Metal of the future? 2021’s copper price peaks may just be the start
When LME copper stores 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.
Stockhead highlights a number of copper plays to watch into the new year and beyond.
Eagle Mountain’s Arizona copper assets have turned plenty of heads in recent times, with the focus largely on the Oracle Ridge project where an aggressive exploration campaign continues to produce promising assays.
The company is actively building up a critical mass of mineralisation at the project with a view to restarting operations, supported by a historic underground mine with 18km of existing development.
Mineralisation at Oracle Ridge sits within a hill, potentially enabling Eagle Mountain to leverage gravity to reduce its emissions in mining and transport – fitting, given copper’s demand forecasts are being largely driven by global shifts toward renewables.
“Copper is critical for global decarbonisation through electrification,” CEO Tim Mason told Stockhead.
“Pleasingly, we are seeing increasing commitments from governments, companies and industries towards decarbonisation through the increased use of renewable energy generation, electric vehicles and electric equipment.
“All of these initiatives require significant amounts of copper to generate and transmit electrons.
“Without reliable access to copper, the transition to renewable energy sources may be delayed, which could have dire consequences on climate change, with long-lasting negative impacts on health, agriculture, forests and water supply.”
A topical inclusion, given its hit announced yesterday of 117m at 3.38% copper from 75m during drilling at the Hermitage project in the Tennant Creek mineral field of the Northern Territory.
Emmerson’s vertical hole HERC003 recorded the above and was abandoned in the middle of some serious high-grade mineralisation – 3m at 14.91 grams per tonne gold and 4.24% copper – and will be continued with a diamond tail in 2022.
One to look out for.
The hole was drilled as part of a program testing an area 200m east-west and a theory that high-grade mineralisation at Hermitage is hosted in almost vertical pipe structures.
“Whilst it is still early days, the metal zonation and mineralisation in drill hole HERC003 displays increasing gold and copper grades with depth – the subject of future diamond drilling,” ERM managing director Rob Bills said in the company’s announcement yesterday.
“Although based on limited data (i.e. rock chips), it appears that HERC003 intersected a subvertical, brecciated, high grade metal rich feeder zone which has channelled and concentrated the copper and gold and remains open at depth.”
Assays are pending for one other hole drilled in the campaign.
Hermitage and its nearby Jasper Hills projects sit on a 100% owned mining lease, and the company says they have seen no modern exploration.
ERM’s share price closed almost 130% higher following the news.
New World’s Antler copper deposit, located on sparsely-populated, privately-owned land in northern Arizona, has plenty of factors in its favour.
“The Antler deposit is the highest grade undeveloped copper asset on the ASX, and one of the highest grade copper deposits in the world,” NWC MD and CEO Mike Haynes told Stockhead.
“With high grade comes opportunity.”
The opportunities Haynes sees are multi-fold – high grade means a smaller and more socially acceptable footprint against comparable operations, projected ease of permitting and lower CAPEX.
“New World should be able to meet the capital development costs in its own right, most likely through a combination of debt on attractive terms and equity, rather than having to rely on a major mining company or some other similar partner to help fund the development of a large capital cost operation,” he said.
“Accordingly, our timeline to development is largely in our own hands.”
A handy thing to have, given the climate for copper. New World’s current 7.7 million tonne resource at 3.9% copper equivalent also offers plenty of upside, according to Haynes.
“There are very strong geological and geophysical indicators that suggest the deposit extends further to the south, outside the area that New World has drilled to date,” Haynes said.
“We know the current 7.7Mt resource at Antler is constrained entirely by the lack of extensional drilling, and we know VMS deposits elsewhere in northern Arizona can be as large as 50Mt.
“So there is a very real chance that Antler is going to get a lot bigger. And if it does, we expect the high grades will continue.”
Focused on Cobar, Peel Mining has been particularly active over the last 12 months, with multiple rigs drilling out the company’s high grade Mallee Bull and Wirlong copper deposits to deliver maiden and upgraded mineral resources, respectively.
The company will be looking to deliver scoping and feasibility studies in the new year, and its managing director Rob Tyson said he believed increased demand for the red metal could only mean good things for pricing and Peel.
“We are planning to move into production as soon as possible, and being in the Cobar Basin, we think we’ll be mining there for many years to come,” he told Stockhead.
Tyson said he felt there was a large risk that the world’s copper supply would fall short of demand as the world moved away from fossil fuels.
“With a predicted 13% annual growth rate in green copper (copper used in renewable energy and EVs) over the coming decade, the world needs to move quickly to ensure supply lines remain intact,” he said.
“The reality is, however, that mining projects generally take a long time to bring online, and the risk of shortfall in the years ahead is very real.”
Sunstone is exploring for large copper-gold porphyry deposits in Ecuador, and recently had success in exploration at its El Palmar porphyry discovery.
Here, the company delivered a number of standout intersections including 105.09m at 0.75 grams per tonne gold and 0.2% copper from 32m, with mineralisation intersected across a 300m long zone and from surface.
CEO and managing director Malcolm Norris told Stockhead he felt porphyry deposits represented the best long-term copper supply opportunity.
“They take considerable skill, funding and time to discover and develop, and at Sunstone we are in the early stages of discovery at El Palmar,” he said.
Drilling at the project is ongoing, and early results support Sunstone’s belief that only the upper portion of a porphyry system has been drilled to date.
Norris is another who sees huge potential longer term for the red metal.
“As the world electrifies and as it looks at opportunities to reach emissions targets, copper will be present in all of the solutions,” he said.
“Copper is the ultimate green metal, and we need to take a very long-term view of the supply fundamentals.
“We are setting the stage for intergenerational demand-supply balance – and the answer is we need to find more copper.”
“There is no decarbonisation without copper.”
Simply put, the words of West Cobar Metals managing director David Pascoe succinctly summarise the state of play for the world’s copper explorers, developers, miners and investors.
Pascoe said new tech like solar, wind energy, EVs and charging stations would all be copper intensive – supplementing the world’s existing industrial consumption of the red metal.
That holds in good stead West Cobar’s work in the underexplored namesake region of New South Wales, where early exploration at the flagship Bulla Park project has returned a best intercept of 135m at 0.24% copper, including 33m at 0.45%.
West Cobar has interpreted the project to have the potential to host a large stratabound copper deposit, similar to those found in Queensland’s Mt Isa region and WA’s Paterson province.
“Success in identifying higher grade mineralisation and proving up a deposit will position Bulla Park very well to help meet the forecast rise in copper demand,” Pascoe said.
The company’s two projects northwest of Bulla Park – Mt Jack and Nantilla – are highly prospective for copper and gold and will be the focus of exploration activity over the next six months.
At Stockhead, we tell it like it is. While Eagle Mountain, Peel Mining, West Cobar and New World Resources are Stockhead advertisers, they did not sponsor this article.