Copper is often used as a check on global economic health because of its ubiquitousness in industrial machinery, electrical equipment, and technology. Now, with the world emerging from the pandemic, the copper market is preparing for a resurgence in demand, especially from the world’s largest copper consumer, China. With inflation at all-time highs in many countries, analysts are looking for any sign that a copper squeeze could worsen inflationary pressures, and potentially maintain hawkish stances for longer.
Wood Mackenzie Vice President of Metals and Mining Robin Griffin recently commented to CNBC that “We’re already forecasting major deficits in copper to 2030”. Unrest in Peru, higher demand from the energy transition industry, and more demand from a reopening of China all contribute to this analysis.
The Companies to Watch for 2023
South America has suffered its fair share of setbacks in the past couple of years, with Peru as a standout with protests starting in December after President Pedro Castillo was ousted in an impeachment trial. However, countries like Chile – the world’s largest copper producer accounting for 27% of global supply, and Ecuador have remained stable, with projects in those countries avoiding some of the shutdowns and losses in Peru.
El Teniente
Codelco’s El Teniente project portfolio is expected to begin operating this year, with other portfolio assets due to conclude works shortly. Anglo American’s Quellaveco mine just reached its first production of copper in concentrate in July 2022, and 2023 production is expected to hit 300,000 tonnes per year.
Solaris Resources
Solaris Resources’ (TSX:SLS) (OTCQB:SLSSF) Warintza Project in southeastern Ecuador continues to report regular exploration results expanding on its discoveries at what has been called a potential “superpit”.
Warintza is considered a take-out target as the Company has defined a large 1.5Bt copper inventory, featuring a high-grade starter pit and low strip ratio, within a mining district offering major structural advantages from highway access, abundant and low-cost hydroelectric power, fresh water, labour and low elevation. The Company has de-risked the project by locking in a social license through an IBA signed with the communities, and freezing in place the regulatory and fiscal framework by signing an Investment Contract with the Government in December. The final de-risking item is completing project permitting, which is ongoing and expected in 2024 with the project being designated a “strategic priority project” by the Government.
Josemaria Resources
The Josemaria copper-gold project in the San Juan province of Argentina could ultimately be the next major copper producer according to the company. Waiting in reserves is 6.7 million lb. copper, 7 million oz. Gold, and 31 million oz. silver. The deposit was first staked in 1999, with the initial discovery made during the 2004-2005 exploration program. Production at Josemaria is expected to begin in 2025.
McEwen Copper
Financing is an important part of the environment in 2023, with foreign investment picking up in countries like Ecuador, Chile, and Argentina. In Argentina, McEwen Copper closed a private placement of US$81.8 million for the Los Azules project on August 31. The company is now well-funded to advance the project in the San Juan province. It expects to release a preliminary economic evaluation in the first quarter of 2023. The company estimates a capex of US$2.36 billion, with a 36-year mine life and production of 169,000 tonnes per year of copper.
More Tailwinds for Copper Prices
Consumption is the other factor expected to affect prices in 2023, with China’s reopening and growth from energy transition and automotive industries to boost demand. China announced plans to reopen its economy in December of 2022, and commodity prices have gained since.
The future decade is expected to be driven by further electrification and decarbonization, as well as increased demand from China. With these trends in mind, the copper market is expecting a tight supply and demand situation in the coming years, with prices expected to remain high, benefitting producers, explorers, and investors as new opportunities continue to evolve in this space.
