Copper miners are increasingly focusing on “buying production” and forgoing investment in greenfields exploration for later development as debilitating labour costs and declining ore grades continue to take hold.
Production in Australia is poised to increase by 6.2% per annum to reach 1.16 million tonnes in 2028–29 despite Glencore’s (LSE:GLEN) Mount Isa copper mines and concentrator closing in H2 2025. Over the same period, the country’s refined output is forecast to grow by just 0.7% annually.
According to the Department of Industry, Science and Resources’ (DISR) latest issue of its Resources and Energy Quarterly: March 2024, the growth in both mined and refined production will come from a range of new projects and expansions of existing operations.
However, industry executives polled by Mining.com.au agree that Australia’s copper output will be marginal with production profiles of copper miners instead being bolstered through corporate or project acquisitions rather than from investing in greenfields exploration.
Buy now, Cu later
Kincora Copper (ASX:KCC) CEO Sam Spring tells Mining.com.au there was a consensus view that 2024 would be one of surplus before going into deficit. However, he notes there’s been a litany of issues affecting global copper production.
“Then what happened in Panama with a lot of the majors missing production guidance, the continual problems coming out of Chile in terms of hitting production and seeing supply actually going backwards, I think that’s probably brought that deficit forward 12 months and you’re seeing that obviously in the price starting to come through,” Spring says.
“But it’s still not at a level where you’re seeing significant amounts of new supply being commissioned. The reason why we’ve always liked copper is that in the last commodity cycle, those committed capital projects in the copper space are pretty much coming to the end.
“Like [Rio Tinto’s] Oyu Tolgoi [project], for example, was commissioned in that last cycle and by 2030 – and this is how long these things take to build – that’s going to be the world’s fourth biggest copper mine for multiple generations.”
In November 2023, Panama announced the closure of First Quantum Minerals’ (TSX:FM) controversial copper mine after the Supreme Court ruled a 20-year concession granted to the Canadian miner to operate it was unconstitutional.
With 3 billion tonnes of proven and probable reserves, First Quantum’s $10 billion Cobre Panama project – located in a biodiverse jungle area in Colon Province, 120km west of Panama City – is one of the largest copper mines to have opened globally over the past decade.
Cu still need exploration
Aruma Resources (ASX:AAJ) Managing Director Glenn Grayson echoes these sentiments, saying it’s a tough market for juniors, particularly for those without cash in the bank. Rising costs are making it debilitating for many to undertake drilling programs and for juniors that are, the market is seldom rewarding regardless of how positive the results, Grayson says.
“We just feel like we’re getting kicked all the time. It’s like investors are waiting for it and every bit of good news is a reason to sell scenario, but it just keeps coming. I think as an industry, the junior explorer has gotten kicked pretty hard so hopefully that is beginning to change,” he tells Mining.com.au.
After acquiring the Fiery Creek Project in Queensland, Aruma is now planning a systematic exploration strategy across the ground and, subject to securing shareholder approval, field work will comprise mapping and surface sampling programs.
Fiery Creek lies in the northern area of the Mt Isa region. The geology of the project area is interpreted as being analogous to the units that host copper deposits within the western fold belt of the Mount Isa Inlier. It’s a region, Grayson says, Aruma is active in the copper space in terms of both exploration and M&A.
“You’ve got Glencore which just bailed out of there and Fortescue are there doing joint ventures, so that’s happening in the Mount Isa district for sure for copper, which I guess there’s hotspots,” Grayson says.
Alma Metals (ASX:ALM) is another copper company putting in the exploration work, recently adding three exploration permits for minerals to its Briggs Copper Project in central Queensland, while drilling continues. An acquisition for two exploration permits (EPM), previously owned by the privately held Tropex Metals, has been finalised, while another small EPM to the west of Briggs has been granted.
The company is preparing an application to the Department of Resources in Queensland to seek consolidation of its portfolio, comprising six EPMs surrounding the Briggs Project, into a single exploration project to simplify tenure administration.
