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Director’s Cut
Copper has not lost its attraction
Our global commodities team has made some timely calls on the copper price,
with a short term sell in early March that was removed near the bottom in mid
May. Looking forward, Colin Hamilton says the fundamentals remain robust.
With mine supply growth assumptions at risk, physical inventories depleting and
Chinese sentiment likely nearing a bottom, he continues to expect copper to
push back towards US$5 a pound over the next 3 to 6 months. Of these bullish
factors, it’s worth highlighting the growing supply risk. He says copper output is
540kt below plan this year, and this number does not include the impact of the
current industrial action in Chile. As one third of global copper production, the
Chile strike presents a major upside price risk. >> Read Report
Two preferred copper picks are OZ Minerals (OZL AU) and Jiangxi Copper
(358 HK). On Jiangxi, Christina Lee recently visited its primary copper mine in
Dexing, which is a good quality deposit, with a 50 year life. Her channels
suggest copper volumes are well on the way to achieving the 200kt target, up
from last year’s production of 172kt. This is a good outcome given many mines
around the world have been struggling to increase their copper output. She also
reminds us that Jiangxi’s share price and earnings have a high correlation with
the copper price with and R-squared of 92% over the past two years, and
earnings rising 1.3% for every 1% rise in the copper price.
Highlights
Paul Cavey says there will be greater concern about China’s growth if the
official PMI also falls below 50, which is his expectation.
Dan McCormack says European measures last week are a step in the right
direction, but fall short of being the desired game changer.
Jason Gammel says the increase in Occidental’s (OXY US) rig count is a
bullish indicator of future production, and he remains a buyer.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
Copper has not lost its attraction
Our global commodities team has made some timely calls on the copper price,
with a short term sell in early March that was removed near the bottom in mid
May. Looking forward, Colin Hamilton says the fundamentals remain robust.
With mine supply growth assumptions at risk, physical inventories depleting and
Chinese sentiment likely nearing a bottom, he continues to expect copper to
push back towards US$5 a pound over the next 3 to 6 months. Of these bullish
factors, it’s worth highlighting the growing supply risk. He says copper output is
540kt below plan this year, and this number does not include the impact of the
current industrial action in Chile. As one third of global copper production, the
Chile strike presents a major upside price risk. >> Read Report
Two preferred copper picks are OZ Minerals (OZL AU) and Jiangxi Copper
(358 HK). On Jiangxi, Christina Lee recently visited its primary copper mine in
Dexing, which is a good quality deposit, with a 50 year life. Her channels
suggest copper volumes are well on the way to achieving the 200kt target, up
from last year’s production of 172kt. This is a good outcome given many mines
around the world have been struggling to increase their copper output. She also
reminds us that Jiangxi’s share price and earnings have a high correlation with
the copper price with and R-squared of 92% over the past two years, and
earnings rising 1.3% for every 1% rise in the copper price.
Highlights
Paul Cavey says there will be greater concern about China’s growth if the
official PMI also falls below 50, which is his expectation.
Dan McCormack says European measures last week are a step in the right
direction, but fall short of being the desired game changer.
Jason Gammel says the increase in Occidental’s (OXY US) rig count is a
bullish indicator of future production, and he remains a buyer.
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