The world needs more copper.
Greenfield exploration is high risk.
High-quality mineral deposits are increasingly scarce and difficult to find. Success in exploration requires perseverance and sustained investment throughout the Preliminary Economic Assessment stage of resource definition. Being unknown at the time, and possibly non-existent in the end, it is very high risk.
Current copper mines face many problems.
From ore quality depletion from existing mines, declining grades, and deeper deposits, to higher expectations from governments, regulators, and communities — on the current path industry grades are expected to decline by 17% over the next decade, according to Wood Mackenzie. New, world-class deposits are necessary to sustain the growing global need for copper.
Three drivers have emerged that have the potential to elevate copper to new highs in the coming decades.
- Electric vehicles
- Renewable technologies
- Growing economies and infrastructure
Electric vehicles are on the rise. Hybrid cars use approximately 40 kilograms of copper — twice the amount of copper a gas car uses — and 90 or more kilos of copper is used in a full electric vehicle — three to four times more copper than used in a gas-powered car. The global electric vehicle fleet is expected to increase from one million vehicles today to about 140 million by 2035. Renewable technologies are the providers for energy in the future.
Renewable technologies, like wind and solar, have increased nearly 50-fold in the last decade. Solar energy’s share of global power generation has more than doubled in just three years, yet still accounts for a small slice of the total energy mix. Between now and 2040, a massive $8 trillion will be spent globally on renewables, about two thirds of all energy spending, according to Bloomberg New Energy Finance. Renewable energy resources require four to 12 times as much copper as traditional fossil fuel-based power generation. Growing demand for solar power generation capacity alone will require between seven and 10 million tons of copper by 2030.
Growing economies create demand. In Asia alone, technology together with surging demographic growth is predicted to lead to an additional 30.8 million tons of copper demand by 2030.
THE WORLD IS FACING A COPPER DEFICIT
At 2.1% global demand growth, 521 kilo-tonnes of new supply needed annually.
The electric vehicle and sustainable energy revolution is underway and its impact is likely to be felt faster than expected — potentially creating material new sources of demand for copper.
Mine production falls ~230 kilo-tonnes per year after 2019.
Sustaining copper mine supply is difficult — copper grades continue to decline, sector reinvestment is needed but not forthcoming, exploration has been increasingly less successful, and the future pipeline of projects is below previous super-cycle.
Market finely balanced through 2018.
Could materially change with similar disruption level as 2015.
Structural deficit starts 2019.
Projects delayed today will not be available by 2019.
CANADA IS A PROVEN COPPER PRODUCER ON THE WORLD STAGE
TRENDS IN COPPER MINING CAPACITY
Copper mining capacity is estimated to reach 25.9 million tons in 2020, with 19% being SX-EW production. This will be 10% higher than global capacity of 23.5 million tons recorded in 2016. Growth in copper mine capacity is expected to average 2.5% per year going forward as new capacity is added at existing and some new operations. The ratio between production and capacity is called the capacity utilization rate. The world mine capacity utilization rate was around 86% in 2016.
THE WORLD DEMAND FOR COPPER CONTINUES TO INCREASE
With the emergence of solvent extraction, or electro-winning (SX-EW) technology, refined copper produced from leaching ores has increased from less than 1% of world refined copper production in the late 1960s to 16% of world output in 2016.
Since 1900, apparent usage for refined copper has increased from less than 500 thousand tonnes to 23.5 million metric tons in 2016 as usage over the period grew by a compound annual growth rate of 3.4% per year.
Where is all the copper going?
Copper Stocks are Trending Up
Stock prices are holding despite recent declines and are expected to grow over the next 5-10 years.