Copper Global Market: Constrained Supply to Benefit Top and Emerging Jurisdictions

• Global copper demand is projected to grow 70% to over 50 million tonnes per year by 2050, driven by economic growth, the energy transition, and digitalization.
• While copper recycling will increase, meeting future demand will still require significant investment in new mine supply of about 10 million tonnes per year over the next decade.
• Major copper producing countries include Chile, Peru and Zambia will continue to dominate while production is rising quickly in Namibia, Europe (Spain, Finland) and Canada.
• Copper supply growth faces challenges from declining ore grades, aging mines, rising costs, and difficulties in bringing on new projects. Companies with experience managing complex projects and strong ESG credentials will have an advantage.
• Higher copper prices will likely be needed longer-term to incentivize the development of the next generation of supply to meet demand. This should benefit companies with high-quality copper assets and growth potential.

Copper is essential to the modern economy and future economic growth. It is a critical component in construction, power infrastructure, transportation, manufacturing and consumer goods. As living standards rise globally and the world transitions to cleaner energy systems, copper will play an increasingly vital role, presenting an attractive long-term investment opportunity.

Soaring Copper Demand

Global copper demand is forecast to surge around 70% from current levels to over 50 million metric tons per year by 2050. This growth will be driven by three major trends:

1. Continued economic development and urbanization in emerging markets, lifting copper demand in construction, infrastructure, and goods
2. The global transition to renewable energy and electric vehicles, which are significantly more copper-intensive than fossil fuel-based systems
3. The digitalization of the economy, including the buildout of 5G networks, connected devices and technologies like artificial intelligence

As a result, copper demand growth is expected to accelerate to 2.6% per year through 2035, double the pace of the previous 15 years. This equates to about 1 million tonnes of new copper demand per year, each year, for the next decade plus. Demand growth will be global in nature, spanning developed and developing economies, in contrast to prior copper cycles driven primarily by China.

Constrained Long-Term Supply Growth

Keeping pace with projected demand will be a challenge for the copper industry. While the copper recycling rate will rise significantly, this alone will be insufficient. The world will still require major investment in new copper mine supply, to the tune of roughly 10 million tonnes per year of new production in 10 years' time.

However, the pipeline of new copper projects is diminished compared to past cycles and faces increasing hurdles:

• Existing mines are aging, with output projected to fall about 15% by 2035 before considering expansions. These operations face declining ore grades and will require substantial re-investment.
• The current generation of greenfield projects have seen repeated delays and some high-profile cost overruns, reflecting their growing complexity.
• Capital and operating costs are rising due to technical challenges, input cost inflation, heightened stakeholder expectations and more stringent ESG requirements.
• The time from discovery to first production for new copper deposits has increased to nearly 20 years. New discoveries of large, high-quality deposits are becoming rarer.

Chile and Peru are expected to remain the world's top copper producing countries, but production is rising quickly in Africa, notably the Democratic Republic of Congo and Zambia while Europe is also emerging to be major producer.

Emerging Markets and Copper’s Supply Dynamics

Chile and Peru: Dominant Producers with Rich Reserves

Chile and Peru collectively supply approximately 40% of the world’s copper. Chile holds 21% of global copper reserves and has well-established mining operations. Similarly, Peru offers rich copper deposits and ongoing investment to expand mining capacity. Political and labor challenges in these regions occasionally disrupt production but present opportunities for risk-mitigated investments that capitalize on their extensive resources.

ATEX Resources

ATEX Resources is well-positioned to benefit from the compelling long-term copper outlook presented in the article. With its strategic Valeriano copper project in Chile, ATEX offers investors exposure to a large, scalable development asset in the world's top copper jurisdiction. Recent high-grade drill results demonstrate potential for higher grade zones that could enhance project economics.

At a C$300M market cap, ATEX appears undervalued relative to the size and quality of Valeriano. Significant re-rating is within reach as a major vote of confidence for ATEX and Valeriano, Agnico Eagle recently acquired a 13% strategic stake in the company, becoming a key financing partner. ATEX President & CEO, Ben Pullinger commented:

"They put in a chunk of change, but two, they've seen something in this project that they like. Long life, big jurisdiction in Chile is where you want to be. So I think it's a very bold step and statement by them."

Hot Chili

Hot Chili, with its Costa Fuego project, is emerging as a globally significant potential new copper supplier poised to benefit from the looming structural deficit outlined in the article. Costa Fuego ranks among the largest low-elevation copper projects not controlled by a major, with a resource of over 3.5Mt of copper equivalent. The recently completed PEA demonstrates robust economics - including an after-tax NPV of over US$1 billion - and clear potential to become a large, low-cost, long-life mine leveraging existing infrastructure in Chile.

