Copper Market Outlook 2024: Sparse Discoveries & Looming Supply Deficit Signal Investment Opportunities

The global copper market is at a critical juncture, with recent analysis revealing a stark contrast between rising demand and a concerning slowdown in major new discoveries. This situation presents both challenges and opportunities for investors in the copper sector.

Declining Rate of Major Copper Discoveries

Recent S&P Global Commodity Insights data paints a sobering picture of copper exploration and discovery trends. Despite a 12% increase in exploration budgets in 2023, the industry has seen only four major discoveries in the past five years (2019-2023), totaling a mere 4.2 million metric tons (MMt) of copper. This marks a significant downturn in the frequency and size of major discoveries compared to previous decades.

Key Discovery Statistics

- 239 major copper deposits discovered between 1990 and 2023
- Total contained copper: 1.315 billion metric tons
- Recent discoveries (2019-2023): Only 4, containing 4.2 MMt of copper

Shift in Exploration Focus

The scarcity of recent major discoveries can be attributed to a significant shift in exploration strategies within the industry. Companies increasingly focus on brownfield assets – extending and expanding known deposits – rather than engaging in generative exploration that could yield new, large-scale discoveries.

- Early-stage exploration budget allocation has dropped to a record low of 28%
- This contrasts sharply with the 50-60% allocation typical in the 1990s and early 2000s

Regional Distribution of Discoveries

Latin America continues to dominate the copper discovery landscape, reflecting its status as a prime copper-producing region:

1. Latin America: 55.6% of discovered copper (730.9 MMt)
  - Chile and Peru account for 78.5% of Latin American discoveries
2. Asia-Pacific: 21% of global discovered copper
3. US and Canada: 10% of discovered copper

Interestingly, Africa has emerged as a leader in discoveries over the past decade, accounting for 56% of copper found during this period – nearly double that of Latin America.

Supply-Demand Dynamics & Market Outlook

The copper market is heading towards a significant supply-demand imbalance:

- A refined copper deficit is projected to begin in 2027
- The concentrate market is currently in deficit and expected to remain so for the next five years
- Mine supply is forecast to peak in 2029
- A potential concentrate deficit of 2.2 MMt is expected by 2032

These projections are already impacting the market, with copper prices recently pushing above $10,000 per metric ton and treatment charges falling to record lows.

Challenges in Addressing the Supply Gap

Filling the looming supply gap presents significant challenges:

1. Increased Lead Times:
  - Average time from discovery to production has increased from 12.7 years (for mines starting in 2005-2009) to 17.9 years (for mines starting in 2020-2023)
  - Longer exploration, permitting, and study phases contribute to these delays

2. Limited Pipeline of New Projects:
  - Of the 239 major discoveries since 1990, 148 are not yet in production
  - 121 of these have yet to complete feasibility studies
  - Only 15 have finalized construction plans and begun development

Investment Implications

The current state of the copper market presents several implications for investors:

1. Potential for Price Appreciation: The looming supply deficit, coupled with increasing demand (particularly from green technologies), suggests potential for sustained higher copper prices in the medium to long term.

2. Value in Exploration Companies: With the scarcity of new major discoveries, companies successfully identifying new large-scale deposits could see significant value appreciation.

3. Importance of Project Pipeline: Mining companies with a strong pipeline of advanced-stage projects may be well-positioned to capitalize on future supply shortages.

4. Geopolitical Considerations: With Latin America dominating discoveries but Africa emerging as a recent hotspot, investors should consider the geopolitical landscape when evaluating copper investments.

5. Focus on Efficiency and Technology: Companies leveraging technology to improve exploration success rates or reduce production costs may have a competitive advantage.

6. Long-Term Horizon: Given the extended lead times for new projects, investors may need to adopt a longer-term perspective when evaluating copper investments.

7. Brownfield Opportunities: Companies successfully expanding existing deposits may offer nearer-term production increases and potentially lower-risk investments.

