Copper – Industry and Equities
Henslow’s Senior Research Analyst, Warren Edney has prepared the first in a series of notes on various commodities and related micro to mid-capitalisation ASX listed companies.
The aim is to provide some background on the key drivers in supply and demand for a commodity and where investors can find exposure for companies exploring or developing projects in Australia.
In this note, we look at copper which is seen as a key component in the construction of electric vehicles and alternative energy production. It is a metal which many market participants will believe will be deficit in the back half of this decade and an increase mine supply to meet future demand. In the short term expectations of the metal price have weakened as the focus moves to recessionary expectations in key markets.
Equity markets have been weak and the bulk of the Australian micro to mid-capitalisation copper explorers and developers have underperformed the physical metal in 2022. Based on our analysis of the explorers and developers it would appear that investors are not discriminating between companies with large resource, high grade resources, or the time to development or production. The takeover activity seen in the last quarter is likely to continue with companies having the opportunity to acquire resources which add to their own projects at a competitive price. Oz Minerals’ acquisition of Kalkaroo and AIC Minerals’ bid for Demetallica at ~A$190/t of copper in the ground over the last quarter set a benchmark and may be the start of things to come.