THE IMPORTANCE OF COPPER When Panguna previously operated...

THE IMPORTANCE OF COPPER When Panguna previously operated between 1972 and 1989 it was among the world’s largest open cut copper mines. In its 17 years, the mine produced three million tonnes of copper concentrate, 306 tonnes of gold and 784 tonnes of silver. Significantly, based on latest resource statements at least 5.3 million tonnes of copper and 547 tonnes of gold remain in situ. To put this into perspective, copper is currently trading at about US$9,500 a tonne and recently topped US$11,000 a tonne for the first time on the London Metal Exchange (futures). Meanwhile, gold has been trading at about $74 million a tonne US. Even conservative estimates place the current ballpark value of Panguna’s remaining minerals in the tens-of billions-of-dollars. The likes of Goldman Sachs (global investment banking) remain bullish about copper prices in the mid-term of the back of industry disruptions and declining inventories. (Industry cost cutting, industrial disputes, labour shortages, anticipated monetary easing and continued growth in copper demand among reasons for increasing pressure on supply). In the longer term, others warn of a potential structural supply gap of up to 10 million tonnes per year by 2030, with new supply not keeping pace with demand. This is good for the Panguna deposit. In no small part this is being driven by the global transition to cleaner energy in the quest to meet ambitious carbon emissions reduction targets. Copper, because of its efficient transfer properties is an essential material in clean energy technologies with about five times the quantity needed when compared to traditional energy systems. A conventional combustion engine for example contains 10-22 kilograms of copper whereas an electric car requires more than 80 kilograms. Meanwhile, a single three MW wind turbine can contain up to 4.7 tonnes (4,700kg) of copper and a solar power system can require 5.5 tonnes per MW (5,500kg). As it stands, about 35 per cent of current copper demand is met from recycling and while recycled copper is sufficient for products such as pipes & fittings; uncontaminated, virgincopper is the most suitable for clean energy technology. That is what Panguna copper concentrates will provide to help satisfy world demand. Ominously, something like 200 copper mines around the world are expected to run out of ore before 2035 (in about 11 years). This augurs well for the Panguna deposit. While expansion of existing mines, including the likes of Ok Tedi, will help ease some of the deficit through to 2030, Bloomberg Intelligence warns of the lack of new shovel-ready projects between now and then. The redevelopment of Panguna comes in handy. It has been said that closing the predicted supply gap would require building the equivalent of eight new projects the size of the world’s largest mine (BHP’s Escondida mine in Chile). Due to long lead times for green field projects, anywhere from 14 to 20 years, there is a strong logic to the redevelopment of a brown field project such as Panguna. It is both a known and proven resource that is logistically accessible both to redevelop and to ship concentrate to market. The fact the project also has the strong political backing of the ABG as well as landowners and veterans sends an important signal to would-be investors.