Also in Queensland, True North Copper (ASX:TNC) has begun a geophysical survey over multiple targets along strike from the Vero resource at the Mt Oxide Project. In early July, the company started mining the Wallace North deposit, part of its Cloncurry Copper Project (CCP) in Queensland.
True North Managing Director Bevan Jones says with mining now underway at Wallace North, a key focus of True North’s will be on the progress being made at Cloncurry.
Solis Minerals (ASX:SLM) recently appointed a geophysical contractor to undertake a maiden drone airborne magnetometry survey to support fast-tracking target generation at the Guaneros Project in Peru. Executive director Matthew Boyes says the company is starting to gain momentum with exploration programs within its copper portfolio in Peru.
One of the few new copper mines to recently come online is Hillgrove Resources’ (ASX:HGO) Kanmantoo project in South Australia, which started production in February 2024. Kanmantoo is a significant greenfield project poised to add some 43,500 tonnes of the reddish metal annually to Australia’s mine production. Hillgrove expects to develop further projects through its pipeline of exploration opportunities over the outlook period to 2029.
As Kincora’s Spring notes, mines such as these take many years to get into production and projects like Kanmantoo coming online have been few and far between, leaving many companies no choice but to pursue buying production to spread soaring costs of new copper projects.
“There’s not a huge amount of new supply coming through, we’re just seeing that tail end of commitment from that last cycle coming through now and you’re not seeing those big groups yet investing in those new growth projects,” Spring tells this news service.
“There’s a pickup in some exploration, particularly brownfields, and there’s certainly M&A which is picking up, but you’re not seeing the new copper units that are needed to basically keep production flat let alone if this whole decarbonisation demand comes through.”
President and CEO of Faraday Copper (TSX:FDY) Paul Harbidge agrees that copper deal activity is being driven by miners seeking to expedite growing production profiles yet these moves are not having the desired outcome.
“When I look at the M&A activity, you see it focused on buying production. The recent BHP aggressive attempt at taking over Anglo, before that they bought OZ Minerals. You’ve seen Rio buy Turquoise Hill, you’ve seen HudBay (TSX:HBM) buy Copper Mountain,” Harbidge says.
“So, buying production because there’s an angst from shareholders about deploying capital onto new projects because they’re worried about these capital blowouts. But all that’s doing is rearranging the furniture, moving it from one company to another, it’s not actually bringing in any new production.”
“We’re actually seeing in a lot of instances production going down and the Panama situation doesn’t help. We’ve obviously got power issues in Zambia that’s cutting production as well. So, instead of saying ‘great we see all this new copper production and supply’, it’s actually not happening, and obviously as a consequence you’ve seen the Chinese smelters having to shut down because there isn’t that supply of concentrate. So that’s just going to exacerbate the situation.”
Yesterday (29 July 2024), Pan Asia Metals (ASX:PAM) became the latest miner to engage in copper M&A when it announced it entered into an exclusivity agreement to conduct due diligence on the Rosario Copper Project in Chile. Rosario is interpreted as a “highly prospective”, yet underexplored Manto-style copper-silver project. This style of mineralisation occurs throughout the northern parts of Chile and is responsible for historical and current copper production.
Pan Asia Managing Director Paul Lock says Rosario lies in an infrastructure-rich setting, with all processing needs nearby and demonstrates peer ground leading copper grades from a large suite of rock chips.
“The project has what is needed to gain a position in the lower third of the cost curve. Rosario represents a tremendous opportunity to position PAM with a high-grade, low-cost copper project,” Lock says.
Major moves
At the other end of town, the majors have been leading copper dealmaking and buying production for some time with Canadian miner Teck Resources (NYSE:TECK) selling its coal business to Glencore (LSE:GLEN) to focus on copper. Glencore in April last year made an unsolicited tilt for Teck in a bid to bulk up its copper business in an all-share offer valuing the target at about US$23 billion.
