Ann: Second Large Copper Porphyry System Confirmed, page-127

Copper supply-demand outlook creates perfect storm for next generation of explorers to producers

Major copper producers are losing market share as demand for the red metal gets set to explode thanks to the clean energy transition already underway. This opens up a big gap for emerging producers to step in and fill. This was illustrated by Newmont’s $C456m ($477.7m) cash offer last month for GT Gold, a copper porphyry explorer in Canada. Juniors with new prospective projects in tier 1 jurisdictions appear set to be well rewarded.Commodities research house Wood Mackenzie estimates that for the industry to counter the issue of grade declines and depletions, over the next decade it needs to inject an additional $US130bn ($170.7bn) to deliver an extra 6.5 million tonnes of copper supply each year.And that’s just to meet Wood Mac’s “base case” scenario. If the energy transition was accelerated, copper producers would need to pump out an extra 9 million tonnes each year by 2030, requiring a massive $US325bn investment.The latter scenario appears more likely and even conservative, according to international copper market commentator Gianni Kovacevic. “Copper is going through a once-in-a-hundred-year pivot with this global transition to electrification,” he said.“The Green New Deal (in the US) and on top of that the restimulation of the global economy, which is now well in excess of $US10 trillion dollars — they all help copper.“We need more copper in the next 20 years than was installed in the last 130 (years).”Kovacevic’s view regarding the transition to electrification is backed up by the world’s largest miner, BHP (ASX:BHP), which estimates copper production will have to double over the next 30 years to satisfy these new demands.Julian Kettle – senior vice president, vice chair metals and mining at Wood Mac – says this would stretch investor appetite and corporate financing capability, potentially to breaking point.“Given lead times, investment needs to be mobilised in the next two to three years – and even this won’t prevent market shortages mid-decade, which are essentially ‘baked in’ due to insufficient elasticity of supply,” he said.There is currently 17 million tonnes of future copper supply already in the pipeline, and while that is more than enough to meet projected demand, Kettle says many of these projects are in “risky jurisdictions” and not the “usual hunting grounds of the copper majors, who tend to prefer the richer pickings of low-risk jurisdictions and long-life, low-cost assets”.By Wood Mac’s numbers, a major copper producer has to pump out at least 500 kilotonnes of copper each year.Kettle said right now there were 13 entities that met that criteria and collectively they accounted for nearly 10 million tonnes per annum of copper production in 2020, giving them 47 per cent global market share.“However, the major copper producers will collectively experience a net decline in output of 800 kilotonnes per annum by 2030, without further project development,” he explained.“Set against an increase in market demand of around 6 million tonnes per annum, this means the majors’ collective market share will decline to just 34 per cent (assuming no further projects are sanctioned).“The situation will become acute by 2040 when, without further investment, the ‘Big 13’ copper majors’ output will decline to 7 million tonnes per annum, or less than 25 per cent of global output.”

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