The Copper Decade: Watch These Two Miners
As we enter into "The Copper Decade" here are the two forms to growth and two of the key players in the transformation.
Before we get into the final monthly Prinsights Pulse issue for 2024, we want to express our gratitude to everyone that joined us this year. In the six months since our launch, we are proud to have provided you analysis on key transformational sectors – those with the strongest ‘pulses’ for long-term price movement in the global economy.
We wish you a very happy, healthy and prosperous New Year and look forward to continuing this journey together.
With that, let’s ‘dig’ into our December issue.
“A penny saved is a penny earned” -Ben Franklin
The Lincoln penny and copper are a cornerstone of U.S. identity. Yet, the 2.5% of copper found in today’s penny is no longer the 95% it was in 1857.
One reason is the shift in the composition of metal, and the other is the growing value of copper itself. That value growth trend is unlikely to stop anytime soon.
Let’s unpack what some of the biggest players are signaling…
In the BHP Group’s latest report, ‘How Copper Will Shape Our Future” one of the world’s long-standing metal and mining giants forecast a 22.1 metric ton (Mt) escalation in the global copper demand between 2021 and 2050. That shift represents a staggering 70% increase over the next three decades.
BHP is not alone. This month, Rio Tinto announced that it is raising its projections for copper production next year. The global mining company noted that it aims to have its annual copper production reach 1 million metric tons by 2030.
Much of this trend comes down to the chasm between existing supply and surging demand due to rising electricity requirements.
There is also financial logic and sound business principles behind these trends. Copper can’t be created out of thin air. Unlike the alchemy that the Fed and other central banks do by printing paper (fiat) money, copper, like other precious and industrial metals, needs to be mined and processed.
Simply put, copper is real and required for products used around the world. To meet the increasing demand levels, or even approach them, we need a lot of copper – and fast.
Let’s put that amount into perspective. The world needs about 16 times the world’s largest copper mine, Chile’s Escondida deposit, operating at maximum capacity to hit that target. The problem is that sustaining maximum capacity isn’t as simple as printing money.
What’s making the situation even more complex is that there’s a dearth of new copper mines being discovered. Complicating matters, the permitting process can be onerous and time-intensive depending on the location. That’s in addition to the cost to develop viable copper mines – and that’s where things get really interesting.
The Copper Decade is Around the Corner
To meet future electric demands, the world needs an extra 10 million metric tons of copper from 2025 to 2035. BHP estimates that $250 billion worth of investment in the copper sector is necessary over that period.
In October, we revealed why we’re entering embarking upon the “Electric Age” – but there’s more to the story. That’s because we are now entering the Copper Decade. Not only are these trends intertwined, but one transformation can’t exist without the other. As we’ve detailed, the infrastructure for expanding electricity and supporting expanding digital outputs requires copper wiring.
The issue is that the quality or grades of existing copper are declining. That means that the stock of current mined copper isn’t as pure as it once was. It has also become more expensive to process. For that reason, high-quality copper concentrate will be in even higher demand.
The upshot is that mining companies with reliable supply chains of high-quality copper concentrate will have an advantage over those without. That’s why mining firms with production or near-production ready copper mines will see near term growth and profits over firms stuck in the exploration stage.