Copper is on the move, and several junior miners look likely to benefit

For a long time Central Asia Metals (CAML) was, as the kids say, the GOAT, at least as far as the London-listed copper companies were concerned. 

Back in 2010, when Central Asia listed, Antofagasta (ANTO) was suffering from all kinds of production and environmental issues, and Atalaya, or EMED, as it then was, was still mired in regulatory issues. 

So Central Aisa rode into town, full of confidence and promise, and duly delivered for the better part of a decade. Founder Nick Clarke had been instrumental in putting the company together on the back of some high value dumps in Kazakhstan that looked ripe for easy processing and handsome margins. And at the point of listing he got everything right – timing, aftermarket, pricing, promotion and, most importantly of all, making sure the assets delivered on their promise. 

They did, and the rest is history. Central Asia was established as one of Aim’s most upstanding companies, developing a long track record of generous dividend payments along the way. Recent years have been more difficult, though, as the company has wrestled with various options for growth. A newer asset in North Macedonia has delivered increased production, but also new challenges, and the attempted acquisition of New World Resources fell through this year when the company was outbid by Kinterra.

Even so, production guidance remains intact, and margins might well hold up as the year draws to a close, because the copper price looks set for a strong fourth quarter.

There are several reasons for this. 

First off, global production has been disrupted by serious issues at two of the world’s largest copper mines - Codelco’s El Teniente mine in Chile, and Freeport’s Grasburg mine in Indonesia. There have also been problems at the Kamoa-Kakula mine in the Democratic Republic of Congo. Before these various operational issues arose, copper supply was already constrained. Now, with global stockpiles at relatively low levels, the need for customers to secure supply is driving the price up. 

The wider context is of course the escalating trade tensions between the US and China, and the ongoing weakening of the dollar, which seems to be one inexorable consequence of the tension. 

At the same time, the global economy, though imperilled by high levels of sovereign debt, is still in growth mode, and likely to increase by just over 3% next year. Copper is essential for building projects, and is also a key component in electronics, and thus of the transition to a green economy. There’s a general consensus that in the longer-term, copper will be in deficit.

Or to put it another way, there won’t be enough of it, and exploration companies will have to go out and find more of it.

All of which bodes well for Central Asia, as it looks to shore up its margins against increasing cost pressures. But what about other companies?

There are several that look well positioned to benefit from the resurgence of copper. The obvious point of departure are other well-known producers, like Atalaya (ATYM), Sandfire, and Greatland (GGP). Yes, Greatland’s primarily a gold company, but it also has plenty of copper, and offers a timely reminder that the stars really are aligning for some producers because copper is often associated with gold.

But if things really turn bullish – and they might – the real upside is likely to be delivered by the explorers. Two dynamics will be at work. First, delivering up new primary assets in a rising market will in and of itself be rewarded by investors. Second, the major producers, who in recent decades have by and large preferred to outsource exploration to juniors, will gobble up any significant discovery they can find. The tussle over New World Resources that we witnessed earlier this year may only be the start. 

Still, big copper discoveries are a comparative rarity. Who might deliver one?

Great Southern Copper (GSCU) offers significant potential on its assets in Chile, one of the world’s great copper mining destinations.

The other great copper destination is, of course, Zambia. And here, several companies are at work, all looking to replicate the success delivered by Kiwara back in 2009, a company bought out by First Quantum for well in excess of US$100 million. The brains behind that deal, Colin Bird, has got several more irons in the fire, including African Pioneer. But also knocking around in the same part of the world is Tertiary Minerals (TYM). 

Arc Minerals (ARCM) , too, has a presence in Zambia.

Other copper explorers in Africa include Bezant (BZT), Aterian (ATN), and privately-held Moxico, which is a favourite of SP Angel analyst John Meyer. Also worth mentioning is Kavango (KAV), which has a district-scale project in the Kalahari Copperbelt, although much of its recent news has been focussed on its portfolio of Zimbabwean gold assets.

Elsewhere, KEFI (KEFI)  has significant copper potential on its Saudi portfolio, although investor attention will understandably be focussed in the near-term on development work at its Tulu Kapi gold mine. 

Others of note include Celsius Resources (CLA), which has an exploration and development company with a portfolio of copper-gold assets in the Philippines, including the flagship MCB project, and Phoenix Copper, which has been using innovative financing techniques to fund work at the past-producing Empire mine in Idaho.

Closer to home, there’s still some copper left on the island of Anglesey, notwithstanding a 2,000 year history of mining, and Anglesey Mining (AYM)AYM  continues to refine plans to get it out. 

There’s also copper left at the polymetallic Winston mine in Ontario, which is currently being redeveloped by Panther Metals (PALM) .

Finally, note that the Aim market’s newest member company is a junior copper explorer, Richmond Hill Resources (RHR), which has an extensive portfolio of exploration assets in Canada.