Copper Investor Roundup: Analysis of the Week’s Most Important Events (March 13th, 2020)

Fitch raises 2020 copper price forecast to $5,900/t on China stimulus

Bottom Line: Fitch analysts have revised their 2020 average copper price forecast to $5,900/tonne from $5,700/t. Fitch expects the Chinese government will lift coronavirus restrictions on most factories by April, paving the way for higher copper demand in the second half of the year. It also expects Beijing to introduce aggressive stimulus measures (as does China-focused research firm PRC Macro, which is forecasting $570 billion stimuli). Copper prices on the London Metal Exchange hit the lowest point since December 2016 this week as the World Health Organization declared a coronavirus pandemic, closing Wednesday at $5,551/t.

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Codelco approves $3.65b in copper investment in 2020 as production slides

Bottom Line: Chile’s state-owned Codelco will invest a record $3.65 billion in 2020, up 0.5% from the previous year. Of this, $1.62 billion will be allocated to structural projects at the Andes Norte (El Teniente), Andina, and Chuquicamata mines. Most of the remainder will go to exploration and development. Codelco’s consolidated copper production was 1.706Mt in 2019, down 5.5% from the previous year, according to data from state copper agency Cochilco. However, it appears Codelco has reclaimed the mantle of number one copper producer, given Freeport McMoRan’s 2019 production fell 15% to 1.47Mt and BHP fell 4% to 1.689Mt.

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Imperial Metals reports 1.7% copper discovery at Red Chris

Bottom Line: Fresh results are in from a drill program at the Red Chris joint venture in British Columbia, and they include 276m at 1.7% copper and 3.3 g/t gold, junior partner Imperial Metals Corp announced. Imperial Metals sold 70% of the Red Chris project to Australian miner Newcrest for $804 million last year. Imperial Metals outperformed amid the market crash Wednesday, falling just 0.7% on the back of the news, however longer term the stock is still down.

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Freeport projects vastly higher production, lower cash costs by 2021

Bottom Line: Freeport-McMoRan says it has made progress towards growing copper and gold production by 30-40% and reducing net unit cash costs of copper by 25% to around $1.30/lb by 2021. The company said production at the Grasberg mine in Indonesia, the world’s second-largest copper mine, has risen 35% quarter-to-date compared to Q4 2019. In other developments, it said: the Lone Star project in Arizona is nearing completion and is on track to be commissioned during 2020; and technology initiatives to enhance productivity and unit cost performance are achieving “durable results”.

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Ivanhoe Mines eyes Q3 2021 start for DRC copper mine

Bottom Line: Ivanhoe Mines said it is making “excellent progress” on the development of the high-grade Kamoa-Kakula copper project in the Democratic Republic of the Congo. Commenting as part of the release of its yearly financial results, Ivanhoe said it and joint-venture partner Zijin Mining are advancing rapidly on civil works for the processing plant and other surface infrastructure. It expects initial copper concentrate production from the Kakula mine to commence in Q3 2021.

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Chile moves one step closer to 3% copper royalty

Bottom Line: The mining and energy committee of the lower house of Chile’s parliament has advanced a bill to introduce a new 3% royalty on copper and lithium production. If the senate gives final approval, the tax will be imposed on companies that produce more than 12,000t copper or 50,000t lithium per year. The funds would go toward environmental development projects in the regions of Chile where the mines are located. Many of the world’s largest publicly traded companies have copper operations in Chile, including Freeport McMoRan, BHP, Rio Tinto, and Antofagasta plc.

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Copper Mountain reduces production guidance on coronavirus

Bottom Line: Copper Mountain Mining Corp (TSX:CMMC) has reduced copper-equivalent production guidance from 100-113Mlbs to 86-94Mlbs in response to changing market conditions due to the coronavirus. In an announcement, it said it would make three changes to deal with near-term copper price uncertainty: deferral of a ball mill installation, saving $22 million; deferring mining of a section of high-grade ore to 2021; and reducing operating costs by re-sequencing short-term production to lower-cost mine phases.

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Market Outlook

Copper producers were hit just as hard as the rest of the market this week as the WHO declared a global coronavirus pandemic and the United States cancelled flights from Europe. Benchmark copper on the London Metal Exchange fell 4.2% to $5,386/t in the week ending close of trading Thursday. After managing to stay relatively stable last week, the Global X Copper Miners ETF (COPX) nosedived 20.5% week-on-week to 12.4 at open Friday.

Because of its use in a wide variety of industrial applications, copper is often treated by investors as a proxy for the global economy. The eyes of copper investors will stay fixed on coronavirus developments next week and on the response of central banks and policymakers – including the Federal Reserve’s scheduled interest rate decision on March 18.

COPX – Global Copper Miners ETF (3-Month)