09. March 2021 | 07:20 CET
Nornickel, Kodiak Copper, BHP Billiton: From general stores to specialists
While precious metals have been consolidating for months, copper prices continue to climb. Most recently, copper started a new upward movement at the end of February and is now more expensive than it has been for decades. What is the reason for this? On the one hand, copper has always been a sought-after industrial metal. Whenever investments are made in infrastructure worldwide, copper climbs. At the same time, copper benefits from the high demand from the automotive industry. Every electric car contains around three times more copper than conventional combustion engines. We highlight three stocks that can benefit from the copper boom.
time to read: 3 minutes by Nico Popp
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
Nornickel wants to become more sustainable
Nornickel suffered severe setbacks in 2020 due to an environmental scandal and benefited little from rising copper prices. The Company primarily produces palladium (37%) and nickel (25%), with copper contributing only one-fifth of sales. Last summer, a subsidiary of Nornickel leaked large quantities of diesel. The associated fines could run into the billions. Sales in the copper business also fell in 2020, upsetting shareholders. Now Nornickel wants to counter the situation with a quality offensive and, above all, become "greener."
Thanks to new technologies, copper is to be mined more sustainably in the future and the impact on the environment reduced. The Company will cease smelting production on the Russian Kola Peninsula by the end of the year. All this reduces environmental damage and should positively impact ESG scores, which investors are increasingly looking at in companies. After Nornickel's share price soared a few weeks ago, it then sold off. The reason was production losses at two mines in Siberia due to water damage. Until the extent can be quantified, investors should keep their hands off Nornickel. However, if the consequences are marginal, the stock could be worth considering due to its high dividend.
Kodiak Copper: Pure-play copper, 50% below the peak price
While Norilsk Nickel is an established commodity producer with a diversified portfolio, Kodiak Copper is a pure copper play. In 2020, the Company impressed with phenomenal drill results on its MPD project and was considered the "next big thing" in the mining scene. After quiet months, the share price picked up again in February. Kodiak Copper had released drill results from last year, successfully identifying copper deposits. However, as two drill holes failed, the spark on the market was not yet sustainable. For late deciders who still want to jump on the copper bandwagon, this could be an opportunity.
In 2021, Kodiak Copper is scheduled for further exploration work. The Canadians already have the necessary funds in their pockets. In addition to MPD, Kodiak also wants to explore its Mohave project in Arizona in more detail. The property is located near Freeport McMoRan's Bagdad mine. Across the board, Kodiak Copper should be a familiar name to many companies in the mining industry. With its approach of targeting large projects amid established infrastructure that have been explored in the past but can positively surprise with new processes, Kodiak Copper has occupied an attractive niche. In 2020, the share price peaked at CAD 3.37 - currently, the stock is trading around CAD 1.50. Given the dynamic demand for copper and the promising assets, the stock is not uninteresting.
BHP Billiton: China business gives hope
Whenever commodities are discussed, BHP Billiton's stock also becomes a topic. Indeed, the Company has a hot iron in the fire with a copper share of around one quarter in terms of sales. But the Company's coal and petroleum business is just as important. However, there is nothing to be gained from this, even given the sustainability boom in mining. The latest figures for the division were also relatively low. Things went better for iron ore.
Although BHP Billiton is not considered to have a promising future because of its coal business, the Company wants to become greener. It has set itself the goal of reducing CO2 emissions by up to one third by 2030. Even though the figures have recently been somewhat mixed, the share price has risen significantly in recent months. BHP Billiton has a strong business in China and should continue to benefit from this. However, the commodity giant is not a copper stock. Smaller stocks, such as Kodiak Copper, are likely to offer greater leverage on the copper price.