- Regal’s Charlie Aitken believes we’re entering a new commodities supercycle
- The firm’s top pick is copper and Aitken says US$15/lb is a realistic proposition
- Earlier this year, Regal doubled its investment in the advanced Caravel copper project
A bullish Charlie Aitken says a new commodities supercycle is on the horizon.
The Regal Funds Management group investment director delivered the opening keynote at the Resources Rising Stars Conference on the Gold Coast this week.
“I think in 33 years of doing this, I can’t remember a better setup for mining commodities and energy,” Aitken said.
“It is all coming together right now. I think we are ending a period of paper assets outperforming hard assets. I think we’re entering a period of low capex businesses outperforming capital-intensive businesses.
“There is a massive change in the world.”
While urbanisation and population growth have been key drivers for commodities over the past decade, Aitken said there were now new demand drivers which would lead to higher metal prices and a re-rating of mining stocks.
“If you think about it, mining and energy now is the intersection of AI, hyperscale capex, defence spending, infrastructure, electrification, decarbonisation – it is all here right now,” he said.
Own scarcity
Aitken said while demand was surging, the supply side remained constricted.
“This is a time to own scarcity,” he said.
“We believe in a world that is inflationary. You want to own the causes of inflation, which is commodities.”
Aitken said the supply side was facing headwinds including red and green tape and lengthy lead times, with an average mine in Australia taking 12-14 years to go from exploration to production.
“That is a very long-term supply response in a so-called mining-friendly economy, and we don’t think that changes in the short term,” he said.
Aitken said investors should be adding resources exposure now, as every macroeconomic element was in place for a commodities supercycle.
“All cycles in everything, in all asset classes, are born of pessimism, grow on scepticism, mature on optimism, and peak on euphoria,” he said.
“I would strongly suggest that we are on the ‘grow on scepticism’ phase of a commodity super-cycle – no one really believes it.”
Though BHP had reclaimed its position as Australia’s largest company, over Commonwealth Bank of Australia, Aitken said people remained sceptical.
“I believe that is a classic prolonged scepticism phase of a mining commodities bull market,” he said.
“It all takes some time, but I feel that all the elements are in place.
“If you think about everything from competition for resources, currency debasement, the concerns about the US dollar, paper assets, global government debt, the geopolitical situation and supply disruptions … I think we have a wonderful situation in front of us now.”
Copper the top pick
Regal likes gold, uranium and critical minerals but its top pick in the commodities space is copper.
This week, copper hit a new record high of more than US$14,750 per tonne or US$6.60 per pound.
“If you think about copper, nothing in this modern world can happen without copper,” Aitken said.
“If you think about the AI data centre capex, none of it can happen without electricity.”
According to the International Energy Agency, the next five years will add on average 50% more electricity demand per year than over the past decade.
Aitken said Regal invested in “picks and shovels”.
“There is no more important pick and shovel outside of semiconductors and memory than copper,” he said.
“None of this can happen without copper, so the copper setup to us looks particularly good.”
Despite copper reaching record highs, Aitken said copper equities were still heavily discounted.
“The number one commodity we are bullish on is copper,” he said.
“We think it is essential across multiple different drivers of growth and is materially undersupplied.”
He added that supply disruptions were particularly acute in copper, with an estimated 7% of global production disrupted over the past 12 months.
“I can see a scenario where five years from now, copper prices could be US$15 a pound. They’re currently US$6.80 a pound,” he said.
“There is a scenario where copper is extremely well bid, and copper equities do particularly well.”
A near-term pick and shovel
Regal’s enthusiasm for copper might explain why it’s backed Caravel Minerals (ASX:CVV).
The company owns the Caravel copper project in Western Australia, which has a resource of 1.28 billion tonnes at 0.24% copper for 3.03 million tonnes of contained copper, making it Australia’s largest undeveloped copper project.
Last year, Regal loaned Caravel $15 million and earlier this year, the maturity was extended until March 2028.
At the same time, Regal also doubled its investment in the project by paying $15m for a 0.75% net smelter return royalty.
“The Regal royalty validates their ongoing confidence in, and strong commitment to, the project,” Caravel managing director Don Hyma said at the time.
“Combined with the extension of our existing facility to March 2028, the additional royalty funding delivers less dilutive funding through 2027, enabling the company to progress the project and advance discussions with potential project partners.”
Caravel has also received non-binding letters of interest from Finnish export credit agency Finnvera and KfW IPEX for up to US$220m of tied, Finnvera-backed senior debt associated with a proposed Metso concentrator equipment package.
Canaccord Genuity analyst Paul Howard is modelling a 25-year operation processing 30Mt of ore per annum to produce around 60,000tpa of copper, with pre-production capital of around $1.8 billion and C1 costs of roughly US$2.00/lb, net of by-product credits.
A definitive feasibility study is due to be released before the end of this month, after which Caravel is planning to move to front-end engineering design, operational readiness, project financing and the finalisation of the approvals process.
Like Aitken was saying, Caravel is yet to fully re-rate off the back of record copper prices.
The stock hit a 52-week high of 52.5c in January and reached a 2026 low of 23c by early July.
Since then, the stock has been on the rise to back over 30c this week and is up nearly 15% over the past month.
Still, Caravel shares sit well below Canaccord’s current price target of 80c per share.
At Stockhead, we tell it like it is. While Caravel Minerals is a Stockhead advertiser, it did not sponsor this article.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
