{"id":6901,"date":"2024-03-08T05:56:22","date_gmt":"2024-03-08T05:56:22","guid":{"rendered":"https:\/\/economicherald.net\/?p=6901"},"modified":"2024-03-08T05:56:22","modified_gmt":"2024-03-08T05:56:22","slug":"monsters-of-rock-what-analysts-are-looking-for-before-they-go-full-bull-on-asx-copper","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=6901","title":{"rendered":"Monsters of Rock: What analysts are looking for before they go full bull on ASX copper"},"content":{"rendered":"

Copper is all the rage, with even Twiggy Forrest bearing his enthusiasm for the red metal in a $14m farm-in and JV with a copper explorer down the road from Evolution\u2019s Northparkes mine announced this morning.<\/a><\/p>\n

Plenty of analysts like the stuff, which is expected to see a doubling of demand by 2050 to underpin the energy transition.<\/p>\n

Shaw and Partners notably upped its long term outlook for the commodity last month, predicting a rise to record levels of US$11,000\/t by next year, with long term prices of US$4.26\/lb (US$9372\/t).<\/a><\/p>\n

Others are more reserved.<\/p>\n

Jarden\u2019s Ben Lyons, Jon Bishop and Adam Bennett see prices of US$3.84\/lb in FY24, US$4.23\/lb in FY25 and US$4.50\/lb in FY26 \u2014 all better than today, but not the rocketing prices predicted by many copper bulls.<\/p>\n

Their long-term prices remains unchanged at US$3.50\/lb Cu and US$1.30\/lb for the closely linked zinc.<\/p>\n

That conservatism has seen flagship ASX copper stocks Sandfire Resources (ASX:SFR)<\/a> and 29Metals (ASX:29M) <\/a>downgraded today.<\/p>\n

\u00a0<\/p>\n

Sandfire run \u2018not over yet\u2019<\/h2>\n

It\u2019s worth noting that Jarden remains bullish on both Sandfire and copper fundamentals.<\/p>\n

Lyons and Co. say they continue to advocate for SFR being a \u2018core holding in the resources sector\u2019. Indeed, with 28% production growth forecast over the next two years from its MATSA mine in Spain and Motheo in Botswana to 108,000t copper or 150,000t CuEq, it appears to be the only pure play copper miner of global import on the Aussie bourse.<\/p>\n

But with Sandfire up over 20% in the past six months \u2014 considerably more than copper prices \u2014 Lyons and his colleagues say it has run too far ahead of their $6.50 target price.<\/p>\n

$3.6b capped SFR was down 2% today to $7.86 a share. At $8.02 on Thursday, Jarden estimates it is pricing in a US$3.93\/lb long term copper price.<\/p>\n

\u201cThe outlook for the copper price remains positive in our view. Material supply disruptions announced late last year (immediate closure of Cobre Panama, and downgrades to CY24 production guidance by Anglo American) have tightened concentrate supply, resulting in spot Treatment Charges (TCs) falling precipitously (>75% in two months) to just US$12.70\/t last week (Fast Markets),\u201d Lyons, Bishop and Bennett wrote.<\/p>\n

\u201cMeanwhile, despite well publicised weakness in the Chinese economy, western world demand remains resilient, the decarbonisation narrative remains robust, and exchange inventories remain low (LME ~100kt). Finally, we
\nnote the increasing potential for US rate cuts later this year, leading to a weaker US$, to act as a possible catalyst for higher Cu prices.<\/p>\n

\u201cHowever, we currently remain comfortable that our existing Cu price profile adequately captures this attractive confluence of events.\u201d<\/p>\n

But a couple things could make them more positive, both macro-wise and at Sandfire, where the decision of a Montana court to reinstate Sandfire\u2019s operating permit at the undeveloped Black Butte could see the long-stranded project returned to analyst projections.<\/p>\n

\u201cAnother large supply disruption (always possible in the Cu industry), or meaningful Chinese stimulus\u201d would provide a trigger for a quicker and higher copper price run.\u201d<\/p>\n

