Copper Investor Roundup: Analysis of the Week’s Most Important Events (March 6th, 2020)

S&P Global Shifts 2020 Copper Forecast to Surplus

Bottom Line: S&P Global Market Intelligence is now forecasting a 27,000-tonne copper surplus in 2020, compared with the 41,000t deficit it was forecasting at the start of the year. In a report on the impact of the coronavirus epidemic on the global copper supply chain, S&P lowered expected full-year global refined copper production by 230,000 tonnes to 12.45 Mt. However, it said this will be outweighed by an expected 299,000t reduction in global copper demand to 12.42 Mt.

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Chile Mining Minister: Copper to rally past $3/lb this year

Bottom Line: The price of copper will rise more than 15% from current levels to $3 per pound (equivalent to $6,613/t) this year, Chilean Mining Minister Baldo Prokurica told Bloomberg on the sidelines of the Prospectors & Developers Association of Canada (PDAC) annual conference in Toronto. Prokurica boldly predicted that coronavirus will only last two to three months and that, when the virus passes, copper prices will stabilize. Chile accounts for more than one-quarter of global copper production. Three-month copper futures were trading at $2.57/lb on the New York Mercantile Exchange (COMEX) on Friday.

Source: LME.

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Global exploration budget declined 3% in 2019

Bottom Line: The global exploration budget for nonferrous metals, including copper, decreased 3% to $9.8 billion last year, according to S&P Global Market Intelligence. The lower 2019 budget, which halted a two-year rebound in the exploration sector, was largely the result of challenging commodities prices, S&P said. It predicted the global exploration budget to be flat in 2020, with gains for gold likely to be offset by weaker conditions for most other commodities. Singling out copper, S&P said unless exploration companies shift their focus back toward grassroots efforts, the dearth of large discoveries in recent years will continue.

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Famed mining investor predicts virus fears will benefit copper miners

Bottom Line: Robert Friedland, a veteran mining investor and founder of Ivanhoe Mines, says copper’s antimicrobial properties will see demand for the metal rise as society focuses on preventing the spread of superbug viruses. “Every surface in every hospital will be now covered in copper,” Friedland said at the PDAC conference in Toronto. “I don’t think anybody’s going on a cruise ship anytime soon until all surfaces are covered in copper.”

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Morgan Stanley: Water crisis to add $0.12-$0.21 to copper production costs

Bottom Line: Water challenges in important copper jurisdictions like Chile and Zambia will require expensive solutions, according to a report by Morgan Stanley. The investment bank said climate change will cause a range of water supply and management issues for copper miners. On one hand, it said already dry climates will become drier, forcing miners to combat freshwater scarcity with expensive solutions like desalination systems. On the other hand, some areas will receive more rainfall, leading to floods and problems with tailings dams (subscription only).

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Freeport says no interruptions from militia attack near Grasberg

Bottom Line: A spokesman for PT Freeport Indonesia said an attack by a rebel militia group on a nearby police patrol would not affect operations at Grasberg, the world’s second-largest copper mine (and world’s largest gold mine). One police officer was killed and three wounded by the attackers, believed to be members of the West Papua Liberation Army. The PT Freeport Indonesia spokesman said gunshots were heard in the mine area and the company has urged workers to be vigilant. PT Freeport Indonesia is jointly owned by Indonesian state-owned miner PT Inalum, with a 51.8% share, and Freeport-McMoRan, (48.2%).

Source: Yahoo Finance.

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Development of Anglo American’s Quellaveco mine more than 50% complete

Bottom Line: Peru’s two biggest copper projects are on track to begin operations in 2021 and 2022 respectively, according to the country’s Ministry of Energy and Mines. Construction of Mina Justa, which is owned by Peruvian miner Minsur and Chilean industrial conglomerate Empresas Copec and will produce up to 100,000 tonnes copper concentrate each year, is 75% complete. Construction of Anglo American’s Quellaveco mine, which is set to produce 300,000 tonnes of copper equivalent per year, is 50% complete (Spanish Report).

Source: Anglo American.

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Max claims copper, silver discovery in Colombia

Bottom Line: Max Resource Corp. (TSXV: MXR.V) jumped 38% in two days after reporting a high-grade outcrop discovery at the CESAR copper-silver project in Colombia. The discovery included a 4x1m rock chip panel with 24.8% copper and 230 g/t silver. Max is continuing to work on the premise of a large-scale copper-silver mineralized system with at least 1.5% copper, Max CEO Brett Matich said.

Source: Yahoo Finance.

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MARKET OUTLOOK

Copper miners earned a reprieve from the stock-market carnage this week as investors reacted positively to the Fed’s emergency rate cut. Benchmark copper on the London Metal Exchange closed at $5,674/t on Thursday, 1% up from one week earlier. After plunging 23% through the first two months of the year, the Global X Copper Miners ETF (COPX) began to stabilize, rising just 1c to $15.61 at Thursday close.

Because of its use in a wide variety of industrial applications, copper is often treated by investors as a proxy for the global economy. Therefore, the effect of the coronavirus outbreak on the global economy – and the response of central bankers and policymakers – will continue to impact the copper price for the foreseeable future.

Global X Copper Miners ETF

Source: Yahoo Finance.
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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Nadav Shemer is a writer, researcher, and analyst specializing in mining, energy, innovation, and consumer finance. While at Mining Journal, he compiled the publication's inaugural list of the world's top 100 mining companies by revenue and reported on visits to mine sites in the U.S., Africa, and Europe. He has also worked at FCBI Energy, where his publications included a series of white papers on decommissioning of North Sea oil rigs and reports on petrochemicals construction costs. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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