Copper Miners: A Contrarian Play on Hidden Demand and Supply Constraints

The copper market is a battleground of volatility. Trade wars, supply disruptions, and geopolitical tensions have sent prices swinging, creating a perfect storm of uncertainty. Yet, beneath the noise lies a compelling case for contrarian investors: ASX-listed copper miners like Capstone Copper (CSC) and Sandfire Resources (SFR) are undervalued, their stocks lagging behind fundamentals that suggest a long-term bullish trajectory.

Why copper? The metal is the bedrock of the energy transition—critical to electric vehicles, solar panels, and grid infrastructure. Even as trade wars threaten to disrupt supply chains, China's stimulus-driven demand for infrastructure and green energy remains resilient. Meanwhile, projects like the Democratic Republic of Congo's Kamoa-Kakula complex (highlighted in recent Macquarie analysis) are proving that supply constraints are real, and production growth is harder than markets assume.

Macquarie's Bullish Call on Kamoa-Kakula: A Supply Game-Changer

Macquarie's 2025 analysis underscores how Kamoa-Kakula's ramp-up is a rare silver lining in a constrained supply landscape. The mine produced 112,000 tonnes of copper in Q2 2025, up 11% year-on-year, with plans to hit 450,000 tonnes annually by 2026. This output is critical in offsetting global deficits, as projects in traditional hubs like Chile and Peru face delays due to regulatory hurdles and water scarcity.

Yet, markets remain skeptical. Analysts worry about dewatering delays and stockpile depletion risks. But Macquarie's view is clear: Kamoa-Kakula's scale and high-grade reserves (up to 5% copper) make it a linchpin of global supply stability. For investors, this means copper prices—despite short-term dips—will stay elevated over the next decade, rewarding miners with cost-efficient operations.

Capstone Copper (CSC): A Hidden Gem in the Andes

Capstone's Q1 2025 results are a masterclass in operational execution. Consolidated copper production surged 28% year-on-year to 53,800 tonnes, while C1 cash costs dropped to $2.59/lb, a 10% improvement. The Mantoverde mine, now operating at record throughput of 33,000 tonnes/day, is the star.

But the real value lies in Capstone's strategic foresight. The $146 million Mantoverde expansion (targeting 45,000 tpd by 2026) and the $2.3 billion Santo Domingo project (106,000 tonnes/year of copper by 2027) are game-changers. These projects, which blend low costs and long mine lives, position Capstone to outperform even as peers struggle.

Valuation? At a current market cap of ~$3.8 billion, CSC trades at a P/E of 12x—well below its five-year average. Investors are ignoring the $1.7 billion after-tax NPV of Santo Domingo, a project that could turn Capstone into a top-ten global copper producer.

Sandfire Resources (SFR): Outperforming with Precision

Sandfire's Q2 2025 results are equally compelling. The company reported an EPS of $0.20, smashing estimates by 25%. This beat was driven by cost efficiencies at its DeGrussa mine in Western Australia, where C1 cash costs fell to $1.75/lb, among the lowest in the industry.

Sandfire's diversified portfolio—including the undeveloped Tropicana gold project and exploration in Queensland—adds optionality. But its real edge is China exposure. Over 70% of its copper is sold into Asian markets, and its low-cost profile insulates it from tariff volatility. Despite this, SFR trades at a 30% discount to its net asset value, a disconnect that's ripe for correction.

China's Hidden Demand: Why the Trade War Isn't Killing Copper

Trade tensions have cast a shadow over copper stocks, but China's demand remains a structural pillar. The country's 2025 infrastructure plans—targeting $1.5 trillion in spending—will require 4 million tonnes of copper annually, up from 3.5 million in 2024. Even as tariffs disrupt some imports, domestic projects like Kamoa-Kakula and Australia's Sandfire are filling the gap.

Moreover, China's hidden demand—driven by EV adoption (projected to hit 10 million units/year by 2027)—is underestimated. Analysts at Macquarie note that 60% of global copper demand growth over the next decade will come from EVs, and China's stimulus is accelerating this shift.

The Contrarian Play: Buy the Dip

The market is fixated on short-term risks—trade wars, inflation, and Fed hikes—but the long-term narrative is bullish. Copper's industrial and strategic importance ensure demand will outpace supply, especially as new projects face permitting delays and cost overruns.

Investment thesis:
- Capstone Copper (CSC): Buy dips below $3.00/share. Target: $4.50 by 2026.
- Sandfire Resources (SFR): Accumulate below $3.50/share. Target: $5.00 by 2027.

Both stocks are cheap relative to their growth trajectories and offer leverage to copper prices. Meanwhile, their exposure to China's stimulus and green energy plans provides a floor against volatility.

Final Take: The Market Is Wrong—Copper's Time Is Now

The copper miners of the ASX are undervalued because they're misunderstood. Investors are overreacting to short-term noise while ignoring the structural tailwinds of electrification, supply constraints, and China's unyielding demand. Macquarie's analysis of Kamoa-Kakula's impact is a reminder: supply growth is hard, and copper's era is just beginning.

For contrarians, this is the moment to buy the dip—before the market catches up.