Wednesday, 19 June 2019

Energy rEVolution Supply Chains: Copper Demand Set To Double In 20 years - The World’s Largest Operating Copper Mines Are More Than 75 Years Old.

In her great article, Danica Cullinane reports from Down Under about the coming crisis in the copper supply lines. As we are discussing here, Copper is at the very heart of Energy rEVolution and green metals make all our gadgets tick. We are facing the coming shock when exponentially growing sales of electric cars and rolling out of charging networks will demand more and more copper. 

The red metal is going green during Energy rEVolution. The world largest operating copper mines are more than 75 years old, head grades are going down and they are literally mining ores which were considered dust just a decade ago. 

Years of underinvestment in junior mining sectors will make the pain even worse as a pipeline of the new copper projects is not coming to majors in time for development. Resource nationalism is making all this situation even grimmer. 

Danica paints a very vivid picture in her report from the Copper to the World conference held in Adelaide, in Australia. International Copper Association Australia CEO Mr Fennell said: " Copper use will be 26 million tones a year by 2040, double what it is today." Old mines are facing ore declines and more and more technical challenges. 

Only new giant copper projects can close the gap between coming demand and available supply and make price shocks manageable. And this forecast is not even according for The Switch when literally millions of people will be switching to electric cars. Extreme heat waves will make more places require air conditioning and fast-growing population will rely on the local smart grids to address their needs for energy generation.

The coming catalyst of an exponentially growing population, climate change and our efforts to keep planet inhabitable by addressing these challenges with electrification will require more and more metals mined sustainably. We are moving very fast into the situation when copper price becomes the second consideration after the paramount priority to secure the supply of the critical for Energy rEVolution metal.

Red metal goes green in the Tesla Energy rEVolution. Goldman Sachs now estimates that copper will be in structural "severe deficits" starting from 2023. And it is happening even before The Switch - the real mass-scale transition to renewable energy generation and when electric cars will affect millions of households all over the world. Despite stormy markets, the smart money was buying all the best copper projects last year. Only new copper giants like Los Azules Copper project under operation by the legendary McEwen Mining can bridge the coming very soon huge supply gap. 

Visual Capitalist presents a brilliant illustration of copper place in the energy rEVolution and particularly in electric vehicles. Smart Grids connecting renewables like Solar and Wind with the grid and charging infrastructure for electric cars will bring another drive for copper demand for very many years to come. Green Energy Metals Royalty Company TNR Gold holds 0.36% NSR Royalty on the entire Los Azules Copper project in Argentina and you can find more information about it in our presentation below.

Tesla Energy rEVolution And The Golden Age For Copper: Kirill Klip GEM Royalty TNR Gold Copper Presentation May 2019.

In a news release dated February 21, 2019, McEwen Mining Inc. ("McEwen Mining") stated: "Our focus is on delivering near-term production growth from our projects in the United States and Canada, and on advancing Los Azules." The statement gives TNR confidence that McEwen Mining is keen to move the Los Azules project forward. 
In addition, McEwen Mining stated the following on its 100% owned Los Azules project: "We spent $6 million at Los Azules during 2018. The activities performed were mainly technical site investigations and environmental baseline monitoring work, to advance permitting efforts. We are currently investigating a new access route to the project that, if developed into a road, could provide year-round access to Los Azules, greatly accelerating the potential development of the project and reducing operating costs. Our 2019 exploration budget for Los Azules is $3 million." 
McEwen Mining's press releases and website material appear to be prepared by "Qualified Persons" (as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101")) and the procedures, methodology and key assumptions disclosed by McEwen Mining are those adopted and consistently applied in the mining industry, but no Qualified Person engaged by TNR has done sufficient work to analyze, interpret, classify or verify McEwen Mining's information, nor to determine the current mineral reserve or resource or any other information referred to in their press releases. Accordingly, the reader is cautioned in placing any reliance on these disclosures. 
The Company holds a 0.36% royalty on the net smelter return ("NSR") royalty of the entire Los Azules copper project in Argentina. TNR summarized the PEA results in a news release issued on October 10, 2017."


Please read legal disclaimer. There is no investment advice on this blog. Always consult a qualified financial adviser before any investment decisions. DYOR.

