Copper Poised for Growth Amid Renewable Energy Demand

The global transition to renewable energy sources is driving increased demand for copper, a key component in wind turbines, solar panels, batteries, and electric vehicles. With copper prices recently falling from near-record highs earlier this year, David Cole, CEO of EMX Royalty Corporation, sees significant upside potential for the metal.

In a recent interview, Cole provided an overview of EMX Royalty's business model and outlook on the copper market. Some key takeaways for investors:

• Copper demand growth from renewable energy could be dramatic. Cole estimates copper production must increase by 10 million metric tons within 10 years to meet net zero emissions targets - a 45% increase from current levels.
• Large copper deposits coming online will be needed to meet demand. EMX holds an attractive royalty on the Caserones mine, one of the world's largest new copper mines developed in recent years.
• Political risks in mining may be overestimated by markets. EMX aims to diversify across countries to mitigate jurisdictional risks.
• Royalty and streaming models offer advantages amid volatile markets. EMX can benefit from exploration upside through royalties while avoiding large upfront capital outlays.

The Renewable Energy Driven Copper Deficit

Cole emphasized the dramatic increase in copper production required to facilitate the global transition to renewable energy and electric vehicles. He stated:

"My number is 10 - that is the number of millions of metric tons of copper that has to be increased in annual production globally in order to meet net-zero commitments within 10 years. That's astonishing. It's a 45% increase of copper production worldwide."

With copper being a key component of electric vehicles, battery storage, wind turbines, solar panels, and related grid infrastructure, demand growth could be exponential as countries aim to cut carbon emissions. However, Cole notes supply is not positioned to keep pace without major new mines being developed.

The Supply Need for New Copper Mega-Mines

large, high-grade copper deposits will be required to meet surging demand growth. One such project is the Caserones mine in Chile, which holds over 200 million tonnes of ore reserves grading 0.52% copper. EMX Royalty holds a 0.425% net smelter return royalty on Caserones, which is operated by Lundin Mining.

Cole notes Caserones as one of the few generational copper assets developed in recent years, stating: "Those are two generational copper assets with very long lives within our portfolio."

Caserones produces copper concentrate and molybdenum concentrate from an open-pit mine at an elevation of 4,600 meters in the Andes Mountains. Management sees potential for royalty portfolio growth as additional mammoth copper projects will need to be built.

Reduced Political Risks in South America

While mining developments in South America carry perceived political risks, Cole believes these risks may be overestimated currently. He sees Chile, Peru, and other countries in the region as likely to remain mining-friendly jurisdictions.

"I believe that some of the political risk factors that are being discussed right now in South America are probably overestimated in my opinion."

By maintaining a diversified royalty portfolio across different countries and continents, EMX aims to mitigate potential jurisdictional risks. Along with royalties in South America, the company holds royalty interests on mines in the U.S., Canada, Turkey, and Australia.

The Royalty Advantage in Down Markets

In today's volatile market environment, royalty and streaming companies hold some key advantages relative to mine operators. They avoid the substantial capital outlays required to build and operate mines. Yet they retain upside exposure to exploration successes, resource expansions, and commodity price gains.

Cole notes that EMX can capitalize on market conditions by providing capital to explorers and developers in exchange for royalty interests. He states:

"Many of whom have prospective mineral rights that we would like to have exposure to. We'd like to be able to give them some money so they can advance those properties in exchange for small royalty positions."

This allows EMX to cost-effectively accumulate royalties on prospective early-stage properties. And the company still benefits from exploration upside over time.

Key Takeaways for Investors

With copper fundamentals aligned for substantial long-term deficits absent major new mine supply, copper prices could have room to run much higher. EMX Royalty provides leveraged exposure to higher copper prices through its portfolio of royalties on copper mines.

Other key points for investors on EMX include:

• Surging copper demand from the renewable energy transition and electric vehicles could lead to dramatic copper supply shortages. EMX's copper royalty portfolio is positioned to benefit.
• Political risks in South American mining jurisdictions may be overestimated currently, providing opportunities for EMX.
• The royalty business model avoids large upfront capital costs while providing upside exposure to exploration successes and commodity prices.
• EMX sees opportunities to expand its royalty portfolio by funding explorers and developers amid tight capital market conditions.

As the world moves aggressively towards decarbonization over the next decade, copper will remain one of the most vital commodities supporting growth in renewables. EMX Royalty offers leverage to this compelling copper demand growth story.