Exploration upside and plans to expand to 150ktpa copper production over a 20+ year mine life provide further value drivers.  Hot Chili is placed among the top five large-scale copper developers globally, outside of major mining companies. Christian Easterday, CEO and Managing Director of Hot Chili, emphasizes the project's significance:

"There are only five projects that are scaled at 100,000 tons per annum of fine copper production globally outside of the control of majors. For the independent projects, there are not many of those that are near term."

Marimaca Copper

Marimaca project in Chile stands out as a unique, high-quality copper development asset well-suited for the impending supply crunch and surging 'green copper' demand discussed in the article. The recently updated resource, now with 86% in the higher confidence Measured & Indicated category, positions Marimaca as one of the top new copper discoveries globally in the past decade. The shallow, high-grade oxide nature of the deposit should support a low strip ratio and strong economics for a simple, open-pit SX-EW operation.

Marimaca's low-elevation, coastal location provides unmatched infrastructure access that lowers development risks and capital intensity. Exploration upside from several district targets provides opportunities to build a long-life copper production hub. Marimaca is a scarce asset that ticks all the boxes to help sustainably fill the looming copper supply deficit.

"We have the potential to either increase our scale quite significantly. If you look at the acid solubilities of the historical resource and the amount of contained copper, it's somewhere around 300,000 tons of contained copper across those two mineral classes. Recoverable copper north of 200,000 based on the acid solubilities." - CEO Hayden Locke

Element 29 Resources

Element 29 Resources, with its portfolio of copper projects in Peru, the 2nd largest copper producing country, is attractively positioned for the positive long-term copper fundamentals outlined in the article. The company's flagship Elida project hosts a significant copper resource with strong expansion potential, as evidenced by some of the highest grade intercepts to date from recent drilling. Element 29 also has a pipeline of earlier-stage but highly prospective targets that provide further exploration and discovery upside.

"Mining companies are willing to go into a place like Peru and spend the billions of dollars that it takes to develop these kind of projects," Richard Osmond, CEO of Element 29, stated. "If you look at recent acquisitions in Peru, Hudbay just acquired Pampacancha from Pan American Silver - a 685 million tonne resource at 0.39% copper and 0.24 g/t gold. That's a realistic goal for us to get into that realm."

Namibia and Zambia: Ambitious Growth in Copper Mining

Zambia aims to increase its copper production to 3 million tonnes annually by 2032, up from its current output of around 800,000 tonnes. Investments from global mining firms, including a $2 billion project by Barrick Gold, underline Zambia’s potential as a key player in the copper market. Zambia’s pro-business reforms and renewable energy integration further enhance its investment appeal, positioning the country as a high-growth opportunity in the coming years.

On another hand, copper potential in Namibia is further supported by a stable political environment, significant mineral resources, and a growing focus on clean energy materials, though challenges such as investment in beneficiation and water management persist. Key projects such as the Kombat Copper Project, owned by Trigon Metals, resumed operations in 2021 after a long hiatus and is scaling up production, targeting 14,500 tonnes of copper concentrate annually by 2024. In the global copper markets, substantial opportunities for investment as the country leverages its resources to support the clean energy transition.

Koryx Copper

Koryx Copper presents a unique investment opportunity that dovetails with the large-scale, low-cost copper development in its flagship Haib Copper Project in Namibia. Haib benefits from an exceptional location in mining-friendly Namibia, with access to key infrastructure and a low-altitude site that positions it on the lower end of the cost curve. The recent resource update demonstrated the potential to significantly improve the project's economics, with higher grades and a focus on a more conventional development scenario.

Koryx's new leadership team, with a track record of successful copper project development and over $550 million in exits in Namibia alone, is well positioned to unlock Haib's value. In addition to Haib, Koryx Copper holds option to acquire a majority stake in two extensive exploration licenses totaling 752 square kilometers in the renowned Copperbelt province of Zambia, known for its numerous giant sediment-hosted stratiform copper deposits and with the licenses strategically positioned on the side of the belt that hosts nine major copper mines.

Spain: Emerging Copper Mining Ventures in Europe

Spain is advancing copper mining projects to meet Europe’s growing demand for locally sourced critical materials. The European Union’s Critical Raw Materials Act seeks to bolster regional copper supply chains, emphasizing the need for rapid project approvals and capital access. Spain’s strategic positioning in Europe makes it an emerging hotspot for copper investments.

Pan Global Resources

Pan Global Resources offers investors an attractive way to gain exposure to the robust copper market fundamentals detailed in the article. With its flagship Escacena Project in the heart of the Iberian Pyrite Belt, Pan Global is rapidly advancing one of the few new copper discoveries in Europe with potential to help fill the looming supply gap.