Small Caps:

Copper demand set to double in 20 years forcing miners to get more from less

"Copper demand is set to double within the next two decades, but miners will need to re-evaluate ways of commercialising the resource as ore levels continue to fall.
This is the warning conveyed by the International Copper Association Australia (ICAA), which correlates to data from Australia’s Office of the Chief Economist (OCE) showing growth in global copper demand is currently exceeding growth in supply.
Speaking at the Copper to the World conference in Adelaide on Tuesday, ICAA chief executive officer John Fennell said most of the world’s largest operating copper mines are more than 75 years old and while ore levels keep dropping, demand keeps rising.
“Copper use will be 26 million tonnes a year by 2040, double what it is today,” Mr Fennell said.
He said miners will be forced to “get more from less”, or search “much deeper than they have every gone before and in riskier, hard to access areas”.
Mr Fennell said this was possible with modern technologies such as artificial intelligence, robotic machinery and armies of advanced sensors, which would also produce safer, greener copper with minimal impact on people and the environment.
“Getting copper out and up from 1-2km underground would have been science fiction once but running a completely automated mine with intelligent machines and haulage from an urban centre is now possible,” he said.
However, Mr Fennell said the roll-out of copper mining technology has not been as rapid or widespread as first predicted, with adoption mainly undertaken by “big miners with deep pockets”.
“We need to ensure sure technology is identified, tested and implemented as widely as possible,” he added.

Ore decline inhibits productivity in Chile

Declining ore levels are a hurdle faced by one of the world’s copper powerhouse nations, Chile, where copper mining currently makes up 13% of the country’s gross domestic product.
Copper also accounts for 60% of its annual exports, mainly to Asian countries including the metal’s top consumer, China.
Also speaking at the copper conference, Minnovex AG vice president Juan Rayo Calderon said Chile’s biggest challenge was that its mining productivity has fallen well below that of its overseas competitors.
“Copper mining in Chile has become more and more difficult as ore bodies decline, the target rocks are increasingly harder, and water is getting far more expensive,” Mr Calderon said.
He said another issue was “human productivity, which faces rising demands of higher salaries, and increased community expectations around more environmentally sympathetic mining”.
These demands have affected not only Chile but the global copper market recently, with a strike at one of the country’s top producing copper mines being attributed to a sudden rise in copper prices.
However, Mr Calderon said a “road map” backed by Chilean government and private sector research and development initiatives to improve productivity is expected to be updated this year.
“That will assist our current gains in seeking to lift productivity while meeting higher public expectations about the way we mine,” he said.

Copper prices and outlook

Copper prices hit a five-month low of US$5,740 per tonne earlier this month but recovered overnight, boosted by a strike that slashed output in half at the Chuquicamata mine in Chile, operated by the world’s top copper producer Codelco.
According to Reuters, benchmark copper on the London Metal Exchange gained 0.5% to US$5,848/t in closing open-outcry trading after an earlier intraday low of US$5,776/t.
This price recovery was also attributed to continued declining output from China, which last month fell 5.2% year-on-year and 3.9% month-to-month to 711,000t, the news wire reported.

Copper demand prices 2019 miners
Historical copper prices.

Meanwhile, some analysts have warned copper and other industrial metals could be pressured by market expectations of damage to growth and demand prospects from the US-China trade dispute.
The OCE also warned in its Resources and Energy Quarterly report for March 2019 that trade tensions could counterbalance some price gains.
“However, it is also possible that investors will pay less heed to trade tensions and associated risks over time as markets adapt to the situation,” the report stated.
Another speaker at the Adelaide conference, CRU Consulting principal analyst Erik Heimlich, said the trade tensions were creating some misconceptions on pricing and impacts but the longer-term copper outlook was “robust”.
“This will see output coming through from the mines approved for development in the past 12 months – where not much additional capacity was coming to actual market – and the spate of copper mergers and acquisitions will add price improvement as worthwhile assets get better attention and investment,” Mr Heimlich said.
He added that China, which currently accounts for almost half of global copper demand, would still be a top consumer in the next five years. However, India and Asia are expected to drive global copper growth beyond 2025.
“I expect 12% of new demand in this period to come from India and around 10% from ASEAN countries – stabilising copper growth globally at around 2% a year over the next four years,” Mr Heimlich said.
With inventories near record lows, the OCE has forecast copper prices to rise significantly to US$6,978/t in 2019 before peaking at around US$8,500/t in 2021, then easing back to US$7,342/t by 2024."

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