RE:RE:Scotia Capital, Opportunistic Takeover." ???? Larger mining companies as well as hedge funds are looking at future demands and Hudbay has been adding to their growth cycle with new grounds with potential in Manitoba. So are the sum of all the parts worth more? It appears analyst believe it to be so. Are they worth more to an aquirer or merger before the next cycle begins? My view is Hudbay is undervalued looking at the long term demands for Cu.
Global copper and supply deficits may cause prices to soar within a few years .A 5.4-million-ton (4.9-million-tonne) copper supply shortfall by 2027 may push prices up by 20% to US$9,800 per ton from around US$8,200 per ton this year, Bloomberg New Energy Finance, a unit of the newswire company, says in its Industrial Metals Outlook 2H 2023: Heading into the storm.
Global annual demand for copper is forecast to rise by 2.6% from last year’s levels to 29.8 million tonnes by 2027 as the green energy transition to more electricity in transport and industry bites into supplies, the report published on Tuesday shows. Copper supplies are expected to increase by 10% over the period to 24.4 million tons.
“As global investment flowing into renewable energy breaks records, the expansion of energy transition-related manufacturing, from solar panels to power grids to electric vehicles, presents new hope for industrial metals demand. “The increasing range of available EV models and technology improvements could further strengthen consumer appetite.”
New copper mines face several barriers such as lower grades, rigorous processes for permits, heightened considerations and protests about environmental, social and government issues, and higher taxes from host countries, according to the report. Even so, funding is increasing.
Copper supplies are growing from Ivanhoe Mines’ (TSX: IVN; US-OTC: IVPAF) start of production at the Kamoa-Kakula complex in the Democratic Republic of Congo, BNEF said. Also, the US$2 billion settlement on royalties between China’s CMOC Group and the DRC’s state-owned Gecamines means the resumption of exports from the country, where huge stockpiles accumulated. The DRC produced 2.2 million tons of copper in 2022, according to Bloomberg Intelligence, making it the third-largest copper producer in the world.
There is also increased output in Chile from Escondida, a joint venture among BHP (NYSE: BHP; LSE: BHP; ASX: BHP) Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) and Japan’s JECO. And Rio Tinto’s US$900 million refurbishment at Kennecott, Utah aims to produce 250,000 tons more copper over a decade, according to the report.
China’s impact
China is also responsible for more than half the world’s copper demand, according to Bloomberg NEF. The market must consider whether the lower U.S. inflation rate of 3.2% in July compared with the peak of 8.5% a year earlier is a sign of softening prices or that the interest-rate tightening cycle will ease, which could in turn boost copper prices.
“An economic slowdown in China could put significant downward pressure on prices,” Ampofo said in the report. “Copper prices are more likely to respond to economic sentiment than the long-term supply and demand balance.