The copper price could explode. This is the ASX share to take advantage

A boy is about to rocket from a copper-coloured field of hay into the sky.A boy is about to rocket from a copper-coloured field of hay into the sky.

There are many ingredients that go towards making batteries and electronics.

That’s why even though lithium stocks might have been all the rage in recent years, it could pay to research other mineral producers.

Wilsons equity strategist Rob Crookston suggested this week that his team is “structurally bullish” on copper shares.

“Copper is a popular base metal that has been favoured for centuries for its electrical conductivity and low reactivity,” he said in a memo to clients.

“Growth in copper demand is expected to outpace new supply over the medium- to longer-term.”

The global decarbonisation movement will require “significant quantities of copper”.

“EVs [electric vehicles] typically require around 3x more copper than comparable conventional internal combustion engine vehicles,” said Crookston.

“Solar and offshore wind require an estimated ~3x and ~7x, respectively, more copper per megawatt of installed capacity than popular fossil fuel energy sources.”

The company that will turn from iron ore to copper

So which ASX shares are the best to buy to cash in on the looming copper shortage?

Strangely, there actually aren’t that many choices.

“In spite of Australia having the world’s second-largest copper reserves behind Chile, the ASX suffers from a scarcity of high-quality pure-play copper miners, which was exacerbated by BHP Group Ltd (ASX: BHP)’s takeover of OZ Minerals.”

For Wilsons analysts, buying a major miner that produces a diversified range of minerals is the favoured method of exposure to copper.

And of those, there is one that they would pick.

“BHP offers by far the most copper exposure of the large diversified miners, in both absolute and relative terms.”

This is despite Crookston’s team staying away from iron ore, which is currently the bread-and-butter business for the Big Australian.

“We are constructive on BHP, partly based on the view that the business will soon become a copper producer first and foremost — though we do note the business has no plans to walk away from its profitable iron ore business.”

The BHP share price is 6% down on a year ago, currently presenting a buying opportunity.

The dividend yield stands at a mouthwatering 8.95%.

The company has copper interests in Chile, South Australia, the United States and Peru.

“BHP’s operational copper mines are high quality, low cost, long life assets with significant production growth potential, while it also owns a range of exploration assets like its Oak Dam development in South Australia,” said Crookston.

“According to consensus estimates, BHP will generate more earnings from copper than iron ore by FY25.”

The most bullish modelling sees BHP’s copper earnings overtake iron ore as soon as the next financial year.

“In any case, regardless of the timing, the long-term trend towards copper is clear, and in our view, this makes BHP a more compelling investment opportunity than the other major diversified miners.”

The post The copper price could explode. This is the ASX share to take advantage appeared first on The Motley Fool Australia.

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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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