Teck remains on the radar of other potential suitors due to its attractive copper assets – its Quebrada Blanca 2 operation in Chile is one of the world’s newest and largest copper mines. The company is considered a logical merger partner for Anglo American (LSE:AAL) or Vale’s (NYSE:VALE) base metals business, both of which BNN Bloomberg reports have assessed a potential deal internally.
BHP (ASX:BHP) previously attempted to acquire diversified miner Anglo American in a US$49 billion offer. Anglo American has a range of copper assets including the Quellaveco, Los Bronces, El Soldado, and Collahuasi mines.
BHP was successful in buying OZ Minerals in May 2023, which resulted in the consolidation of Olympic Dam, Carrapateena, and Prominent Hill as a new single-operated asset known as Copper South Australia. According to DISR, this amalgamation is expected to significantly increase refined copper output from BHP’s South Australian operations.
The OZ Minerals acquisition also included the West Musgrave Project, which contains a large scale of copper and nickel sulphide. The project is expected to add an annual production capacity of 41,000 tonnes from 2025 onward over the outlook period to 2029.
Reddish metal green shoots
Pivotal Metals (ASX:PVT) Managing Director Ivan Fairhall says the copper sector is dynamic, noting Q2 2024 has been an important one with ongoing works reinforcing confidence in the exploration upside of its copper-dominant Horden Lake Project in Quèbec, Canada.
Fairhall tells this news service it’s a pivotal time for copper and for the company itself with extensive news flow due out in the coming months.
“We think there is going to be considerable interest in Pivotal given the highly constructive copper market dynamic that we find ourselves in,” he says.
Horden Lake, which was discovered by Inco in the 1960s, is located 131km north-northwest of Matagami in Québec and hosts an indicated and inferred resource of 28 million tonnes @ 1.5% copper equivalent.
Tempest Minerals (ASX:TEM) Managing Director Don Smith agrees the market is dynamic, adding things are starting to turn around in the junior exploration space more broadly.
In mid-July, Tempest completed a pro-rata non-renounceable entitlement offer to help fund a drilling program at the Remorse target in Western Australia, which has a presence of “large-scale” copper-zinc geochem and geophysical anomalies.
“I and everyone else are noticing visibly and intuitively or emotively … we are noticing that there’s green shoots and it feels like we’re about to come into better times marketwise,” Smith tells this news service.
“But I’m also tempering that with data from various sources but I intuitively feel that we’re heading in a positive direction. I guess we’ll see what everyone says once all the numbers have been crunched for June 30 to the world and see if it’s improved any since May.”
DISR reports green shoots are emerging in other parts of the global economy and especially the US, with a broader trend of infrastructure investment and resilient conditions expected to drive copper demand in 2024.
Beyond this year, global consumption is projected to rise by 2.2% per annum to reach about 32Mt in 2029. Clean energy applications such as electric vehicles and low emissions power generation and grid infrastructure is expected to drive this growth.
Global mined copper output in 2023 grew by 3.8% to reach 22.4Mt. Copper demand came largely from China’s refined copper consumption increasing 8.5% to reach over 28Mt. This continued a solid, post-pandemic recovery of 4.1% growth in annual global demand since 2021.
“This helped to offset falls in refined copper consumption in the US and the EU by 6.4% and 2.4%, respectively,” DISR reports.
“Global copper consumption is forecast to grow by 1.3% in 2024 to reach 28.4Mt. Key end use sectors such as property construction (in China and Europe) and manufacturing (in Europe) are expected to remain weak in the near-term.”
Among major producers, in 2023 Peru and the Democratic Republic of Congo (DRC) had significant production growth, up 13% and 22% respectively.
Yet the world’s largest producer Chile saw copper output decline by 1.5%, largely due to a combination of operational issues, project delays, and ongoing social unrest. Chile’s largest copper miner Codelco reported an 8.3% fall in production in 2023 to total 1.424Mt. The company is battling high debt levels, which is delaying sustaining and expansion projects, as well as lower grades at its existing operations.
Write to Adam Orlando at Mining.com.au
Images: Anglo American & DISR
