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Why this fund manager is backing ASX copper shares

Copper prices are trading at their highest levels in more than 2 years. So which ASX copper share is reaping the benefit?
The post Why this fund manager is backing ASX copper shares appeared first on Motley Fool Australia. –

copper fittings

The best placed ASX copper shares are enjoying some healthy share price gains as the price of copper trades at levels not seen in more than 2 years.

At the current price of US$6725.50 per tonne, copper has gained 37% since its 20 March lows.

You’ll find copper used extensively in construction areas such as plumbing and roofing, as the metal is highly resistant to corrosion. As nations move to revive their economies after the coronavirus slowdowns, that should help drive continued strong demand.

But copper’s main appeal is its superior electrical conductivity. Its widely used in buildings’ wiring, but also faces a likely surge in demand as electric vehicle (EV) production begins to take off.

John Forwood is the portfolio manager at the Lowell Resources Fund and he has a keen eye on the burgeoning EV market. But rather than guess at which battery technology – and hence which metals – will win the technology race, he’s focusing on copper. As noted by Australian Financial Review, Forwood says:

The way we really like to play the electrification theme – all the charging stations, the cars themselves – require a lot more copper. So that’s probably the safest bet. Rather than trying to pick battery chemistry – is it going to be cobalt, is it going to be titanium, is it going to be tin or zinc or whatever. Every month, there’s a new battery chemistry that gets touted.

If the demand for copper continues to outpace new supply, it should bring more good news to OZ Minerals Limited (ASX: OZL) shareholders.

What does Oz Minerals do?

Based in South Australia, OZ Minerals is a mining company primarily focused on copper. It owns and operates the high-quality Prominent Hill copper-gold mine and the Carrapateena advanced exploration copper-gold project. Both sites are located in South Australia.

OZ Minerals also has extensive operations in Brazil and an exploration project in Sweden.

How has the OZ Minerals share price been performing?

Oz Minerals’ share price is down 8% from 3 September, when shares were trading at 5-year highs.

As you’d expect, the company’s share price fell hard alongside the copper price in the first months of the global pandemic, dropping 45% from 20 January through 23 March. Since that low, the share price is up 131%, putting it up 31% so far in 2020.

By comparison the S&P/ASX 200 Index (ASX: XJO) is down 12% year-to-date.

The Oz Minerals share price is unlikely to leap another 131% any time soon. But with copper inventories running low and demand likely to remain strong, this is one share you might want to add to your portfolio.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why this fund manager is backing ASX copper shares appeared first on Motley Fool Australia.

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