\u00a0<\/p>\n

Sandfire Resources (ASX:SFR) share price today<\/h2>\n\n

<\/span>\u00a0<\/p>\n

\u00a0<\/p>\n

Can BHP man turn around 29Metals<\/h2>\n

29Metals (ASX:29M)<\/strong><\/a> was down almost 5% after Jarden reduced the stock from overweight to neutral, having rallied some 120% or more from a low on February 16 before today\u2019s open.<\/p>\n

It comes after James Palmer, once the boss of BHP\u2019s (ASX:BHP)<\/strong><\/a>\u00a0 Queensland coal businesses, was announced as the successor to outgoing CEO Peter Albert.<\/p>\n

\u201cWe also expect Mr Palmer would likely be similarly familiar with the Queensland copper industry, having commenced his career as a metallurgist at the Mt Isa smelter, now owned by Glencore,\u201d Lyons, Bishop and Bennett said.<\/p>\n

\u201cIn short, it appears that Mr Palmer\u2019s experience should be a strong fit for the role.\u201d<\/p>\n

Again, Jarden\u2019s resources boffins say the company, heavily sold down last year after a flood left it unable to mine its Capricorn copper project in Queensland for several months, would benefit if Chinese stimulus or more supply curbs hit the market.<\/p>\n

But as of Thursday, they said the stock was trading 8% above their 38c NPV. It closed at 39c today. At current price levels, Jarden suggests 29Metals may have to enter the market to raise more cash later in 2024.<\/p>\n

\u201cWe expect high on the list of priorities will be the restitution of an appropriate capital structure and lower operating costs for 29M,\u201d they wrote.<\/p>\n

Our view remains that costs at both operations, and corporate costs,
\nremain too high.<\/p>\n

\u201cAt spot commodity prices, we forecast the entire cash balance to be exhausted by the end of CY24 \u2013 in short, the longer commodity prices stay at spot levels, the more likely 29M is to require additional liquidity.\u201d<\/p>\n

At Jarden\u2019s forecast copper and zinc prices, 29M\u2019s cash balance would be drained from $162m at December 31, 2023, to just $38m at the end of 2024.<\/p>\n

\u00a0<\/p>\n

29Metals (ASX:29M)<\/strong><\/a> share price today<\/h2>\n\n

<\/span>\u00a0<\/p>\n

\u00a0<\/p>\n

And on the market<\/h2>\n

You\u2019d be forgiven for thinking gold was performing shoddily today, with a Christmassy blend of red and green across our watch list.<\/p>\n

In fact, they found a new record high overnight, rising on the LBMA to US$2153\/oz.<\/p>\n

Genesis Minerals (ASX:GMD)<\/a> was down after releasing its half year results, turning a net profit for the first six months of $14.8m on EBITDA of $46.6m and gold sales of $209.1m.<\/p>\n

Raleigh Finlayson\u2019s Gwalia owner produced 69,361oz at all in sustaining costs of $2114\/oz, leaving it with $192.3m in the bank after spending $44.5m on growth capex and exploration.<\/p>\n

But there will likely be little action in Genesis until after a five year outlook, charting its plan to grow production to its targeted 300,000ozpa rate, is released later this month.<\/p>\n

More broadly, the materials sector rose 0.12%, with strong commodity import figures from China in January and February painting a more positive picture for metals demand.<\/p>\n

Capital Economics commodities economist Bill Weatherburn said in a note iron ore and coal imports could trend lower, however, over the next few months.<\/p>\n

\u00a0<\/p>\n

Monstars share prices today<\/h2>\n\n

<\/span>\u00a0
\n<\/span><\/p>\n

The post Monsters of Rock: What analysts are looking for before they go full bull on ASX copper<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Copper is all the rage, with even Twiggy Forrest bearing his enthusiasm for the red metal in a $14m farm-in and JV with a copper [more…]<\/a><\/p>\n","protected":false},"author":0,"featured_media":6902,"comment_status":"","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-6901","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nMonsters of Rock: What analysts are looking for before they go full bull on ASX copper - Economic Herald<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/economicherald.net\/?p=6901\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Monsters of Rock: What analysts are looking for before they go full bull on ASX copper - 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