S&P confirms – the world is struggling to find more copper
Major new copper discoveries are at decade-long lows and if the industry doesn’t get cracking, there could be a massive shortage in the next 15 to 20 years, according to S&P Global Market Intelligence.
The level of funding spent on copper exploration over the past decade has increased significantly. The problem is, it’s not turning up any new discoveries.
“Over the last 10 years, US$25.8 billion has been allocated to all stages of copper exploration, well above the US$15.4 billion allocated from 1990 to 2008,” senior research analyst Kevin Murphy said.
“However, the increased funding has so far failed to identify more new discoveries.
“Even after adjusting for copper in recently identified deposits that we expect eventually to surpass our major discovery threshold, and the addition of further copper at recent major discoveries, we forecast copper in discoveries to remain historically low.”
While this particular situation won’t affect near-term supply, the industry needs to start finding new mines now to deal with the shortfall expected in the next one to two decades.
“There are a significant number of developing copper assets that can feed the short-to-medium term supply pipeline, although many of these require additional investment to bring them to fruition,” Murphy said.
“The longer-term pipeline is, however, at risk from the reduced discovery rates.”
S&P’s research suggests that an asset takes about 20 years to advance from discovery to production.
“This implies that the reduced discovery rates of the past decade will limit the pool of projects that could come online in 15 to 20 years when many major copper mines are currently scheduled to be producing much less than they presently are and a host of smaller producers will have closed.”
So those ASX-listed explorers that are just now putting their foot on prospective copper ground or defining up resources will be well placed to capitalise on the expected shortfall.
Although the copper price has come back a bit from its highest point this year of US$6,570 per tonne, it is still up nearly 6 per cent at US$6,178 per tonne since the start of 2019.
RBC Capital Markets said recently that the copper price increase was driven by optimism around a US-China trade deal and Chinese stimulus efforts.
But noted that recent soft economic numbers from China, the US and Europe kept the slowing global economy in focus.
“Motivated governments and central banks are helping cushion the economic downside and the physical market for copper remains relatively tight; however, we see this more as supportive versus driving prices materially higher,” RBC said.
“In this environment the producers can still generate healthy margins, advance development projects, and return capital to shareholders.”
RBC added that it saw opportunities in selected equities trading at large discounts to historic levels.
Partners Aeris Resources (ASX:AIS) and Argonaut Resources (ASX:ARE) revealed on Monday that they had successfully drilled through the artesian aquifer at their Torrens copper-gold project in South Australia.
The two companies are exploring for iron-oxide copper-gold systems similar to BHP’s (ASX:BHP) big Olympic Dam mine, which lies 75km from the Torrens project.
Aeris is already producing copper from its flagship Tritton mine in New South Wales and aims to produce 25,500 tonnes of copper in FY19.
Caravel Minerals (ASX:CVV) is advancing a copper project in Western Australia.
Last month the company increased the indicated and inferred resource to 372 million tonnes at 0.35 per cent for 1.3 million tonnes of contained copper.
Aeon Metals (ASX:AML) is developing its Walford Creek copper and cobalt project in northwest Queensland.
The company has started a new 18,000m drilling program to test for mineralisation outside of the current resource.
Minotaur Exploration (ASX:MEP) is continuing its exploration across the Cloncurry mineral belt of northwest Queensland in partnership with larger miner OZ Minerals (ASX:OZL).
Drilling on the joint venture is currently focusing on the Jericho copper and gold system.
Minotaur also owns the Highlands project 50km northeast of Mt Isa in Queensland, where it is looking for copper sulphide mineralisation.
Xanadu Mines (ASX:XAM) recently completed a scoping study for its Kharmagtai project in Mongolia’s South Gobi Desert.
Based on the results of the scoping study, the company has decided to do further drilling and undertake more advanced mining studies.
Xanadu believes there is further upside from extending the life of the open pit mine, assessing higher-grade underground options and evaluating oxide gold potential near surface at several locations.
Hot Chili (ASX:HCH) has been on investors’ radars a bit lately after it cemented a deal that gives it the option to buy a major privately owned copper and gold discovery right next to its Productora and El Fuego copper projects in Chile.