Why this copper bull market is better than the last and the Aussie stock set to benefit
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By now it’s pretty well accepted that the world is going to need an unfathomable amount of copper to help keep pace with the clean energy transition, but some experts are predicting demand will hit a whole new level.
New York-headquartered resources fund manager Goehring & Rozencwajg is as bullish as they come, predicting prices will go past $US10 a pound (+$US22,046/t). Earlier this year, the fund manager forecast the red metal might even test $US33,000 a tonne.
“Although this may sound outlandish, copper rallied seven-fold from its 1999 bottom of $0.61 to its 2011 high of $4.57 per pound,” Goehring & Rozencwajg said.
“Our models tell us the fundamentals are much better today than they were during the last bull market.”
The drawcard is the fact that both renewable energy and electric vehicles are extremely copper intensive. Several countries also require a lot more copper to aid in their electricity distribution.
And copper demand hasn’t been held back by COVID-19, with the World Bureau of Metal Statistics calculating that global refined copper demand in 2020 rose by 900,000t – the highest level of growth since 2014.
At the same time, new copper discoveries in the past decade have been sparse.
“While new projects are coming online in the DRC, Panama and Mongolia, these will only offset depletion at other existing mines, resulting in muted overall mine supply growth,” Goehring & Rozencwaj said.
“Last year, copper mine supply fell by 80,000 tonnes compared with the year before, driven mostly by Chile.
“Most of the disappointment was related to COVID-19 mine shutdowns and will likely come back. However, it is interesting to note that supply has been slower to restart than expected.”
All this, according to Goehring & Rozencwajg, is translating into plenty of interest in copper stocks.
“Generalist investors are beginning to take notice and are establishing positions in copper mining equities, helping push prices higher,” the fund manager said.
Goehring & Rozencwajg says the recent pullback in the share prices of copper stocks makes for a great buying opportunity.
“Despite having found support from generalist investors, we continue to believe the true potential of many copper equities is being overlooked,” the fund manager said.
One stock that has had a pullback this year is Cohiba Minerals (ASX:CHK), which believes it is sitting on a potentially large iron oxide-copper-gold (IOCG) discovery right next door to mining heavyweight BHP (ASX:BHP) in South Australia’s Gawler Craton.
Cohiba is undertaking a multi-million-dollar exploration campaign after drilling at its Horse Well prospect earlier this year encountered rock types typical of an IOCG environment and returned high grades of up to 12.15 per cent copper
Exploration so far has uncovered multiple targets next door to BHP’s potentially massive Oak Dam discovery, where over 40km of drilling has been completed and the major is fast tracking work to position the new discovery as an extension of the Olympic Dam mine.
Cohiba’s ground is also located in close proximity to Olympic Dam and OZ Minerals’ (ASX:OZL) $1bn Carrapateena copper-gold mine.
Cohiba’s goal is to become a significant explorer for IOCG deposits in the Gawler Craton.
IOCG deposits, like Olympic Dam, can be tremendously large, high grade, and simple-to-process concentrations of copper, gold and other economic minerals.
Olympic Dam is one of the world’s largest deposits of copper, gold, and uranium. These things are company makers.
This article was developed in collaboration with Cohiba Minerals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.