Escacena's location in Spain is a key differentiator. As a stable and mining-friendly jurisdiction with well-developed infrastructure, Spain offers an attractive alternative to some of the more challenging copper producing countries.

Beyond La Romana, Pan Global has identified numerous untested targets across the Escacena Project that provide further discovery upside. The company is well-funded to aggressively advance these priorities. As one of the premier undeveloped copper projects in Europe, Escacena is well-positioned to gain increased investor attention and strategic interest as the copper supply crunch unfolds.

Canada: Strength in Established and Emerging Copper Districts

Canada’s abundant copper resources position it as a critical player in meeting growing global demand. British Columbia leads the way with extensive copper-gold porphyry systems under development, including Amarc Resources’ projects in the Joy and Duke districts. These initiatives, conducted in partnership with global mining firms like Freeport-McMoRan, underscore Canada’s commitment to exploring large-scale deposits using sustainable methods

Finland: Advancing Domestic Copper Resources

Finland is emerging as a key player in Europe’s efforts to secure sustainable copper supplies. The Hautalampi project in eastern Finland exemplifies this shift, focusing on producing nickel, cobalt, and copper concentrates. With reserves of 4.56 million tonnes and a mine life of 12 years, this underground mine is strategically aligned with Europe’s push for locally sourced critical materials for renewable energy and electric vehicles.

GT Resources

The company's North Rock copper project in Ontario features a historic resource and 13 km mineralized trend that align with the article's emphasis on the potential for new copper supply from stable jurisdictions to fill looming deficits. Drilling is underway to expand the known zones and test for higher grade mineralization.

With the potential for a high-grade sulfide discovery that could be developed relatively quickly and at modest capital intensity. Majors like Glencore recognize this potential and have taken a stake in GT.

With a tight share structure, over C$10 million in working capital, and an experienced management team, GT is well positioned to create value through exploration success. Trading at around a C$25 million valuation, the company looks attractively priced relative to the potential of its projects and is leveraged to rising copper and nickel prices. As the copper-focused article makes clear, the market will increasingly seek out and reward companies like GT that can make new discoveries to sustainably feed the energy transition.

Global Demand Drivers: The Green Energy Transition

Copper’s role as the “metal of electrification” places it at the center of the global green energy transition. Ambitious renewable energy targets, such as tripling global renewable energy capacity by 2030, necessitate significant copper use in EVs, solar panels, and wind turbines. The International Copper Study Group (ICSG) projects strong demand growth, particularly in China and other developing economies, as they expand renewable energy infrastructure.

As a result, meaningfully higher real copper prices are likely to be required to incentivize the next generation of global copper supply. Prices will need to rise to a level that provides an adequate return for the marginal new copper project needed to meet demand in 2035 and beyond.

Conclusion

This is a bullish signal for copper prices on a longer-term horizon and for companies with high-quality copper assets and growth potential. Diversified global miners and pure-play copper producers with a track record of project execution, jurisdictional experience and strong social value credentials should be well positioned. Attractive opportunities may also emerge to gain exposure to the next generation of copper supply via project investments or acquisitions.

The Investment Thesis for Copper

• Compelling demand outlook, with global growth of ~70% to over 50 Mt/year by 2050 driven by economic development, clean energy and digitalization
• Constrained long-term supply growth, with declining production from existing operations and a diminished pipeline of new projects facing rising costs and risks
• Expectation for substantially higher copper prices in real terms to incentivize new higher-cost supply, benefiting producers with high-quality assets and growth
• Consider investing in diversified global miners and established copper producers in strong financial position with demonstrated operational, project and ESG capabilities
• Monitor opportunities for direct investments in quality future copper projects via acquisitions, joint ventures, streams, royalties or offtake agreements

Key Takeaway

The long-term investment case for copper is compelling. A step-change in demand is expected in the coming decades as copper plays a critical role in global economic development, the energy transition and digitalization. However, a lack of new high-quality development projects and increasing challenges in delivering new supply create a constrained outlook for mine production. As a result, materially higher real copper prices are likely to be required to bring on the higher-cost supply needed to meet the market in the 2030s and beyond. Companies with high-quality copper assets, an attractive growth pipeline and strong stakeholder credentials are likely to benefit. Investors should consider building exposure to established copper producers while monitoring opportunities to participate in the next generation of copper supply.

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_References:

1. _{Statistica (January 2024). Major countries in copper mine production worldwide in 2023}
2. _{Owen, Will (November 2024). Global Mining Review. Copper, carbon, and costs: The triple challenge for mining}
3. _{National Minerals Information Center. USGS. Copper Statistics and Information}
4. _{Home, Andy (October 2023). Reuter. Copper Study Group expects big supply surplus in 2024}