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Why the Oz Minerals (ASX:OZL) share price is up 78% in 2020

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South Australia’s Oz Minerals Limited (ASX: OZL) is rounding off an exceptional year. With the Oz Minerals share price up 78%, it’s the ninth best performer on the S&P/ASX 200 Index (ASX: XJO) in 2020.

The broader ASX 200 is flat over that same period.

How has the Oz Minerals share price outperformed?

The remarkable 78% year-to-date gains for the Oz Minerals share price come despite the company’s shares having plunged 41% earlier this year during the pandemic-fuelled market panic.

Oz Minerals shares bottomed at $5.99 on 23 March before staging a mighty rebound, gaining 213% since that low to today’s $18.72 per share (at the time of writing).

Shareholders have much to thank for Oz Minerals’ success this year, including strong management and high-quality mining assets. But one of the big factors driving the 2020 share price gains is the soaring price of the company’s primary mineral target, copper.

Like Oz Minerals’ shares, copper also hit its low on 23 March, trading for US$4,630 (AU$6,092) per tonne. It’s currently trading for US$7,788 per tonne, or more than 68% higher.

Copper prices have been rising as surging demand for the metal has far outpaced new supply this year. Copper is used in a range of infrastructure projects due to its non-corrosive nature. And its high conductivity has seen demand grow for use in wiring, and in batteries for home storage and electric vehicles.

As with iron ore, China’s appetite for copper to fuel its infrastructure and manufacturing projects is a prime factor driving prices higher. And, as Forbes reports, explosive growth in freezer production in the Middle Kingdom is further tightening limited supplies:

Citi, an investment bank, identified the freezer factor in its latest metals sector research which noted how strong copper demand in China had “singlehandedly propelled” the bank’s copper consumption tracking tool to levels normally associated with synchronized global growth.

“We have seen an 80% year-on-year increase in freezer output in China, potentially reflecting Covid-19 related fears over security of food supplies,” Citi said.

And there could be more good fortunes for ASX copper shares ahead in 2021. As Jeff Currie, head of commodities research at Goldman Sachs told Bloomberg, “We have all the tell-tale signs of a super-cycle.”

Oz Minerals company snapshot

Headquartered in South Australia, Oz Minerals is a mining company primarily focused on copper. It owns and operates the Prominent Hill copper-gold mine and the Carrapateena advanced exploration copper-gold project. Both sites are located in South Australia. The company also has extensive operations in Brazil and an exploration project in Sweden.

Based on the current Oz Minerals share price, the company pays a dividend yield of 1.23%, fully franked.

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Motley Fool contributor Bernd Struben 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 Bruce Jackson.

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