Is 2020 the year that copper rallies?
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Could copper find its legs this year? There are certainly some indications that the industrial metal – a key indicator of how well the global economy is performing – could rally.
The increasing likelihood that China and the US will reach an interim trade deal – given President Donald Trump’s declaration that he will sign the first phase deal – will do wonders to keep the global economy on an even keel.
This has already resulted in some confidence returning to China’s manufacturing sector with the key manufacturing purchasing managers’ index showing an expansion in manufacturing for a second straight month.
LME copper closed at $US6,182 ($8,825.8) a tonne on New Year’s Eve, up nearly 5.5 per cent from its opening price of $US5,861 a tonne in 2019.
Bloomberg quoted Goldman Sachs as saying that copper was “set to inflect” due to strong growth out of China, while Citigroup forecasts that China’s copper consumption will increase by 2.6 per cent this year.
It also quoted a voice of caution, with Windsor Capital Management Co saying that copper prices had surged recently and may face corrections.
Meanwhile, the International Copper Study Group (ICSG) released its preliminary data for September 2019 world copper supply and demand which indicated that copper mine production had fallen about 0.4 per cent in the first nine months of 2019.
This was due to reduced output from Chile and Indonesia that was partly offset by the start of production from the Cobre de Panama mine in Panama.
The ICSG data also indicated that global apparent refined copper use grew by 0.3 per cent in the first nine months of 2019 while the supply deficit in the same period was about 390,000 tonnes.
Chinese stockpiles are believed to have declined by about 135,000 tonnes in the first nine months of 2019, while copper stockpiles held at major metal exchanges totalled 365,09 tonnes at the end of November 2019, up about 4 per cent from inventories held at the end of December 2018.
Argonaut mining and energy research director Matthew Keane told a Perth conference in mid-December that copper would “stage a recovery” in 2020.
Should copper prices rise as forecast, here are some small cap copper players that could be poised to catch the upswing.
Magmatic Resources (ASX:MAG) is focused on exploring its East Lachlan copper-gold porphyry assets in NSW that are close to Alkane Resources’ (ASX:ALK) Boda project where exploration returned a +500m intersection grading 0.48 grams per tonne (g/t) gold and 0.2 per cent copper.
In September 2019, Staveley Minerals (ASX:SVY) reported an eye-popping shallow, very high-grade intersection of 32m at 5.88 per cent copper, 1g/t gold, and 58g/t silver at its Thursday’s Gossan project in NSW.
Carawine Resources’ (ASX:CWX) work at the Hill 800 deposit has not only established the continuity of good copper-gold grades, it has also found a porphyry source to its mineralisation and identified the potential for large porphyry systems at the broader Jamieson project. Diamond drilling targeting nearby, deeper porphyry targets is expected to start in the first quarter of 2020.
Over in Chile, Hot Chili (ASX:HCH) is poised to really expand the size of its Cortadera project in Chile. The company has already delivered multiple broad intersections of porphyry copper-gold including a massive 972m grading 0.5 per cent copper & 0.2g/t gold from surface.
This year will also be one of discovery for Gold Mountain (ASX:GMN), which will soon know just how big its Wabag project in Papua New Guinea actually is. Results from the first two holes of a nine-hole program are expected mid to late January.