Copper Crunch: Looming Shortage Threatens Electric Future

• Global copper demand is projected to increase by 2050 to support development and electrification greatly
• 100% electric vehicle (EV) manufacturing by 2035 will require opening 55% more new copper mines compared to the baseline scenario
• Copper supply may struggle to keep up with EV demand without policy changes to encourage copper exploration and mining
• Transitioning to 100% hybrid vehicle manufacturing instead of 100% EV by 2035 would require negligible additional copper
• There are sufficient global copper resources, but the challenge is the rate at which new mines can be developed

The Copper Conundrum: Balancing Electrification and Supply

Copper, often called "the metal of electrification," is becoming increasingly crucial as the world moves towards a future powered by renewable energy and electric vehicles. The unique combination of properties that copper possesses - its exceptional electrical and thermal conductivity, malleability, and corrosion resistance - make it an indispensable component in various electrical applications, from wiring and transformers to motors and batteries. As the global economy progressively shifts away from fossil fuels and towards electrification, the demand for copper is set to soar. However, meeting this surging demand presents a significant challenge for the mining industry, with the path to a more electrified world being fraught with obstacles, particularly when it comes to ensuring a sufficient and timely supply of this critical metal.

The Demand Surge

The global demand for copper is projected to rise substantially in the coming decades, driven by various factors. Firstly, economic development, particularly in emerging markets, is a major driver of copper demand. As developing nations seek to modernize their infrastructure, improve their standard of living, and catch up with the developed world in terms of electrification and the adoption of copper-intensive technologies, their consumption of copper is set to increase significantly. This baseline demand growth alone would put substantial pressure on global copper supply.

However, the accelerating transition towards renewable energy and electric vehicles further complicates the demand picture. Initiatives to decarbonize the global economy and combat climate change, such as the Paris Agreement, are leading to rapid growth in deploying wind turbines, solar panels, and electric vehicles, all of which are highly copper-intensive. For instance, a single wind turbine can require several tons of copper, while electric vehicles use approximately 2.5 times more copper than traditional internal combustion engines.

In particular, the push for 100% electric vehicle (EV) manufacturing by 2035, as some policymakers and automakers proposed, would necessitate a dramatic increase in copper supply. Achieving this ambitious goal is estimated to require the opening of 55% more new copper mines compared to the expected baseline demand scenario. This EV-driven demand surge, coming on top of the underlying growth in baseline copper consumption, presents a daunting challenge for the global copper mining industry.

Mining Challenges

While global copper resources are believed to be sufficient to meet projected long-term demand, the key challenge lies in the mining industry's ability to bring new supply online at a pace that matches the anticipated demand growth. The copper mining sector faces a multitude of headwinds that could constrain its ability to scale up production rapidly.

One of the primary challenges is the declining rate of new copper deposit discoveries. Despite increased exploration budgets in recent years, significant new copper finds have been dwindling. This is partly because many of the easiest-to-find and highest-quality copper deposits have already been identified and developed. New discoveries are increasingly rare and often located in remote or politically challenging locations. Moreover, even when promising deposits are identified, the process of confirming their economic viability through extensive drilling and analysis can take years.

Even after a viable copper deposit is confirmed, the process of securing the necessary permits and approvals to begin mine development can be lengthy and fraught with obstacles. Mining projects face increasing scrutiny from regulators, environmental groups, and local communities, particularly regarding their potential impacts on water resources, biodiversity, and indigenous rights. In some cases, opposition to mining projects has led to significant delays or outright cancellations.

Furthermore, the copper mining industry is also grappling with shifting political landscapes in some key producing regions. Changes in government policies, such as increases in mining royalties or taxes, more stringent environmental regulations, or even outright nationalization of mining assets, can significantly impact the economic viability of copper projects and deter investment.

These challenges collectively mean that, despite the strong incentive provided by rising copper demand and prices, the copper mining industry may struggle to bring new supply online fast enough to keep pace with the projected demand growth. The current pipeline of new copper projects and expansions, while substantial, may not be sufficient to meet the additional demand surge driven by ambitious EV targets, at least not without significant policy support and an acceleration of the mine

Hybrid Consideration

One potential way to balance copper demand with the realities of supply growth is to adjust the vehicle electrification targets. While a full transition to EVs puts substantial pressure on copper supply, shifting the 2035 goal to 100% hybrid vehicle manufacturing would require very little copper above the baseline demand.

