In this short series, the Investor Insight team takes a look at some of the critical elements of the periodic table, how they affect our lives today and into tomorrow and what our clients are doing in this exciting space.
An average family home contains more than 90kg of copper, according to Geoscience Australia.
The use of copper is ubiquitous thanks to it being an excellent conductor of heat and electricity, its malleable and ductile nature, and natural resistance to corrosion. Electrical generators and motors, wiring, radios and TVs, vehicle radiators, air-conditioners and home heating systems are just a few of the everyday items that rely on copper to function.
As the world moves to renewable energy, copper demand is also being fuelled by an increase in electric vehicles and renewable infrastructure developments.
Australia is the number two producer of global copper, only behind Chile, according to the United States Geological Survey. In this, recent impacts on Chilean copper producers because of striking workers has enhanced Australia’s position as a reliable supplier.
Copper prices hit long-term highs on the London Metal Exchange in 2021 as strong demand for clean energy technologies continues. A report from ING has forecast that copper demand from road transportation and the power sector will increase by 117% between 2020 and 2040.
And Goldman Sachs reaffirmed its bullishness this month in a research report in which its analysts said the copper price was “building towards a breakout” as worries about the global economy, particularly China’s engine of growth – property – began to ease.
“With a diversified set of demand drivers – from EVs to electrical grids – sustaining a very tight micro into 2022, we believe that copper will reprice once these broader macro concerns abate,” the analysts said.
They added that the limited seasonal build-up of copper inventories from record low levels – currently at just over 200,000 tonnes or just enough for three days of global consumption, was “entirely insufficient to tackle” the market’s expected deficit of 197,000t for this year.
“The longer this continues, the higher the risk of an extreme scarcity episode by the end of the year,” Goldman Sachs said.
Goldman Sachs is not alone in highlighting that the copper market has just two years of primary production growth left.
The continued operating challenges in Chile and a dearth of new, quality discoveries are front and centre of investors’ minds.
This is, of course, great news for the well-led and well-funded explorers eyeing 2022 as the year when they will make significant inroads into advancing their early stage ventures.
Think of Artemis Resources, in the WA’s Paterson Province within earshot of the world-class Havieron find, Lykos Metals with its quality exposure to the Tethyan belt in Bosnia-Herzegovina, St George Mining’s nickel-copper sulphide discoveries at Mt Alexander in WA’s Goldfields and – of course – Torrens Mining, which this week attracted a $23 million takeover bid from Coda Minerals, its partner in the Elizabeth Creek copper project in South Australia.