Garimpeiro was on the mark – for once – in August last year when he made the call that the “golden years’’ for copper were coming and that perhaps it was time to load up on developers/explorers for leveraged exposure to the red metal’s upside.
The copper price was $US3/lb at the time, having recovered from a COVID 19-hit 2020 June half average price of $US2.50/lb. It has since marched to $4.09/lb, having got as high $US4.36/lb last month.
At the current price, copper is up a thumping 46% on the average price for all of last (calendar) year, putting the metal within reach of its all-time high of $US4.62/lb in 2011. Resurgent demand, a slow supply response and a shortage of scrap supplies is behind the latest price rally.
And most of the leading commodity price forecasters are bullish on the metal’s near-term outlook. Citi is the amongst the most bullish, tipping on March 8 copper could hit an all-time high of $US4.76/lb within three months.
Macquarie is forecasting a $US3.83/lb average for 2021, saying that prices will need to hold on to persistently high levels to encourage a supply response. Without a supply response, the metal faces structural supply deficits from 2025 which could force a “blow-out’’ in prices to reflect scarcity pricing, Macquarie said.
The biggest copper stocks on the ASX are BHP and Rio Tinto. Copper’s price strength will provide a handy offset to any iron ore prices weakness for them but the reality is that if it’s copper that is sought, the go-to stocks are OZ Minerals (ASX:OZL) and Sandfire (ASX:SFR).
But as is Garimpeiro’s wont, today’s interest is in the developers and explorers with copper exposure.
Orion adds another star to its belt
In the “golden years’’ for copper rant in August last year, Garimpeiro nominated Orion (ASX:ORN) and Venturex (ASX:VXR) in the developers category.
Orion’s story has got much better since as it has added another near-term copper production asset to its South Africa African portfolio but it is trading around the same level (3.4c a share). In meantime, Bill Beament of Northern Star fame has chosen WA copper-zinc developer Venturex as his new vehicle, sending the shares soaring to 45.5c.
Caravel (ASX:CVV) has more than doubled since August last year to 18.5c on the strength of its low-grade but large-scale (1.86 million tonnes of copper) project. The project was looking good enough at $US3/lb copper but would fly in a $US4/lb market.
Amongst the explorers, Stavely (ASX:SVY, trading at 69c) is poised in coming months to make the transition to developer status once a maiden resource estimate is released for its namesake project in western Victoria.
And as mentioned previously by Garimpeiro, 2021 could be the breakout year, discovery wise, for the hardy Paterson province explorer, Antipa (ASX: AZY, trading at 3.1c).
See you in the NT?
For the more adventurous investor, the junior explorers with a footprint in the Northern Territory’s Barkly region east of Tennant Creek could be of interest.
Sitting between Tennant Creek in the NT and Mt Isa in Queensland, the region was recently described by the NT’s Geological Survey as “rapidly emerging as one of Australia’s most exciting exploration frontiers.’’
The comment followed the discovery of copper in some of the holes drilled in a Federal government funded program designed to test for the presence of rocks capable of hosting large-scale iron oxide copper gold-type (IOCG) deposits like Olympic Dam in South Australia and Ernest Henry in Queensland.
The drilling results have excited a bunch of juniors which pegged ground ahead of the government drilling. They are now keen as mustard to start drilling the IOCG targets being generated on their own ground.
They are all lightly capitalised ahead of the drilling programs which means any success will make for lively share price reactions.
The main players are Inca Minerals (ASX:ICG), Greenvale (ASX;GRV), Middle Island (ASX:MDI) and Strategic Energy (ASX:SER).