Copper's Incentive-Price Gap & the Case for Near-Term, Low-Capex Supply

• The copper price required to bring meaningful new supply online sits at US$15,000 to US$20,000 per tonne, against a June 2026 spot price of about US$13,500 per tonne.
• New large copper projects cost US$30,000 to US$40,000 per tonne of capacity, and few reach production below US$20,000 per tonne.
• New-economy demand from the energy transition, electric vehicles, batteries, and AI data centres accounted for 12% to 14% of copper demand in 2021 and has grown quickly since then.
• Major producers are deferring high-capex mega-projects, shifting the supply response toward near-term projects that use existing infrastructure.
• Fitzroy Minerals' Buen Retiro project in Chile illustrates that model, targeting first production in early 2028 through a partner's existing processing plant.

The copper market has opened a gap between the price new supply requires and the price the metal trades at. Bringing meaningful new supply online now requires a sustained price of US$15,000 to US$20,000 per tonne, while the metal traded at about US$13,500 per tonne in June 2026. New large projects cost US$30,000 to US$40,000 per tonne of capacity to build, and very few reach production below US$20,000 per tonne. That spread between the cost of new supply and the prevailing price frames every development decision across the sector.

Two forces sit on either side of the gap. Demand has picked up a new engine in the energy transition, electric vehicles, batteries, and AI data centres, layered on top of a mature base of wiring, plumbing, and construction. Supply, meanwhile, has grown harder and more expensive to add, as grades fall and new deposits sit deeper, higher, or in more difficult jurisdictions.

With the largest producers reluctant to sanction the most expensive projects, near-term supply that leans on existing plants and infrastructure has gained ground, and a Chilean copper oxide project run by a junior developer shows what that model looks like in practice.

The Demand Base & the Geopolitical Turn

Copper demand runs on two tracks. The old-economy base of plumbing, electrification, wiring, buildings, industry, and vehicles grew at 2.8% to 2.9% a year between 1950 and 2008, then slowed to 1.8% to 1.9% after the global financial crisis and held there for about 18 years. A new-economy layer emerged 4 to 5 years ago in the energy transition, including wind and solar power, electric vehicles, batteries, robotics, drones, and air conditioning, accounting for 12% to 14% of total demand in 2021.

The scale of the newest driver is measured against the mining industry itself. Google's data-centre capital spending in 2026 is roughly on par with the entire copper mining industry's brownfield capital budget. On a longer horizon, the world needs to mine about 700 million tonnes of copper by 2050, a figure equal to the total mined over the previous 6,000 years.

A geopolitical shift over the last 6 to 12 months has added a supply-security dimension to those demand numbers. According to the President and Chief Executive Officer of Fitzroy Minerals, Merlin Marr-Johnson, the US government's buying of critical copper reserves began in February 2026, and a Section 232 review of tariffs on refined copper entering the United States was scheduled for June 30, 2026. The stockpiling that preceded it raised the domestic US price while draining liquidity from international trade, even as the metal eased from US$6.50 to US$6.00 per pound against a stronger dollar and softer gold and silver.

Where New Supply Is Coming From

The largest producers have concentrated their capital on extending and sweating the brownfield mines they already own, rather than committing to new discoveries. In Chile, the significant copper discoveries of recent decades came largely from junior explorers rather than the majors.

Those junior-led discoveries also show how long the cycle runs. The Filo project took about 20 years to advance from its early-2000s results toward development, and NGEx's Lunahuasi and ATEX's Valeriano sit in the same Andean discovery lineage. Outside Chile, Ivanhoe's Kamoa-Kakula in the Congo, found in 2011 and 2012, only reached production of roughly 300,000 to 400,000 tonnes a year with Chinese partners, a last-cycle discovery still ramping today.

The tools have changed even as the timelines have not. Artificial intelligence has moved into exploration for processing geophysical data and prioritising where to drill next, and adoption is now standard among smaller explorers. That leaves the discovery task with the junior developers who hold and work the ground, even as their methods modernise.

Supply Inelasticity, Grade Decline & Capex Inflation

Copper supply is structurally slow to respond to price. The metal has been mined for about 6,000 years, and most of the easy deposits have already been found, which leaves new discoveries lower in grade, deeper, higher in the Andes at 4,000 to 5,000 metres, or in more difficult jurisdictions. The average grade mined by the major companies has fallen sharply from about 1% over 40 years, and deposits such as Resolution in the United States now sit 1 to 2 kilometres below the surface. 

Cost has compressed the old distinction between building new and expanding existing. The gap between greenfield and brownfield capital intensity has converged, putting expansion projects on the same cost footing as new builds. Studies at the preliminary economic assessment (PEA) or prefeasibility stage that show US$15,000 to US$25,000 per tonne often rest on unrealistic inputs, such as power priced at half the regional industrial rate.  

Recent mega-project histories show the direction of travel on cost. Teck's Quebrada Blanca expansion began with a capital estimate of under US$4 billion and has risen to above US$8 billion, toward US$10 billion, while BHP's Jansen potash project added US$2 billion to a study completed only 3 years earlier, a 20% to 25% increase. With the majors reluctant to commit to new mega-projects at those numbers, the largest supply increments keep being pushed out, which tightens the market and lifts the price copper needs to clear.

