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Date : 21/07/2023

Why Copper Stocks are Lucrative for ASX Investors?

Copper is an incredibly crucial metal today due to its remarkable properties, such as excellent electrical and thermal conductivity, superior anti-corrosive properties, and durability. Its myriad uses span from electrical wiring to electronic components, plumbing fixtures, and even coins. Moreover, copper plays a crucial role in newer technologies like renewable energy systems, contributing to a rise in demand.

Over the medium to long term (5-10 years), there’s a high likelihood that copper’s value will increase. This trend is driven by various factors, including heightened global demand for copper, its significant role in renewable energy projects, and its crucial part in infrastructure development. The burgeoning electric vehicle market, which requires double the amount of copper than traditional vehicles, and increased use of renewable energy sources like solar panels and wind turbines, are key drivers of copper’s growth prospects.

The precise amount of growth is difficult to predict, but some industry experts have made optimistic predictions. Billionaire miner Robert Friedland suggested that demand could increase tenfold when its true importance is universally recognised. Forecasts from S&P and the Australian government’s Department of Industry, Science, Energy and Resources suggest significant growth in demand over the next decade.

Despite these promising long-term predictions, copper prices have experienced short-term dips due to fears of global recession and specific weak manufacturing data releases. The construction industry, which currently accounts for a significant chunk of copper’s demand, has faced inflation and supply chain challenges that have further exacerbated this short-term decline.

Despite short-term market uncertainties, there are ways investors can capitalise on copper’s projected rise. This could be done through investing in copper-related stocks, mutual funds, or ETFs. Such investments can expose the entire value chain of copper, from production to processing and distribution, thus benefiting from its rising price. Diversifying investments across copper-involved companies can help mitigate risk and offer rewarding returns. However, it’s important to note that any investment carries inherent risks and should be considered carefully.

Sandfire Resources Ltd (ASX: SFR)

With an almost $3 billion market capitalisation, The company is involved in numerous copper projects, contributing to its diversified portfolio and positioning it as a strong player in the industry.

One of Sandfire’s significant projects is the DeGrussa copper-gold endeavour in Western Australia. Additionally, the firm operates MATSA Mining in Spain, extending its footprint into the European continent.

A major point of interest for Sandfire is the Motheo copper project in the African nation of Botswana. This mine has already begun yielding its first copper concentrate, marking a significant milestone for the company.

The company’s growth strategy extends beyond its existing projects. Sandfire is actively seeking more global opportunities to expand its copper project portfolio. The firm maintains a broad, high-quality exploration portfolio spanning several geographic locations. These include Australia, the Kalahari’ copper belt’ in Botswana and Namibia, Montana in the USA, and across the Iberian Pyrite belt in Spain and Portugal.

Financially, the company is on stable ground. According to Commsec, Sandfire is valued at 13 times FY25’s estimated earnings, indicating a healthy financial outlook.

Sandfire Resources Ltd Shares

Aeris Resources Ltd (ASX: AIS)

Aeris Resources Ltd, another noteworthy company on the ASX, is a compelling pick for investors seeking exposure to the copper industry. It is significantly undervalued, with Commsec pricing the copper share at just 5 times FY24’s estimated earnings.

Aeris is predominantly a copper miner, with several operations dispersed across various regions. These include the Tritton underground copper operations nestled in the Cobar region of central New South Wales and the Jaguar operations in the Eastern Goldfields region of Western Australia, which yield zinc, copper, and silver.

The company’s North Queensland ventures comprise “the underground Mt Colin copper mine, the Barbara development project and a prospective 1,102km2 tenement package in the Mt Isa/Cloncurry region.” This provides Aeris with a diversified and robust operational portfolio.

Furthermore, Aeris Resources is involved in the Stockman project, a copper and zinc development in the East Gippsland region of Victoria. This project presents a significant opportunity for the company to further strengthen its foothold in the copper industry.

Aeris Resources Ltd. Shares

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