Rocky made a couple of very pertinent points towards copper yesterday one of which isn’t discussed too often at present:
- Copper could easily be in oversupply in 2023 which might give another attractive opportunity to increase copper exposure if such weakness eventuates.
- The outlook is very bullish for years to come but if we see a recession in 2023/4 the industrial metal could easily correct another 20%.
Sandfire (SFR) is now the Australian market’s long-life major international copper play and last month’s +40% rally appeared to see money flood from BHP target OZ Minerals (OZL) to SFR, we like the stock but may trim into further strength – it’s currently trading at 50% of its fair value hence ideally we are sellers at higher levels due to its attractive valuation metrics and strong balance sheet. NB: We are taking up our entitlements at $4.30 meaning our position size will increase to ~5.5%.
- We believe SFR will need copper to regain its “Mojo” before it can attempt a rally towards $6 i.e. this will probably need China to ease its Covid-zero policy.
MM remains long and bullish SFR
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