Hybrid vehicles, which use an ICE and an electric motor, require only modestly more copper than traditional ICE vehicles. This more gradual approach to electrification could allow copper supply to catch up while still offering significant reductions in emissions.

Encouraging Exploration and Mining

For copper supply to meet projected demand in the longer term, policies that encourage copper exploration and development are needed. This could involve:

• Streamlining permitting processes for mines with strong environmental standards
• Promoting domestic mining to diversify supply
• Investing in technologies for deep and efficient copper mining
• Researching environmentally-sound deep-sea mining
• Encouraging copper recycling to supplement newly mined supply

The path to electrification and decarbonization is heavily dependent on copper. While demand is set to surge, particularly with ambitious EV targets, copper supply faces a challenging road to keep pace. Policymakers and industry leaders must strike a balance, perhaps by setting more gradual vehicle electrification targets and promoting policies that enable the environmentally responsible development of new copper supplies. With the right approach, copper can continue to serve as the conduit for a more sustainable future.

The Investment Thesis for Copper

• Long-term demand growth is robust and likely to outpace supply
• Near-term supply deficits possible due to EV demand and mining challenges
• Copper price likely to rise to incentivize new mine development
• Companies with existing mines, expansion projects, or promising exploration prospects are well-positioned
• Investing in a basket of copper miners can provide diversification
• Monitor government policy decisions in major copper-producing countries as a key risk factor

The next few decades will bring a strong increase in copper demand as the world electrifies and decarbonizes. However, copper supply, constrained by the challenges in discovering and developing new mines, may struggle to keep pace, particularly with ambitious vehicle electrification targets. This could create opportunities for investors in copper mining companies but also argues for a balanced approach to EV adoption timelines. Policy support for environmentally sound copper mining will be a key enabler for the energy transition.

Pan Global Resources

Pan Global Resources is a dynamic exploration company focused on discovering and developing high-quality base and precious metal projects in southern Spain's prolific Iberian Pyrite Belt. The experienced management team has a proven track record of success in the exploration, discovery, development, and operations of mining projects worldwide, coupled with extensive local connections and expertise.

Their flagship Escacena Copper-Tin-Silver-Gold Project, spanning 5,760 hectares, is strategically located adjacent to several world-class mines, including the soon-to-be-constructed Aznalcóllar and Los Frailes mines (Minera Los Frailes/Grupo Mexico), the operating Riotinto (Atalaya Mining) and Sandfire MATSA mining complex, and the Las Cruces mine (First Quantum), which is considering underground mining following the depletion of its open pit in Q3 2023.

The Escacena Project boasts the exceptional La Romana copper-tin-silver discovery made in late 2019, along with numerous other promising targets. With over 180 holes drilled at La Romana since its discovery, they have achieved an impressive 99% hit rate for mineralization, demonstrating the immense potential of this deposit. The strike length now extends over 1.4km, and anticipate further growth with ongoing drilling.

In April 2023, they released encouraging first metallurgical test results for La Romana, and in September 2023, and announced a new copper-gold discovery at the Cañada Honda target, just 3km north of La Romana. An 11-drillhole campaign commenced in November 2023, with initial results reported in January 2024, highlighting the prospectivity of the entire Escacena Project.

The European Union's growing demand for copper and its focus on responsible and sustainable sourcing positions Pan Global Resources Inc. to capitalize on this opportunity. The EU imports 48% of its copper requirements, primarily from Chilean exploration and extraction, then processed in Chinese facilities. By 2030, the EU will require an additional 2.5 million tonnes of copper per annum, presenting a significant market opportunity for our company.

Furthermore, the EU's emphasis on environmental, social, and governance practices within the copper industry aligns perfectly with our values and commitments. This focus is expected to streamline project permitting and provide access to various forms of capital, including grants, tax incentives, research, regulatory assistance, and other financial and technical support.

As they continue to unlock the true potential of the La Romana deposit and the broader Escacena Project, we remain dedicated to creating substantial value for our shareholders. Their unwavering focus on exploration and development, combined with the highly favorable market conditions and regulatory environment, positions Pan Global Resources as a compelling investment opportunity in the rapidly growing copper sector.

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