Outlook for #29, the red metal As we enter the holiday stretch here, I wish you all a Merry Christmas and a safe and prosperous 2021. I am passing along some industry commentary specific to copper from the top players, all quoted directly from their most recent annual reports. A common expressed concern appears to be the lower grades and declining stocks of existing resources. Note the rather blunt analysis by Teck of how much additional capacity will need to be brought online in order to meet demand. I hope that you enjoy the reading material.
Cheers.
BHP Group – 2020 annual report
We have secured and will continue to grow options in copper and nickel, where increasing demand and our capability give us competitive opportunities. (page 8)
In the medium term, we believe that the effect of the pandemic will be to delay the timing of the anticipated structural deficit for copper by one or two years from prior expectations. Longer term, traditional end-use demand is expected to be solid, while broad exposure to the electrification mega-trend offers attractive upside. Our view is that the price setting marginal tonne a decade from now will come from either a lower-grade brownfield expansion in a lower-risk jurisdiction, or a higher-grade greenfield project in a higher-risk jurisdiction. Prices are expected to rise on the back of grade decline, resource depletion, increased input costs, water constraints and a scarcity of high-quality future development opportunities after a poor decade for industry-wide exploration. (page 103)
At the end of FY2020, BHP had six major projects under development in copper, iron ore, potash and petroleum, with a combined budget of US$11.4 billion over the life of the projects. (page 110)
Rio Tinto – 2020 annual report
In order to develop future growth options, including the Resolution copper project in the US and the Winu copper-gold exploration project in Australia, in 2019, we boosted exploration and evaluation expenditure from $488 million to $624 million. (page 8)
In copper, our 2019 operational performance was affected by lower grades at all operations, which we partly offset by higher throughput and productivity improvements. (page 12)
To create options for future growth, this year also saw us maintain our industry-leading investment in exploration. In 2019, we invested $624 million in 69 programmes in seven commodities across 17 countries, with copper remaining the focus. (page 12)
Global demand for copper is set to grow, driven by urbanisation, industrialisation, digital communications and increasing use of renewable energy: copper plays a key role in electrification and power production. Our operations around the world are at various stages in the mining lifecycle, from exploration to programme rehabilitation. Alongside copper, we also produce gold, silver, molybdenum and other materials such as rhenium. We supply customers in China, Japan and the US. (page 49)
Review of operations - Mined copper production was 5% lower than 2018, primarily attributable to lower copper grades at all three operations, partly offset by higher throughput and productivity improvements. Refined copper production, at 6% lower, largely reflected the reduced copper concentrate availability at Escondida and our Kennecott smelter. (page 50)
Exploration - This year, we explored for seven commodities in 17 countries and generated more opportunities than at any other time in our history. Expenditure on exploration and evaluation was $624 million. Of this, $315 million was for the exploration and evaluation of greenfield programmes and $309 million was for brownfield programmes in our product groups, mostly copper. (page 57)
Glencore – 2019 annual report
Widespread adoption of renewable energy sources as a means to decarbonise energy supply will create significant new demand for the enabling commodities, including copper, nickel, cobalt and lithium. The quantum of potential new demand is generally of a size that is especially large relative to current annual production and known defined global resources of that commodity. (page 9)
Fortescue Metals – 2020 annual report
We are focused on early stage exploration of commodities that support decarbonisation and the electrification of the transport sector, and continue to assess copper, gold and lithium opportunities throughout Australia, South America and Europe. (page 9)
We are undertaking exploration activities in New South Wales and South Australia, as well as in Ecuador and Argentina, and preliminary exploration activities on tenements that are in application in Colombia, Peru, Portugal and Kazakhstan, prospective for copper, gold and lithium. (page 20)
Newcrest Mining – 2020 annual report
To achieve our mission of safely delivering superior returns to our shareholders through the discovery and development of gold/copper orebodies and from our operating gold/copper mines, we strive to: leverage our exploration and technical expertise to find, or gain access by early-stage entry to, new gold/copper orebodies;
(page 3)
Evolution Mining – 2020 annual report
Our corporate strategy: open to all quality gold, silver and copper-gold value accretive investments. (page 11)
