Copper demand is expected to skyrocket in the coming years, with supply scrambling to catch up.
“Beyond 2020, we forecast that consumption will outstrip production over the period to 2024, resulting in a growing refined market deficit and increasing copper prices.” According to S&P Global Market Intelligence commodity analyst Thomas Rutland.
Global copper production will need to rise by between 3 and 6 percent per annum by 2030 for countries to reach the Paris Agreement on climate change according to a Bernstein research note.
Yet mine output is barely expected to reach 3 percent increases per annum in the coming decade and supply actually decreased by 2.1 percent in 2020.
With copper expected to be dramatically undersupplied in the coming years, we expect copper prices to soon exceed the previous all-time high of 2011.
Australia is a premier copper mining jurisdiction, and we are lucky enough to have some extremely attractive copper miners listed on our local exchange.
Most investors have heard of the largest ones, BHP, OZ Minerals, and even Newcrest Mining each produce large amounts of copper. However, there are other ASX listed copper producers that we believe are overlooked by the market. These include Sandfire resources (which we’ve written about before) and minnow Aeris Resources.
Aeris Resources – AIS.AX
Following the acquisition of the Cracow project from evolution mining in July 2020, Aeris Resources looks set to have a bumper year. The copper and gold producer is set to benefit from a rise in the price of its key commodities, which could see strong returns generated for shareholders.
At the recent third quarter production report Aeris stated that they expect to produce around 23,500-24,500 tonnes of copper this year at an AISC of $A3.60-$3.75 and around 70,000-75,000 ounces of gold at an ASIC of $1,550.
While these production costs are a little higher than some of Aeris’s larger competitors, they imply that Aeris will make around $48 million for each of copper and gold this year before other costs are added.
There is one covering analyst for the stock and they are expecting around $80 million in profits this financial year; they rate the stock a strong buy with a price target at $0.13 per share. The company currently sits at a market capitalisation of just $190 million, so it should trade on an incredibly attractive multiple of earnings this year.
The copper and gold mines of Aeris have current mine lives of 5 and 4 years respectively, so there could be longevity concerns for some investors. However, Aeris is engaging in plans and exploration to extend these mine lives and find other attractive opportunities. Should they manage to do so, we would expect that this would also help drive the share price higher.
We recently suggested Aeris Resources as a Top Stock recommendation to Emerald Equities clients. We suggested an entry price of 9 cents per share and prices have now advanced from our entry level. Regardless, we believe Aeris still offers a fantastic opportunity to investors looking to gain exposure to the copper/gold space of the ASX.
At Emerald we provide recommendations on what we believe to be solid investment candidates. We also provide financial data, quantitative modelling, analysts’ predictions, and all the other information you need to form an investment decision for yourself. Find out more about our equity research and recommendation service at emeraldequities.com.au or call us on 03 8080 5777 for a chat.
DISCLOSURE: entities associated with Emerald Financial and/or Emerald Equities have shareholdings in Aeris Resources.