OZL, other copper miners to see earnings boost on demand, price
Aussie copper miners, including a South Australian business valued at more than $7bn, are tipped for double-digit boost to earnings in line with powerful demand for the metal over the next five years.
Growing energy transition-related global demand for copper and its soaring price are set to transform the earnings outlook for Aussie miners, Macquarie group analysts said in a note to clients today.
The group upgraded copper price forecasts to more than 20 per cent in the short-term and more than 30 per cent in the medium-term to incorporate energy transition related demand.
Macquarie’s previous forecast of a 247,000-tonne surplus for the global copper market has now swung to a 226,000-tonne deficit.
“The upgrades have transformed the earnings outlook for OZL (South Australia-based OZ Minerals) and SFR (Sandfire Resource, WA), enhancing our bull case for both names,” Macquarie’s note said.
The group tipped a 50-60 per cent rise in earnings over the next five years for OZL, which has two copper-gold mines at Prominent Hill and Carrapateena in South Australia.
OZ Minerals reported a $48.7m increase in its FY20 underlying net profit to $212.6m while group revenue increased 21.2 per cent to $1.3bn.
“OZL can now fund its impressive growth outlook from cash flow and existing facilities and remains our preferred base metal pick. Our price target rises 25 per cent to $30.00 due to the improved outlook.”
The impact on SFR is expected to be significant with earnings forecasts “rising by an average of ~90 per cent” over the next five years, lifting Macquarie’s price target 34 per cent to $9.
“BHP and RIO both see solid upgrades while higher by-product credits enhance the outlook for PAN (Panoramic Resources) and NCM (Newcrest Mining), which we upgrade to Outperform.”
BHP earnings are likely to be up 6-11 per cent from FY22-25 while Rio will see a 2-9 per cent lift for the calendar years to 2024.
“We lift our ASX price targets on BHP and RIO by 10 per cent and 5 per cent to $55 and $142, respectively.
Long-term copper price in real terms is forecast to be 13 per cent higher at $US3.15/lb.
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