Looming copper supply cliff puts porphyry players in pole...

Looming copper supply cliff puts porphyry players in pole position

Industry legend and the founder of large Canadian copper miner Ivanhoe Mines recently shone the spotlight back on the extreme lack of copper supply the world is facing thanks to years of underinvestment in the mining sector and the acceleration in the clean energy transition.

According to Robert Friedland,the world is going to need a whopping 700 million tonnes of copper over the next 22 years– the equivalent of all the copper ever mined in history.

This dire need for copper in years to come was reiterated in a recentABC Four Cornersprogramfocusing on the critical minerals required to continue the push towards net zero.

Allison Britt, director of mineral resources for Geoscience Australia, described a critical mineral as an element, metallic or non-metallic, that’s got two characteristics – “one, it’s absolutely essential for modern technologies, our economies, or even our national security and two, there’s a risk, either real or perceived, that its supply chains could be disrupted”.

Each electric vehicle requires 500,000 pounds of raw materials and that includes copper, with demand for its use in EVs set to increase tenfold by 2030. Demand for copper, in absolute tonnage and dollar terms, is the most critical of these metals needed to facilitate the decarbonisation transition.

“It’s absolutely ironic, but to save the planet we are going to need more mines,” Britt told theABC.

CRU Group analyst Robert Edwards said in a recent Copper Market Outlook report that the market is heading for a near 200,000t deficit in 2022, which should drive the price of the red metal up late in the second quarter and continuing into the third quarter of this year.

He noted that while a number of major mining projects would start production later this year and next, the associated forecast surpluses in 2023-2025 would not be sufficient to drag the price much below $US10,000/t in the medium term.

“The forecast has a steeper refined copper deficit in 2022 than three months ago (187,000t v 100,000t),” he explained.

“We assume the copper price will average $10,000/t in May and then begin to move higher, as China lockdowns end and stimulus begins to kick in, and before key South American mine projects hit commercial production.

“2023-2025 surpluses are higher than in January but not enough to fundamentally change the medium-term price view, with LME 3M staying close to $10,000/t.”

While electrification and ‘greening’ the planet is driving copper demand, there has been a shortage of major new development projects or discoveries to help meet this predicted demand.

Last week Anglo American’s new CEO, Duncan Wanblad, stated that a carbon neutral world would require approximately 60 new copper mines the size of its largest growth project, the Quellaveco mine in Peru. It has taken more than 10 years to bring Quellaveco into production with a construction cost of over $US5 billion.

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