Perhaps the most interesting indicator of the ever-increasing attractiveness of copper to the investment community during the third quarter of this year was Sprott Asset Management launching its Physical Copper Trust (TSX:COP.UN).
Created in June 2024, the Sprott Physical Copper Trust is a closed-ended trust to invest and hold substantially all of its assets in physical copper metal.
Sprott Asset Management CEO John Ciampaglia said in early July the trust was the world’s first physical copper investment vehicle.
“The trust was created to provide investors with an alternative to rolling copper futures, and a complement to investing in copper mining equities,” he said.
“Copper is an increasingly important metal in an era of growing energy demand, electrification and the adoption of new copper-intensive technologies.”
From early July to early August, the copper price on the London Metal Exchange (LME) slid nearly 12%, but since then the price has reversed that trend, advancing nearly 15% to over US$10,000 ($14,485) a tonne just before the end of September.
The Australian Government notes in its September 2024 Resources and Energy Quarterly that while copper prices have eased, they are expected to rebound in the next two years.
Export earnings are anticipated to rise to $15.6 billion in 2025-26, up from $15.4 billion in 2024-25, as a result of production growth.
“Growth will primarily be driven by expanding manufacturing activity (such as EVs), large investment in energy transition, and construction – all concentrated in the US, China and India,” the federal government says.
There have been several factors playing into the recent price volatility, including majors missing production targets, strike action, US interest rate cuts and China’s promise of fiscal stimulus for its real estate market.
In August, workers at BHP’s (ASX:BHP) Escondida Copper Mine in Chile walked off the job, halting operations for three days.
Escondida – which is a joint venture between BHP (57.5%), Rio Tinto (ASX:RIO) (30%) and Japan’s JECO Corp (12.5%) – is the largest copper producer in the world, contributing about 1 million tonnes annually, or 5%, of global supply.
Meanwhile in Panama, First Quantum Minerals’ (TSX:FM) Cobre Panama Mine has been suspended since December 2023 over environmental protests. In early July, the Panamanian Government said it would conduct an environmental audit to determine whether the Cobre Panama mine could safely re-open.
Price volatility mirrors global disruptions
Frazer Tabeart, Managing Director of copper explorer Alma Metals (ASX:ALM), says these issues can have quite a big impact on the short-term copper price.
“For example when Cobre Panama was effectively closed down, the copper price responded very strongly because it took out almost all of the supply surplus for the year,” he tells Mining.com.au.
“Those are the sort of short-term fluctuations, but it’s all on a long-term thematic, which is that the world needs more copper as it becomes increasingly reliant on electrification as part of decarbonisation.
“So however you look at it, the long-term copper thematic looks really good. I think you’re going to see the general base price increasing over the next 10 to 20 years and then a lot of volatility around that, but if you took out that volatility and looked at moving averages, you’re going to see an upward increase in copper price.”
While “traditional” growth in developing countries is expected to underpin copper demand upside, the clean energy transition remains a key source of upside for copper beyond the traditional levers, according to BHP.
“As the energy transition unfolds, we anticipate the roll-out of EVs to lift the transport sector’s share of total copper demand from around 11% in 2021, to over 20% by 2040,” the mining giant says.
Data centres will be another source of solid copper demand growth, due to their intensive need for power and cooling. BHP expects global electricity consumption for data centres to rise from around 2% of global demand today, to 9% by 2050, with copper demand in data centres increasing six-fold by 2050.
“Putting all these levers together, we project global copper demand to grow by around 70% to over 50Mt per annum by 2050 – an average growth rate of 2% per year,“ BHP notes.
Majors step up acquisitions for copper growth
The trend this year has been for majors to grow their copper portfolios through acquisitions rather than exploration, and Tabeart sees this continuing.
“I think it definitely is going to increase. I think BHP signalled that when they made an offer for Anglo American (LON:AAL),” he says.
“BHP has done a subsequent deal after being rejected by Anglo, but it was a much smaller deal in the context of things. What that isn’t doing is really putting much new copper supply in there, it’s just changing who owns what’s already known. But they are starting to acquire things.”
