Ask most mining chief executives and investors which metal will perform best in the future and very often copper will come up. The reason primarily relates to supply. Relative to how much of it we use, copper is geologically one of the scarcest industrial commodities.
World copper demand is relatively steady. A deficit of about 150,000 tonnes between supply and demand exists, continuing through next year, says the International Copper Study Group. One way to measure the increasing scarcity is by tracking the yield of copper from each unit of ore mined. That percentage has steadily declined, making it harder to meet demand.
Consider that in 2010, the 15 largest copper producers had reserves rated at an average yield of 1.2 per cent. By the end of last year, that number had nearly halved to 0.72. Only three group members — Norilsk Nickel, Anglo American and Southern Copper — managed to lift their grades.
The four largest copper miners, including state-owned Codelco of Chile, all have this problem. As grades decline, the amount of copper, per tonne of rock removed, produced drops. Costs rise, too.
There is a renewable energy angle to think about. Enough copper goes into electric vehicles and their charging units, that EVs could lift demand by a quarter in the years ahead, according to Bernstein Research. Meanwhile copper inventories have gone sideways for three years.
That means miners are keenly searching for new sources of supply and some have been eyeing the Democratic Republic of Congo. Its south-eastern Katanga province has high-grade copper resources, including at Tenke, now owned by China Molybdenum.
But the DRC looks politically unstable because President Joseph Kabila wants to stay in office beyond his two-term maximum. The risk of resource nationalism in Africa also keeps investors wary.
Over the past year more attention has gone to the opposite side of the globe in Ecuador. London-listed SolGold has soared since 2015 on the country’s potential to rival the quality of other major Andean copper regions.
Copper prices have done well. The orange metal ranks among the top performers across all commodities over the past few years. Increasingly, copper is a precious metal.
Source: www.ft.com