Buen Retiro as a Low-Capex Illustration  

Fitzroy Minerals (TSXV: FTZ | OTCQX: FTZFF) is advancing Buen Retiro, a copper oxide project near Copiapó in Chile, with plans to produce a soluble concentrate on-site and truck it to a partner's existing plant, targeting first production in early 2028. Using that plant, operated by Pucobre, avoids the need to build its own electrowinning plant and saves roughly US$70 million in capital costs. The near-surface material runs 0.7% to 2% copper, well above the grades most oxide operations run, with recent drilling returning 78 metres at 1.7% copper and channel samples of 7 metres at 11% copper. Construction of the leach and solvent-extraction circuit is estimated at US$40 million by Pucobre, but Fitzroy conservatively assumes to US$60 million, leaving its contribution at US$42 million at 70% ownership or US$30 million at 50%. 

The economics rest on round base-case numbers. Fitzroy's conservative working assumption in a June 2026 interview is 10,000 tonnes of copper a year for 10 years, or about 22 million pounds, at total costs under US$3 per pound against a copper price of US$6 per pound. That US$3 margin implies roughly US$66 million in total annual cash flow, of which the company's share runs at US$30 million to US$45 million. Pucobre holds a letter of intent option to buy back a 30% stake in mid-2027 by paying 90% of Fitzroy's project investment from 2023 to 2027. Against a June 2026 enterprise value (EV) of US$80 million to US$85 million, a UBS benchmark valuing copper production at US$53,000 per tonne would place the company's 7,000-tonne attributable share at about US$350 million.

Marr-Johnson frames the strategy plainly: 

"In Fitzroy, we're going to try and do both things. We're going to find copper in the ground but also monetise the good prices today with a high-margin project, so that we can explore for more copper in the ground without dilution."  

That cash flow is aimed at exploration the company would otherwise fund by issuing shares. Buen Retiro sits on a billion-tonne iron oxide copper gold target that Fitzroy is targeting for drilling this year, 43 kilometres from Lundin Mining's Candelaria mine, which produces 150,000 tonnes of copper and 80,000 ounces of gold a year. A separate porphyry target at the company's Caballos project covers a 5-kilometre circular anomaly, 2 kilometres from a hole that returned 200 metres of 0.8% copper equivalent, on a trend near Los Pelambres, Los Bronces, and El Teniente, three mines that together produce roughly 1 million tonnes of copper a year. Results from a deep induced-polarisation geophysical survey at Caballos, which tests for the sulphide minerals that carry copper, are targeted for July 2026, with drilling to follow in the fourth quarter, while the company has four rigs turning, an environmental application targeted for September or October 2026, and a full PEA targeted for the end of the first quarter of 2027.

Chile's Fiscal & Permitting Shift 

The jurisdiction in which Buen Retiro is hosted shapes the cost and speed of that model. Chile produces about 24% to 25% of the world's copper, according to Cochilco, the Chilean state copper commission. Cochilco upgraded its estimate of capital investment into the country over the next 8 years from US$83 billion to US$105 billion, a figure projected to lift Chile's share of global production from 23% last year to 27% by 2033. Yet the tonnage barely moves, rising only from 5.3 million to 5.4 million tonnes, with a peak near 5.7 million around 2030, because most of that capital maintains throughput in older, depleting mines rather than adding net new metal.

The royalty regime favours a producer of Buen Retiro's scale. There is no royalty on production up to 12,000 tonnes a year, followed by a sliding scale between 12,000 and 50,000 tonnes, while the previous administration under President Gabriel Boric raised the rate for producers above 50,000 tonnes.

The current administration has moved further toward private investment. Marr-Johnson is direct about the fiscal turn:

"The new president has come in, and he's said he wants less regulation, less state intervention, more private investment, and he's reduced the corporation tax from 27% to 23%, 1% per annum over the next 4 years."

A permitting reform passed under the previous administration targets cuts of 30% to 70% in approval times, with President José Antonio Kast committing to push toward the 70% end of that range, and allows smaller brownfield projects to proceed on a statement of impact rather than a full Environmental Impact Assessment (EIA). For a project that is sequencing its environmental application into late 2026, a faster, cheaper permitting route shortens the gap between drilling and cash flow.

Industry Outlook 

The setup points to a repricing of the copper complex over time. On the long-run setup, Marr-Johnson puts it this way:

"I sometimes look at the copper price in units of gold, as the ratio to the gold price, and it's still very depressed and has been low for the last 20 years. So real assets are not being properly valued at the moment, and the whole copper complex should have a major rewrite going forward."

On this view, the metal has been undervalued relative to gold for two decades, and any correction would run through higher prices that would pull new projects up the cost curve.

The near-term path carries a specific risk. If the Section 232 review results in no tariffs, the above-ground stockpiles brought into the United States could be released, knocking the price back down. The market may also take some months to price in that inflation has not gone away, and that about US$39 trillion of US debt remains on the books. 

Beneath any short-term move, the demand drivers remain in place. Defence, drones, AI, air conditioning, solar, wind, batteries, and robotics continue to add to copper consumption, which does not reverse with the price cycle.

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