Here’s Looking at You, KidTops,
When and who put out the graph. There's no reference. I know that for a while in early 2019, Capital Economics projected a huge shortfall in copper trading up to $4 lb. But by late 2020, the head of Codelco said there is no shortage of copper and projected $3 lb for a long term price. Since they're the world's top copper producer, they're in the best position to gauge demand. That was before coronavirus struck at the heart of the global economy. Right now, there is a temporary shortage due to mine closures, which will clear up after covid is gone. My own thought on this is $3 lb assuming a strong recovery, $2 in a weak recovery. So, I'm assuming $2.50 lb in my own model once all mines are all up and running again.
It doesn't matter if there is enough copper for the next 50 years at K-K. Anything beyond 25 years does not offer investors a return in a reasonable time period. You can't spend money after you're dead. From a financial analysis perspective, any model over 25 years is impractical. The Company offers a 37 year life of mine plus two years construction in their base case scenario for an 18 Mtpa mine, with $3.10 lb copper at a very permissive discount of 8%. That's the basis of my own valuations. No one can argue that the assumptions are overly strict.
And what if copper goes to $4 lb. The DRC can, without notice, declare copper a strategic metal and charge a 10% royalty on gross sales, not income. And according to the 2018 mining law, they can also impose a 50% supertax on all windfall income. So, if copper does go to $4 lb, you probably won't get to see one red cent. That's another reason to stick with the Company model, and not go off chasing rainbows in the DRC.
Anyone who is sufficiently motivated should refer to the latest company resource update on Sedar.com under technical reports. View the Economic Analysis, section 24. Professional geologists and engineers put together this study and you would be well advised to hear what they have to say.