Barry FitzGerald
BHP has a long history of getting it right. It wouldn’t be The Big Australian it is if it didn’t.
So Garimpeiro has decided he’s big enough to forgive BHP’s unfortunate bet on Nickel West. “It was not alone in getting it wrong,” he notes, with no less than 20 private-sector forecasters who in January this year were predicting good times ahead for the battery metal.
The best approach? Chin up, hop on the good foot etc, and what’s this? In the commentary notes accompanying the release of BHP’s $US6.6 billion December profit report during the week, a “decidedly bullish” tone on copper.
Not spectacular lately, but up 5% in the December half is certainly solid against the likes of lithium and nickel.
The rub – BHP reckons a supply deficit largely mooted to emerge in the final third of the 2020s could actually come earlier.
And, in BHP’s own words, those deficits could be “pronounced” in the medium–term. That’s “five years”.
Time to dust off a couple of copper juniors with “tonnes of leverage”, just in case that ‘Golden Era’ of copper is finally upon us.
29Metals (ASX:29M – 27.5c, $192m MC): Trading last year at 70c a share, it is now back around the 28c mark, and trading like a junior.
It’s lost fundie Ausbil as a substantial shareholder but gained the biggest of all, AustralianSuper and is chaired by Australia’s original copper bull, Owen “Stronger for Longer’’ Hegarty.
Hegarty recently assured shareholders the “recent dramatic fall” was “unwarranted and of serious concern”, reminding them that 2024 was a recovery year after the group’s Queensland copper operation was hit by floods in 2023.
29M has one of the biggest resource/reserve bases on the ASX.
Important disclosure: Hegarty is an AFL Bombers fan, and that is “good enough for Garimpeiro to hear him out”.
Caravel Minerals (ASX:CVV – 16c, $84m MC): As far as Garimpeiro’s concerned, there is no ASX junior with more leverage to the potential for copper to crack $US4/lb and then keep going.
The comes from Caravel’s 3.03Mt namesake copper project some 150km northeast of Perth in WA’s wheatbelt. It is being worked up as a 65,000tpa copper producer with molybdenum-gold-silver credits.
Yes, it’s low-grade (0.24% copper) and has a $1.6 billion capex requirement. But its potential scale of production in a Tier 1 location means there is likely to be support in one form or another to get it in to production, just about when copper could be enjoying the sort of price strength that BHP’s forecast pronounced supply deficit would deliver.
“Plug in $US5/lb or $US6/lb copper for its planned 143M/lbs of annual production potential, and the extreme leverage to higher copper prices is plain to see.”
Rusty Delroy
Investment manager, Nero Resource Fund
If you absolutely can’t ignore the feeling that “lithium’s a buy”, actual drum-beating resources stock picker Rusty Delroy loves an unloved mining stock.
Delroy’s strategy with Cottesloe-based Nero Resource Fund is all about cutting against the grain, and with metals and mining juniors stuck in a rut for the past 18 months, that tells him to “deploy capital”.
Among the most sold off parts of the market are the lithium stocks, thanks to a collapse in prices from over US$80,000/t for chemicals to around US$14,000/t. And 6% Li2O spodumene concentrate made at WA’s hard rock mines is fetching US$850/t, down from over US$8000/t in late 2022.
Delroy likes Delta Lithium (ASX:DLI – 31c, $220m MC), with around 40Mt of spodumene resources in WA – and the backing of MinRes.
“I still think this is gonna be a very choppy, difficult year for lith with the physical pricing. But you do want to be hunting some things that are beaten up,” he said.
“Delta is not an A-Grade asset. It’s like a C-Grade asset suite but there’s strategic interest there.
“And $100-odd million at bank, probably compelling at some point for MinRes to wrap it back up with some paper and take the cash back. I’m sure their balance sheet could do with that.”
Delroy also rates Canadian explorer Winsome Resources (ASX:WR1 – 70c, $134m MC) ahead of the $1.62 billion capped Patriot Battery Metals (ASX:PMT), the much-ballyhooed James Bay startup helmed by former Pilbara Minerals supremo Ken Brinsden.
Winsome posted an initial resource in December of 59Mt at 1.12% Li2O at its Adina deposit last year, with a further update expected in the first half of 2024.
“That’s a quality asset that’s going to continue to grow,” Delroy believes.
“It’s still got a journey, but it is a proper asset and it’s far more compelling from a valuation standpoint than something like a Patriot.
“And it’s also, I think, got a far shorter path to market than Patriot. I think there’s a more credible permitting process with Winsome.”
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
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