Argonaut Algorithm: Copper’s a long-term theme for fundie David Franklyn

Taking a page out of Stan Druckenmiller’s book, Argonaut’s David Franklyn is thinking long-term – and that’s put copper in his sights.

David Franklyn sees copper as a long term investing theme. Pic: Supplied/Stockhead

Argonaut Funds Management’s David Franklyn joins Stockhead to share investing secrets from the high-conviction resource sector investing fund, including his junior stock pick of the month.

When looking for inspiration as an investor it can pay to study the performance and philosophies of some of the masters.

One whose work springs to mind for Argonaut's David Franklyn is Stanley Druckenmiller, a billionaire hedge fund manager whose legacy spans both sides of the political spectrum in the US.

Druckenmiller worked with George Soros to bet against the British Pound in the 1990s and mentored current Republican Treasury Secretary Scott Bessent at the same firm.

An interview recorded last year between Druckenmiller and Norges Bank CEO Nicolai Tangen has Franklyn thinking about the famous investor – reputed to have never had a down year – and his bias towards long-term strategic thinking.

"He's looking at the key themes that are impacting the market and trying to identify those and then the other, I think, key point is he looks 12 to 24 months out," Franklyn said.

"He's not really focused on what's happening today, but he's looking forward to say how is the world going to look in 12 or 24 months and how do I position my portfolio for that."

That's where Franklyn is taking inspiration through a resources investing lens.

Recent movements in the US under President Donald Trump have Franklyn thinking critical minerals and copper will be key themes to focus on in the years ahead, exemplified in the rare earths supply deal signed by the Department of Defense with MP Materials and the threat of a 50% tariff on copper not refined in the US.

Copper is the key theme, where Argonaut likes the longer term view.

"I think the outlook for critical minerals, and I think copper is really a key one there, is very good if you look through the noise of what's happening globally and the discussions around tariffs.

"A lot of the copper stocks are kind of on hold because people can't really see what the implications are.

"But if you look at copper dynamics, on the supply side you've got constraints. Most of the world's copper comes out of Chile, Peru and the DRC, countries that aren't particularly reliable as far as their annual production.

"And then on the other side you've got demand really strong and driven by a broad range of demand drivers. That comes from energy transition to the electrification of everything, data centres, increasing demand from China.

"There's a whole range of key drivers there on the demand side. It's a big market, it's hard to manipulate which is a positive in this day and age. So we're very bullish on that."

See also: ASX Copper Tier List: Australian copper stocks to play the rising tide

Copper bull run

The tariffs announced by US President Donald Trump were generally viewed as negative for non-US based copper stocks, with prices in the US domestic market opening up a wide arbitrage against the LME benchmark.

So why is the intense focus on the red metal potentially a good signal for long term investment in copper miners?

"If you stand back and you say, what is this all about? It's that copper is a critical metal and increasingly required," Franklyn said.

"While the US has copper resources, it's been very hard to get new projects up and running. And they do very little of their own refining or processing.

"I think ultimately what it's all about is to make sure they're in control of the refining and processing and then obviously give their domestic projects fast tracking so they can bring new projects on at a quicker pace.

"But even in having said that, bringing new projects online is a long, slow process. It's still going to take time, so I don't think it's really going to have a material impact on the supply-demand dynamic for quite some time."

So where does Argonaut see the best opportunity in ASX copper?

Argonaut's stock pick of the month

There aren't many copper growth stocks on the ASX, with a dearth of options leaving most of the big players looking pricy.

"Sandfire Resources (ASX:SFR) has done very well, but it's probably fairly priced relative to its global peers. You've got MAC Copper (ASX:MAC) disappearing under takeover from Harmony," Franklyn said.

But one that does stick out for Franklyn is FireFly Metals (ASX:FFM).

It owns the Green Bay copper and gold project in Newfoundland and the Pickle Crow in Ontario, both in Canada.

The real focus is Green Bay, which includes 24.4Mt of measured and indicated resources for 460,000t copper equivalent and 34.5Mt of inferred at 2% for 690,000t CuEq, the vast bulk of that at the Ming mine.

Led by Steve Parsons of Bellevue Gold fame, Firefly is currently running at a $760m market cap.

"They've just done a capital raise in the last month or so, raised $95 million bucks in Australia and another $10 million from retail shareholders. That's going to leave them with about $135 million in cash, that will fund a major drilling campaign to boost their resource," Franklyn said.

"So I think the fourth quarter of this year you'll see a resource upgrade and they'll move into some feasibility studies next year.

"They've already got a pretty decent sized resource, they've also got a lot of infrastructure already on site and and some of the improvements that are required. So I think that's a real standout."

Argonaut Funds Management is a high conviction resource sector investor managing the Argonaut Natural Resources Fund and the Argonaut Global Gold Fund. David Franklyn is the Fund Manager for the Argonaut Natural Resources Fund.

The views, information, or opinions expressed in  this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.

Originally published as Argonaut Algorithm: Copper’s a long-term theme for fundie David Franklyn