Longer-term copper price & Kalkaroo

US$10,000 tonne copper & the impact of geological exhaustion. Can anywhere replace Chile?

Last week, US investment firm Bernstein Research updated its forecast copper prices to US$3.13/lb during 2022, US$3.40/lb during 2023, and US$3.67/lb during 2024.

Bernstein pointed to key factors underpinning copper demand: recent government stimulus programs; the electric vehicle revolution; and greening of electricity. The firm coupled its bullish demand thesis with 11 reasons why copper supply may disappoint, which ranged from the scarcity of the metal, lower grades and lengthening lead times for mine development.

"We see all these ingredients and more for the copper sector and are thus more bullish than both consensus commodity forecasts and the forward curve."

As Kalkaroo is a 'gold mine' in the first few years, the anticipated copper metal price recovery predicted by BHP during 2024 would fit in nicely, particularly if few new large copper projects are approved for development. Kalkaroo has the potential to provide significant leverage to anticipated future improved copper prices.

See post #:46159661.

For every US$0.10 pound increase in just the long-term forecast copper price under the Kalkaroo PFS value matrix the Kalkaroo NPV_7.5% increases by ~$42 million (after-tax). Or approximately the current HAV market capitalisation.



For those that had not heard of Bernstein before, during August 2013 it published the attached Copper Report. The majority of the points raised in that 2013 report look like they are still valid today, including US$10,000 per tonne copper longer-term:



"The geology of copper...there is no escape from declining quality of remaining deposits.Once exploited a deposit is gone forever, and once discovered a deposit cannot be rediscovered. The Earth's endowment with high grade copper deposits is finite. It is only a question of when (not if) that limitation leads to higher real copper prices to fund copper extraction and development."

"The supply of the world's copper is critically dependent on the unique geology of Chile. There are no new Chiles and this fact must be factored in to expectations about the viability of future supply growth."


Five out of the top 10 copper behemoths are located in Chile. Escondida in Chile is the largest copper mining operation in the world during 2019, but with a declining copper grade:

• 1.72% Cu average head grade during 2007
• 0.52% Cu Ore Reserve grade during 2019.

According to Bernstein, copper prices going substantially higher is the only way new long-term copper production will be built. To put it simply, both technological and geological advances in copper mining are increasingly difficult, meaning that the copper metal price becomes the principal motivating force.

Reminder: The attached Copper Report from Bernstein was written before the increased demand associated with the worldwide move to 'electrification of transport' and the 'decarbonisation of stationary power'.

BHP sees copper, not lithium or cobalt, as the best way to benefit financially from increased EV (Electric Vehicle) adoption rates.

Food for thought.

Cheers

These are only my thoughts and it does not constitute investment advice. Before acting on any information you read and before making any financial or investment decisions, you should always consult your advisor(s) or other relevant professional experts.


P.S. US$10,000 per tonne copper equals US$4.54/lb.

The last time copper metal price was at US$10,000 per tonne was during February 2011.