Second, there’s Rio Tinto’s copper chief, Bold Baatar, who argues that even the very short-term outlook for the critical mineral is looking ‘pretty healthy’ as ‘physical stocks of inventories of copper are at multi-year lows,’ while Chinese demand is increasing amid reduced South American supply.
Finally, Goldman Sachs commodities head Jeff Currie has warned that ‘the forward outlook is extraordinarily positive. We’ll be at the lowest observable inventories that have ever been recorded at 125,000 tonnes. We have peak supply occurring in 2024…near term we put (the copper price) at $10,500 and longer term our price target is $15,000 a tonne.’
Given inflationary factors and the diminishing quality of legacy reserves, BHP’s acquisition of Oz Minerals could be just the start of copper consolidation as the titans seek new sources to take advantage of what could be a renewed bull market.
Best ASX copper penny stocks
As a caveat, it’s worth noting that almost all penny stocks are volatile, high-risk investments which are usually highly speculative and are rarely generating reliable income.
And this is sometimes doubly true when it comes to exploratory mining — where poor drilling results, running out of capital, political shifts, excessive time to production, and a general lack of information or analyst coverage are common problems.
Of course, these high risks are often balanced out by higher potential rewards.
1. Austral Resources (ASX: AR1)
Austral Resources shares have risen by 32% over the past year to AU$0.25, as the copper cathode producer and miner, which operates in the Mount Isa region, benefits from surging demand for the critical mineral.
In addition to its current production plant and mine assets, it also holds over 2,000 square kilometres of highly prospective exploration tenure that could yield more greenfield finds.
Its focus is currently on the Anthill Project located just 45km from the Mt Kelly processing facility. The Anthill deposit contains a JORC 2012 compliant Mineral Resource Estimate of 13.8Mt grading 0.70% Copper.
Austral sells a 99.9% pure copper cathode, which is consistently in high demand, and leaves investors more exposed to the likely long-term appreciating price of the metal.
2. Kincora Copper (ASX: KCC)
Kincora Copper shares have underperformed over the past year, losing nearly half of their value after an AU$2.4 million raise in December 2022. However, the ASX copper company aims to become the leading pure-play copper-gold porphyry explorer in Australia’s leading porphyry belt.
And this type of copper deposit is responsible for 75% of the world's copper production, 50% of molybdenum production and 20% of gold production.
The company recently uncovered ‘significant’ zones of shallow mineralisation from a diamond drilling program currently underway across the Dunns North, Dunns South, and Botfield prospects within its brownfield Trundle Project in New South Wales.
Results included gold grades up to 14.2g/t Au from Dunns North and additional grades of 6.88g/t Au from Dunns South, described as ‘very encouraging’ and indicating ore grade mineralisation at relatively shallow depths.
CEO Sam Spring enthuses that ‘we have drilled about 25,000m to date at Trundle...the key project in our immediate region that we think is a reference point is Northparkes. It is Australia’s second biggest porphyry mine owned by China Moly and Sumotomo that has about 24 million ounces of gold equivalent metal endowment and has been in production for over 30 years.’
3. Xanadu Mines (ASX: XAM)
Xanadu Mines spiked in mid-March after announcing the completion of Phase 2 and Phase 3 of its Strategic Partnership with Chinese titan Zijin Mining Group, almost a year after Phase 1 was completed.
The company’s tagline is that it is ‘committed to Mongolia and its potential as one of the last great copper frontiers.’ This is no bad focus— Mongolia is the location of Rio Tinto’s 66%-owned world-class Oyu Tolgoi copper mine, into which it is pouring US$7 billion as its flagship growth project. The mine will eventually become the world’s fourth-biggest source of copper, churning out half a million tons a year.
Xanadu’s deal with Zijin involves an AU$7,164,645.28 million placement for circa 179 million Xanadu shares at $0.04 per share, a 33% premium on the latest market close price, increasing Zijin’s shareholding to 19.42% of Xanadu.
US$35 million is being invested directly into the flagship Kharmagtai project as part of a 50/50 Joint Venture agreement. With the Pre-Feasibility Study and discovery now underway, Xanadu remains the JV operator for the next 18 months while the PFS is completed, after which Zijin will take over.
Xanadu will then either need to fund its share of construction, sell it 50% share of the JV to Zijin, or — and possibly most likely — sell half its share of the JV (25%) to Zijin for US$25M plus a zero cash loan carry for the remaining 25% to commercial production.
Executive Chairman and Managing Director Colin Moorhead advises that the two companies ‘are fully aligned with our goal for Kharmagtai to realise its potential as globally significant copper-gold project. We expect to provide regular updates and news-flow through the next 18-month PFS period.’
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