Copper Bottoming; New Buys
The broad industrial and precious metals market remains subject to the wild oscillations of daily news headlines. There are, however, some glimmers of life in beleaguered metals like copper and platinum.
While the front-month copper futures price is down 14% from its May intraday high of $4.90 a pound, the red metal was up nearly 3% on Wednesday in response to supply-related concerns in Peru, the world’s second-largest copper producer.
Northern Miner reports that Shanghai Futures Exchange warehouse inventories are at their lowest levels in over 12 years, while Mining.com said LME on-warrant inventories have slid almost 91,000 tons (down 27%) in the past week.
Source: Mining.com
Copper-related news out of China is a mixed bag, with traders still worried that fallout from China’s major property developer, Evergrande, will hurt building-related copper demand (copper’s single biggest use). However, falling inventories and rising premiums in China are providing a strong counterbalance to the Evergrande-related fears for copper’s near-term outlook.
All told, the copper futures price is still trying to establish an intermediate-term bottom and appears to be close to establishing one. Assuming this happens in the next few days, we’ll likely get a confirmed buy for one of the stocks I placed on our watchlist earlier this week, namely Taseko Mines (TGB). A decisive breakout above 2 level will confirm the buy for TGB, as previously discussed.
Elsewhere, we have a new buy signal for a mining company that will provide us with some exposure to tin after our stop-loss in the tin ETN was recently triggered. While the tin price itself has been subject to broad market volatility of late, demand for the metal remains strong
The London Metal Exchange tin price is up about 70% since January, mainly because of stable demand coupled with supply still not being able to catch up to it. This is in part due to a shortage from a major smelter in Malaysia, which was unable to fulfil contracts due to Covid-related lockdowns.
With tin remaining in a position of strength, I’m placing Alphamin Resources (AFMJF) on a buy. Mauritius-based Alphamin explores and develops mineral properties and is a low-cost producer of tin concentrate from its high-grade deposit, Mpama North, part of the Bisie Tin Project in the Democratic Republic of Congo. (Mpama North is the world’s highest-grade tin resource—about four times higher than most other operating tin mines in the world—allowing Alphamin to produce 3% of tin produced globally.)
Alphamin also mines and sells tin from its North Kivu mine, producing nearly 10,000 tons of tin annually. While Alphamin is recognized as a promising tin producer, it flies largely under the radar among mining stock analysts right now. Total revenues for 2021 are projected to be around $310 million, up 66% from a year ago.
What to Do Now
Participants can buy a conservative position in AFMJF here using a level slightly under 58 as the initial stop-loss. BUY A HALF
I’m also placing the ADR for Glencore PLC (GLNCY) on a buy after its recent show of strength. Glencore is the well-known multinational commodity trading and producing firm, with exposure to oil and gas, minerals like coal, ag commodities and metals like copper, zinc and nickel. In other words, it’s an across-the-board natural resource play and, as such, allows investors to capitalize on broad commodity market strength.
Recent strength in the energy sector is responsible for much of Glencore’s outperformance vis-à-vis more metal-focused stocks, but its industrial metals business is also doing well. (Glencore’s CEO recently told the Qatar Economic Forum that world copper supplies need to double by 2050 in order to meet the growing demand for renewable energy, and the firm is well positioned to benefit from this demand explosion.)
Analysts anticipate 47% revenue growth for the full year.
What to Do Now
Participants can buy a conservative position in GLNCY here using a level slightly under 8.75 as the initial stop-loss. BUY A HALF