That makes sense if energy (oil) is increasing in price its going to put pressure on the supply and drive the copper price higher. The biggest cost to most operations is diesel for plant and machinery and power station.
It is interesting to see the chart of mined copper grades leveling out around the 0.6% mark. Some large porphyry mines have cut-off grades around the 0.4-0.5% range. Its also interesting that the copper grades reduced significantly from the 1930's to 1970's but the copper price generally ranged between that $2-$3 mark. Perhaps something to do with increased productivity and a move towards large bulk tonnage operations? Because generally the larger operations with generally smaller average grades can produce at lower costs due to economies of scale. But as you have suggested if these grades continue lower due to limited new discoveries and demand is the same or higher the copper price will increase. You just have to take any potential productivity increases into account such as new technologies.
So if the oil price is increasing over the long term and the average grades of deposits are decreasing (without any significant improvement in productivity) there is good argument that things have changed. Pending things keep steaming along in the developing nations, and Americas stock market keeps going up forever.
TGS Price at posting:
9.6¢ Sentiment: None Disclosure: Not Held