Evolution’s vision is to create a premier global mid-tier gold company which create sustainable returns for our shareholders and delivers benefits to our stakeholders. As a business we must prosper through the metal price cycle. We believe that this can be best achieved with a portfolio of six to eight assets generating superior returns with an average mine life reserve of at least ten years. To maintain this long mine life, we require an active pipeline of quality exploration and development projects. We strive to build a reputation of sustainability, reliability and transparency. Financial discipline must be core and embedded across the entire business. We remain open to all quality gold, silver, and copper-gold value accretive investments and recognize that divesting assets is an important component to our strategy. (page 86)
Freeport-McMoRan Copper & Gold – 2020 annual report
The current public health crisis is spotlighting the substantial antimicrobial properties of copper, which can reduce, and in certain cases significantly diminish, the transmission of bacteria, viruses and other pathogens. We can expect a future where copper will be increasingly used for personal health protection, in medical facilities and in other public spaces. Copper is a major component in electric vehicles (EVs) and is used in electric motors, batteries, inverters, wiring and charging stations. EVs, which consume up to four times the amount of copper in terms of weight compared to vehicles of similar size with an internal combustion engine, are expected to be a long-term demand driver for copper globally. (page 2)
Teck Resources – 2019 annual report
QB2 (Quebrada Blanca Phase 2 project) will significantly increase our copper production at a time when the world needs significantly more copper to support the transition to a low-carbon economy. Renewable energy systems, like solar, can require 10 times more copper than traditional energy systems. Zero-emission electric vehicles need up to four times as much copper as an internal combustion vehicle. Recent research by S&P Global Market Intelligence points to the need for between 11 million and 70 million tonnes of incremental copper production by 2030 to meet climate targets outlined in the Paris Agreement. While this range reflects a number of market scenarios, even at the low range of 11 million tonnes of incremental production, the world would need to build the equivalent of about three QB2s every year for 11 years to provide the copper needed to meet these climate targets. Through QB2 and future expansion opportunities, Teck will be well positioned to take advantage of this growing market. (page 5)
Early stage copper exploration continued to focus primarily on advancing porphyry-style projects in Chile, Peru and the United States in 2019. In addition, significant exploration was carried out in and around our existing operations and advanced projects, including approximately 17 kilometres at QB2 and QB3, where we continue to define mineralization beneath and to the east of the current resource. In 2020, we plan to drill several early stage copper projects, and we will continue to explore around our existing operations and advanced projects, with a program to support QB3 studies. (page 28)
Antofogasta PLC – 2019 annual report
Outlook: Despite a strong finish, the copper price was flat for most of the year, impacted by the uncertainty around global trade. However, in the longer term we continue to believe that the fundamentals for copper are strong. The demand picture suggests that the world’s appetite for copper as part of the greening of our global power and transportation systems will continue to grow at a time when new copper supply sources are becoming rarer. (page 7)
For geological reasons, copper deposits frequently have higher- grade material nearer the surface and therefore grade declines with depth. This means that unless action is taken, such as an expansion, copper production declines as a mine gets older. Also, as an open pit gets deeper, haulage distances and rock hardness increase, and this, combined with the declining grade, leads to higher unit costs. Large long-life mines will have several expansions during their lives. The current expansion at our 20-year old Los Pelambres mine is its fourth. (page 10)
First Quantum Minerals – 2019 annual report
As urbanisation in developing countries continues to gather pace, copper use will continue to increase. As developed countries move to an increasingly connected, networked and new energy future, copper will remain in demand because of its fundamental importance to networks, electronics and energy storage and delivery.
(page 3)
Exploration: A global exploration program continues to be focused on identifying high quality porphyry and sediment hosted copper deposits in prospective belts around the world. This program includes work at advanced stage exploration projects at Taca Taca in Argentina and Haquira in Peru as well as near-mine resource expansion around Las Cruces and Kansanshi. In recent years, early stage exploration has expanded to cover systematic investigation of properties throughout the Andean belt in Argentina, Chile, Peru, Ecuador and Colombia but also includes evaluation of high priority targets in several other jurisdictions. Exploration in the fourth quarter of 2019 included drill programs to test greenfield targets in Argentina, Chile, Zambia, Ireland and Papua New Guinea. Some encouraging results from prospects in Argentina and Papua New Guinea in particular, will require more detailed follow up drilling during 2020. (page 15)