Tabeart also pointed to the acquisition of Rex Minerals’ (ASX:RSM) Hillside Copper Project, which is Australia’s “largest shovel-ready copper project”.
“That’s, I think, predominantly being acquired because it’s almost fully permitted. So the new owners will be able to get that into production in a relatively short time frame,” he says.
“I think that’s what people are looking for. The more advanced the project, the more likely it is that somebody is going to want to buy it.”
Tin faces slow recovery, zinc deals ignite
The LME tin price slid over 19% from its 2024 peak of US$35,582 a tonne, recorded in May, to US$28,779 in July. Since then it has gained over 14% to trade at US$32,913 by the end of September.
Fastmarkets says supply headwinds in the tin market in 2024 and the recent sell-off in the futures market show that demand is recovering more slowly than anticipated because of the poor macro-economic climate.
However, over the longer term, the expectation is that demand will grow as a result of the clean energy transition.
Tin is traditionally used as a solder, and the more technologically advanced products get, the more soldering is needed due to the increase in circuits used.
This means increased demand is going to flow through from solar panels, semiconductors, and electric vehicles.
There has been some interesting moves in the zinc space as the price of the base metal stages a late-quarter recovery.
Zinc hunter Rumble Resources (ASX:RTR) secured a $1 million investment from a company linked to a large Indian mining contractor.
Bain Resources Holdings agreed to subscribe for 25 million shares at $0.04 each. Bain is associated with Hyderabad-headquartered BGR Mining and Infra, which has executed deals for over 50 projects and has an order book of close to US$11 billion ($15.88 billion).
Rumble Resources Managing Director Peter Harold said last week Bain was interested in the company’s Earaheedy zinc-lead-silver project, given the size of the inferred resource — 22.2 million tonnes zinc, 700,000 tonnes lead and 12.6 million ounces silver — and the potential for it to be a large-scale, open pit mining and processing operation in the future.
Meanwhile, the play for a controlling stake in Korea Zinc (KRX:010130) has stepped up several notches, with the company’s chairman moving to table a counter offer and potentially undertake a ₩1 trillion ($1.1 billion) share buyback to maintain control.
in mid-September, private equity firm MBK Partners and Young Poong Group tabled a ₩2 trillion offer, or ₩660,000 per share, to acquire a controlling stake in Korea Zinc, one of the world’s largest zinc smelters.
Young Poong is Korea Zinc’s largest shareholder with a 25.4% stake as of the end of June. The pair have since raised the offer price to ₩750,000 per share.
Macquarie Bank sees zinc mine supply continuing to climb through to 2028. This follows the launch of Russia’s new Ozernoye plant in early September after delays related to a 2023 fire, coupled with US sanctions.
The plant is set to be the world’s fifth largest concentrate producer with an annual output of 600,000 tonnes of concentrate with a 53% zinc content at full capacity.
Between the start of July and early August, the LME zinc price slid nearly 12% to a quarterly low of US$2,581.50 a tonne. Since then, it has recovered all of its quarterly losses and then some to climb back up to US$3,099 — not far off its highest point for 2024.
This rise in price has been sparked by interest rate cuts and economic stimulus, with growth reported across the European and Asian zinc ingot markets.
The Australian Office of the Chief Economist says in its September 2024 Resources and Energy Quarterly that the spot zinc price remained relatively steady over the September quarter, averaging US$2,761 a tonne.
“This represents a slight dip from US$2,833 a tonne in the June quarter, which came following surging global investor interest in base metals,” the report says.
“Prices remain well above the mid-2023 lows (of below US$2,350 a tonne), which were a result of a weakness in demand.”
According to the Office of the Chief Economist, the LME zinc price is forecast to average around US$2,720 a tonne in 2024, a 2.8% rise from 2023.
“The zinc price is then forecast to pick up slightly in 2025 — to around US$2,770 a tonne — before dipping back to around 2024 levels (US$2,710 a tonne) in 2026,” the report says.
Write to Angela East at Mining.com.au
Images: Mining.com.au, BHP, Rex Minerals and Rumble Resources
