The copper market is at the cusp of a major bull run, thanks in part to recent US economic policies. With the world slowly shifting its focus towards sustainable solutions and technologies, the demand for copper – an important element in these solutions – is set to witness a significant shift in demand that could take prices to new heights.
The Infrastructure Investment and Jobs Act (IRA) and its Impact
The IRA, put into action in November 2021, allocates $7.5 billion for Electric vehicle (EV) charging stations. Why does this matter for copper? EVs consume an approximately fourfold higher quantity of copper compared to their gasoline counterparts. This increased investment in the EV infrastructure will likely trigger a surge in the demand for copper.
Solaris Resources and the Warintza Project
In the middle of these promising conditions, companies like Solaris Resources are emerging as potential leaders in the copper exploration and development space. Focusing on the Warintza Project in southeastern Ecuador, Solaris has tapped into a large inventory of copper resources with 1.5Bt of 0.5% CuEq, including a high-grade starter pit of 287Mt of 0.8% CuEq.
Given the high-grade nature of the deposit starting right from surface within an open pit setting offering a low strip ratio, it is strategically positioned to be a significant contributor to future copper supply. Analysts have highlighted in research notes that the starter pit can generate a margin of $50 per tonne. An annual output of 40 million tonnes of ore could then translate into a potential EBITDA of US$2 billion annually for approximately 7.5 years. Over the last 18 months, the Company has completed further resource growth drilling and is expected to issue an updated mineral resource in the coming months. The company intends to double the starter pit size in the next resource update, which investors continue to watch closely for.
In addition, the company has made two recent discoveries located in close proximity to the current mineral resource, offering the potential to rapidly add near-surface, high-grade mineralization to the deposit that could contribute to future starter pit growth.
The Warintza Project, with its immense potential, stands out as an example of what major mining companies may aim to acquire to expand production to meet the growing demand, promising to supply both US and international demand if needed.
The Path to Net-Zero Emissions
The ambitious goal set by the Biden administration to hit net-zero emissions by 2050 necessitates monumental investments in the renewable energy sector. Solar installations and wind farms, both cornerstones of the green energy transition, consume roughly double the amount of copper compared to conventional power generation systems. This transition towards a sustainable energy grid will fuel the demand for copper even further.
Inflation and Copper
The inflationary trends in the US are also proving to be favourable for the copper industry. Given the metal’s widespread application – ranging from construction materials and electronics to everyday appliances – rising prices inevitably stimulate an increased demand for copper. This is because both enterprises and everyday consumers seek cost-effective alternatives in an inflationary landscape.
The Global Economic Impact
Beyond the confines of the US, the global economic scene is also contributing to the copper boom. Rapid urbanization and burgeoning industrial activities in developing nations are intensifying the need for copper, especially in infrastructure and construction ventures.
Aging Infrastructure: The Copper Replacement Demand
The US alone is a vast market with its approximately 600,000 miles of copper power lines nearing their end of service. The inevitable replacement of this expansive network will necessitate substantial quantities of copper, further intensifying its demand.
A Year of New Highs and Recovery for Mining Stocks
The copper industry is on the brink of a golden era. Driven by a combination of policy decisions, sustainability goals, and market forces, the demand for copper is expected to rise exponentially. While Solaris Resources stands out with its promising Warintza Project, multiple other companies are also stepping up, capitalizing on this booming demand and adding more energy to an industry that is already operating at full speed.