ASX Copper Stocks Gush Despite ICSG Forecasts for Tepid Copper Demand

  • Dec 11, 2019 AEDT
  • Team Kalkine
ASX Copper Stocks Gush Despite ICSG Forecasts for Tepid Copper Demand

Copper prices are witnessing a turnaround and fanning the ASX copper stocks post a deep pause over the bilateral trade dispute between the United States and China, which raised pessimism among the market over the global growth and exerted pressure on copper.

Copper futures on COMEX (HG) soared from USD 2.515 (intraday low on 1 October 2019) to the present high of USD 2.767 (high on 10 December 2019), which underpinned a price gain of over 10 per cent.

As copper prices are gushing in the market, Australia copper mining companies and their respective prospects are gearing up for a big gain. However, the International Copper Study Group recently anticipated tepid demand for copper, which could possess headwinds for the ASX copper stocks.

To Know More, Do Read: ICSG Slashes Supply and Demand Outlook for Copper; BHP’s Escondida Disruption Propels ASX Copper Stocks

Despite potential risks on the demand counter, Australian copper mining companies are confident that the changing trend towards the EV battery technology, which integrates copper for cathode along with improvement in the bilateral trade-relation between the United States and China would eventually support the copper demand.

While the demand is predicted by Australian miners to show some promising increase over the years ahead, the supply could face a problem over the export ban from Indonesia, which is already fuelling the Nickel prices in the international market and could support the current level of copper prices.

To Know More, Do Read: Indonesia Export Ban to Create a Nickel Boom while Mincor and Independence Develop Assets?

In the status quo, the demand remains tepid, and supply remains tight, which is prompting the ASX copper mining companies to increase the production to fill the supply gap over the anticipated shift in the demand dynamics across the globe.

To know, how ASX copper mining companies are increasing the production capabilities, and which mines in Australia could see a production burst over the years ahead, Do Read: CML Digs for More Nickel-Cooper; While Base Metals Continue the Bull Run

ASX Copper Stock Under Price Momentum

Independence Group NL (ASX: IGO)

IGO is an ASX-listed multi-commodity producer with exposure in Nickel, Copper, Gold, and Cobalt. The key copper prospect of the company is Nova prospect in the Fraser Range, Western Australia, which is currently the hub of high investment activities in the copper-related projects.

The exploration expenditure in Western Australia rose in 2018-19 to stand at $329 million, which represented a surge of ~71per cent against the previous corresponding period. While the exploration expenditure in Western Australia surged on a q/q basis for some time, September 2019 quarter witnessed a large influx in the copper exploration expenditure with overall expenditure reaching to $109 million.

The timing of a large influx into the copper prospects represent the ability of the ASX copper mining companies to anticipate the direction of copper prices with some degree of confidence. The copper futures on COMEX rose from USD 2.494 (low in September 2019) to the present high of USD 2.767 (as on 10 December 2019 06:09 PM AEST).

IGO produced 11,333 tonnes of copper concentrate during the first quarter of the financial year 2020 (ended on 30 September 2019), up by 5.35 per cent against the last quarter of the financial year 2019. The metal concentrate (copper) stood at 3,212 tonnes in Q1 FY20, slightly up against the Q4 FY19.

Source: Company’s Report

The stock price of the company gaining momentum, with prices rising from $4.240 (intraday low on 6 June 2019) to reach at $6.640 (high on 17 September 2019), which marked a price gain of over 56 per cent. Recently the stock tumbled on ASX to mark a low of $5.760 (intraday low on 4 December 2019), but the prices are recovering with the current high of $6.030 (as on 10 December 2019).

OZ Minerals Limited (ASX: OZL)

OZ Minerals is an ASX-listed gold-copper miner with an extensive operating portfolio including Prominent Hill, Carrapateena, West Musgrave, etc. The company also holds a cornerstone copper asset in Brazil- Pedra Branca, for which OZL recently updated the mineral profile.

Mineral Resources and Ore Reserves at Pedra Branca

The company estimated the Mineral Resources of the prospect to be at 19 million tonnes of copper with an average grade of 1.6 per cent. The JORC 2012 classified Measured Resources stand at 2.3 million tonnes with an average grade of 1.6 per cent Cu and 0.5g/t Au.

Source: Company’s Report

The company estimated the total Ore Reserves at the prospect to stand at 5.0 million tonnes with an average grade of 1.9 per cent Cu and 0.6g/t Au, which would account for 21,000 tonnes of contained copper and 20,000 ounces of gold.

Source: Company’s Report

OZL is under a price momentum, with prices recovering from the low of $8.470 (as on 4 September 2019) to the recent high of $11.030 (high on 11 November 2019), which marked an increase of over 30 per cent.

The stock recently corrected till $10.220 (low on 22 November 2019) to the current high of $10.850 (high on 29 November 2019).

While IGO and OZL are just an example of copper-related stocks, who are currently in price momentum, many other ASX copper stocks, which are currently witnessing interest from the bulls. The vast array of available stocks related to a particular commodity could give investors some trouble in picking some quality stocks.

To assist the investors in their endeavour to select quality stocks, we previously wrote about a few parameters, which could be used to pick a quality mining stock.

Please Refer; An Investors’ Guide for Commodity Valuation and Mining Stocks

For understanding the complexity of mining stocks better, we would like to encourage our readers to visit and spend some time on the hyperlinked article present in the above-linked article.

Copper-to-Gold Demonstrate Potential Bearish Flag

Source: Thomson Reuters

On comparing the copper-to-gold ratio, and post witnessing the individual price of both the commodities, it could be observed that copper-to-gold ratio is increasing amid an increase in copper price and fall in gold prices.

However, the ratio chart is forming a potential bearish flag pattern on the daily timeframe, which is yet to give confirmation and apparently indicates a challenge for the copper rally (provided strong fundamentals behind gold).

Gold is currently falling in the market; however, the fundamental behind gold remains somewhat decent, and many industry experts anticipate the gold to still shine as a safe haven.

To Know Gold Fundamentals, Do Read: Does Gold Investing Intimidate you? Discover the Right Parameters for Astute Judgement


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