Dec22 quarter predictions, page-87

ASX copper stocks to watch as OZ Minerals leaves the index
Sandfire Resources, 29Metals, and Aeris Resources could constitute three of the best ASX copper stocks to watch in 2023.

Source: Bloomberg


Indices Shares CommoditiesCopper Australian Securities ExchangeASX

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Charles Archer | Financial Writer , London | Wednesday 11 January 2023 11:55
OZ Minerals has arguably for the past several years been the best ASX copper pure-play stock. For many who accept the long-term bull argument for copper prices, OZ constituted an excellent investment, and investors have been rewarded fairly by both its share price run and buyout at a premium.

Copper price 2023
Indeed, copper prices are now at a six-month high as China ploughs on with its reopening. And due to the inflationary costs of opening new mines, S&P Global research predicts the world could see a 10-million-ton deficit of the critical metal by 2035, and Bloomberg Intelligence a 14-million-ton shortage by 2040.

Analysis from Goldman Sachs shows that miners need to collectively invest US$150 billion in new mines over the next ten years to prevent this supply gap from forming, an unlikely scenario given the expense of exploring and developing new sites, and especially through what may be a global recession in 2023.

This leaves ASX companies with rights to already-proven copper sites likely to experience share price growth or even become buyout targets as the copper price begins to reflect the mismatch between copper demand and supply.

Best ASX copper stocks
Of course, many investors will stick to tried and tested ASX 200 behemoths such as Rio Tinto and BHP, OZ’s new owner. However, while this offers the benefit of diversified mining, it also diminishes the potential returns to be seen as copper prices rise. Naturally, this will require China’s reopening to stay on track, which is not a foregone conclusion.

Sandfire Resources (ASX: SFR) could now be the most popular ASX copper stock. The miner boasts an AU$2.75 billion market cap and has fallen by 12% over the past year, representing a fair entry point for position investors. It’s worth noting that while SFR shares are coasting along at AU$6.02, this is down from a record AU$8.97 in mid-June 2018.

The ASX copper company acquired Spain-based MATSA copper-zinc operation for US$1.865 billion early last year, which produces out of three mines with room for expansion though the 2020s. In addition, it owns the DeGrussa and Monty copper-gold mines in Western Australia, and two further copper projects in the early stages in Botswana and the US. This geographical diversification among stable countries is appealing.

Then there’s AU$1.03 billion 29Metals (ASX: 29M), which offers two long-life producing assets — Golden Grove in Western Australia and Capricorn Copper in Queensland. The company plans significant growth at the two sites, and also holds a strategic tenement package and project at Redhill in Chile, the world’s number one copper-producing country.

Finally, investors may want to consider Aeris Resources (ASX: AIS), which acquired Round Oak Minerals Pty Ltd from investment company Washington H. Soul Pattinson and Co. Ltd for $80 million in cash and $154 million in shares early last year.

In a stroke, this made the investment company Aeris’ largest investor with Chair Robert Millner granted a seat on the board. The ASX copper company now boasts four operational mining assets, a long-life development project and a huge explorative portfolio to go along with its AU$445 million market cap. However, the miner has struggled with inflationary costs in 2022.

Of course, there are smaller ASX copper stocks with the potential to deliver exceptional returns in 2023 to consider — including the likes of Austral Resources, Alma Metals, Alvo Metals, Kincora Copper, Xanadu Mines, Cobre Minerals, Hot Chili — but these are more speculative trades that few will view as a fair portfolio replacement for OZ.

And with so few large copper-producers on the ASX, Sandfire Resources, 29Metals, and Aeris Resources will likely see elevated interest through 2023.