Canada, making Valor a two-for-the-price-of-one story.
New World Resources (ASX:NWC, 7.9c): Another copper/zinc developer. It got a mention by Garimpeiro on July 3 when it was trading at 9.1c. It is now back at 8c. The good news in that is that copper and zinc prices are higher than back on July 3, zinc substantially.
More than that though, the company is just weeks away from releasing a maiden resource estimate for its Antler project in Arizona which will allow the mine permitting process to begin while exploration of Antler’s high-grade shoots continues.
The company has talked about becoming a producer in 2024, with the project having clear potential to produce around 30,000tpa of copper equivalent. That’s significant for a company with NWC’s modest market cap.