The copper market is poised for a period of significant change, characterized by supply constraints and potentially higher prices. While challenges abound, particularly in bringing new discoveries to production, this environment also creates substantial opportunities for well-positioned companies and informed investors. As the global economy continues to electrify and decarbonize, copper's role as a critical metal is only set to grow, underscoring the importance of this sector in investment portfolios. Investors should closely monitor exploration success, project development progress, and advancements in mining technology as key indicators of potential value in the copper sector. With careful analysis and a long-term perspective, the current market dynamics may offer attractive entry points for investment in this crucial commodity.

Best Copper Junior Management Teams

Marimaca Copper (MARI) is a TSX-listed company (symbol: MARI) focused on developing the Marimaca Copper Project in Chile's Antofagasta region. This project is the only significant copper discovery globally in the last five years, offering low risk and substantial exploration potential. The Marimaca deposit is unique, hosted in intrusive rocks rather than volcanics, challenging conventional exploration wisdom. Its location in the coastal belt at low elevation, near Antofagasta and Mejillones, positions it as a high-profile development project with access to existing infrastructure, potentially enabling low-cost development. Marimaca's dual strategy aims to realize the full potential of the Marimaca Copper Project while exploring for similar large-scale targets, including a possible new IOCG district. The company's vision is to create significant value for shareholders and stakeholders by developing what could become one of the most important copper-oxide discoveries in recent years in Chile.

Pan Global Resources (TSX-V: PGZ, OTCQX: PGZFF, Frankfurt: 2EU) is a mineral exploration company focused on copper discovery in Spain. Their flagship Escacena Copper Project, covering 5,760 hectares in the Iberian Pyrite Belt, hosts the La Romana copper-tin-silver and Cañada Honda copper-gold discoveries and several other prospective targets. The company also explores the 16,000-hectare Águilas Project near Cordoba. Pan Global targets copper-rich deposits, capitalizing on the metal's strong long-term outlook due to global electrification and energy transition demands. Spain offers a tier-one, low-risk jurisdiction for mining investment, with favorable permitting, excellent infrastructure, and EU support for copper as a Strategic Raw Material. The Pan Global team brings expertise in exploration, discovery, development, and mine operations, and is committed to safe and environmentally responsible practices.

Western Copper and Gold (WRN) is developing the Casino Project, a premier copper-gold mine in Yukon Territory, Canada. The project is considered one of the most economically viable greenfield copper-gold mining projects globally. The company has been developing Casino since 2008, with multiple studies completed. The most recent June 2022 feasibility study demonstrated robust economics. Western Copper and Gold is committed to collaborative development with First Nations and local communities, employing responsible mining practices. The project entered the Yukon Environmental and Socioeconomic Assessment Board (YESAB) review process in 2014. In 2016, it was referred to a Panel Review, the highest level of assessment by YESAB. The company is preparing an Environmental and Socio-economic Effects (ESE) Statement based on YESAB guidelines. As a single-asset company focused on Casino, Western Copper and Gold offers investors direct exposure to a significant copper-gold project in a stable jurisdiction.

Chakana Copper (TSX-V: PERU) is a Canadian-based minerals exploration company focused on advancing the Soledad project in Peru's Ancash region, a favorable mining jurisdiction. The project is notable for its high-grade copper-gold-silver mineralization hosted in tourmaline breccia pipes, with an initial inferred mineral resource estimate released in February 2022. The company's 2024 exploration program targets high-grade breccia-hosted mineralization, precious metal mineralization, and mineralization related to a causative intrusion across multiple zones within the project. Chakana's strategy involves identifying and advancing mineral projects to an economic resource stage within a single commodity cycle, aiming for further development by mid-tier or major mining companies. The company employs cutting-edge technology in its exploration programs to test projects' upside potential. Chakana's leadership team boasts a proven track record in the minerals industry, from capital raising and exploration to discovery, development, and successful asset monetization through divestment.