AC knows where copper is heading
When LME copperstores hit 47-year lows in October, driving prices above US$10,000 per tonne, it looked like the beginning of an almighty run for the red metal.
At its October peak, the copper price was within striking distance of the LME all-time high, of US$10,724/t recorded in May of this year.
Prices didn’t exceed the early-year benchmark in that instance, but that’s not to say they won’t run further into the future.
The fundamentals driving demand, combined with ageing copper projects around the world and an increasing focus on ESG issues, have lead analysts and major miners alike to a bullish stance on the metal’s future.
Argonaut’s George Ross is among them.
“What we’re seeing around the world is a rapid shift to decarbonise our industries, our consumer goods, our vehicles and heating,” he said.
“Through that we’re going to need to basically electrify our economy, and copper is the most fundamental metal for electrification of industry and our lives in general.
“That can only help the demand side of the copper equation, and the big question is – can supply keep up?”
If supply can’t keep up with demand, it would be reasonable to expect prices to set highs beyond the May peak. And with a number of the world’s prolific copper projects maturing, Ross said it seemed likely that new supply will be required to sustain a hungry market.
But what should investors be looking for when it comes to a copper project?
“Grade and scale, because that typically defines how you can mine the minerals,” Ross said.
“After that it’s the cost of mining and operating costs, as well as upfront and sustaining capital costs.
“You can have quite small deposits with quite low capital costs, but they churn out money because they’ve got very good grades and low operating costs.
“At the same time, you can have very large deposits that look amazing, and might contain a huge amount of metals, but that doesn’t necessarily mean they’ll be particularly profitable in all circumstances through a cycle.
“Some deposits make an enormous amount of money when prices are good, but either lose money or just keep their head above water during the lean times.”
As the red metal rises, a number of ASX-listed aspirants will be looking to fill the supply gap.
