Declining Grades & Developing Tariffs Create More Upside on Copper's Critical Role

• Copper demand is driven by electrification, renewable energy, and urbanization. Copper prices are rising due to these robust demand and supply constraints on mining challenges.
• Copper consumption from energy transition sectors is projected to grow at a compound annual growth rate (CAGR) of 10.7%, with the EV sector alone expected to see a 14.3% CAGR.
• Mining challenges include declining ore grades, regulatory hurdles, and capital requirements.
• Investors can gain copper exposure via ETFs, futures contracts and mining stocks such as copper developers ATEX Resources, Marimaca Copper, Hot Chili, and Pan Global which are well-positioned in the market trend.

Copper plays a pivotal role in modern infrastructure and technology. Its excellent electrical conductivity makes it indispensable in various applications, from power generation and transmission to electronic devices and renewable energy systems. As the global economy shifts towards sustainable energy solutions, the demand for copper is poised to increase significantly.

Global Demand Drivers

Electrification & Renewable Energy

The transition to renewable energy sources is a primary driver of increased copper demand. Wind turbines, solar panels, and electric vehicles (EVs) require substantial amounts of copper for their components and infrastructure. For instance, electric vehicles utilize approximately four times more copper than traditional internal combustion engine vehicles. Copper consumption from energy transition sectors is projected to grow at a compound annual growth rate (CAGR) of 10.7%, with the EV sector alone expected to see a 14.3% CAGR.^[1]

Urbanization & Infrastructure Development

Rapid urbanization, particularly in emerging economies, necessitates extensive infrastructure development, including electrical grids, transportation systems, and residential construction. These projects significantly contribute to copper consumption. The ongoing urban expansion in countries like China and India underscores the sustained demand for copper in building and construction sectors.

Geopolitical tensions can disrupt copper supply chains. For example, potential U.S. tariffs on copper imports have already caused market shifts, with the premium of U.S. COMEX copper futures over London Metal Exchange contracts reaching record levels. Such policy decisions can lead to market fragmentation and price volatility.

Market Performance & Price Trends

As of February 2025, copper prices have demonstrated significant upward momentum. The front-month Comex copper contract settled at $4.69 per pound, marking a 2.25% increase. This rise is part of a broader trend, with prices up in 10 of the past 12 sessions.

Analysts attribute this surge to a combination of robust demand and supply constraints. The ongoing electrification movement and infrastructure projects worldwide continue to bolster demand, while mining challenges and geopolitical factors limit supply, creating a favorable environment for price appreciation.

Mining Challenges

Despite the rising demand, copper supply faces several challenges. Declining ore grades in existing mines mean that more material must be processed to produce the same amount of copper, leading to increased operational costs. Additionally, the development of new mining projects is often hampered by regulatory hurdles, environmental concerns, and substantial capital requirements. Wood Mackenzie's report indicates that slower-than-expected growth in refined consumption has led to a modest surplus; however, robust demand is expected to constrain the size of this surplus in 2025, pushing prices to a peak in the current cycle.

Investment Vehicles

Investors seeking exposure to copper have several options:

• ‍Exchange-Traded Funds: ETFs offer a convenient way to invest in copper by tracking the performance of copper mining companies or the commodity itself. For instance, the iShares MSCI Global Metals & Mining Producers ETF provides exposure to global companies involved in the extraction and production of metals, including copper.

• Futures Contracts: For more sophisticated investors, copper futures contracts traded on exchanges like the COMEX offer a direct method to speculate on price movements. However, this approach requires a thorough understanding of the futures market and carries higher risk

• ‍Mining Stocks: Investing directly in companies that mine copper is another approach. Major mining firms like BHP, Rio Tinto, and Freeport-McMoRan have substantial copper operations with strategic focus on copper, given the metal's critical role in future energy solutions.

ATEX Resources

ATEX Resources' latest drill results from its Valeriano Copper-Gold Project in Chile exceeded expectations, intersecting 152.0m of 2.03% CuEq within a broader interval of 342.0m of 1.48% CuEq. This represents a significant extension to the high-grade breccia mineralization and confirms Valeriano as one of the most important recent copper-gold discoveries globally.

With a billion tonne resource already defined and ongoing exploration upside, ATEX is well positioned to benefit from the looming copper supply deficit. The company's strategic partnership with Glencore, which has a 7.8% stake and an off-take agreement, provides validation of the project's potential.

Our most recent interview with Ben Pullinger, President & CEO of ATEX Resources.

Marimaca Copper

Marimaca Copper has commenced an Integration PEA study to examine the synergistic development of its Marimaca Oxide Deposit (MOD) and the newly acquired Pampa Medina project. With historical resource estimates indicating additional high-grade, near-surface copper oxide and leachable sulphide mineralization at Pampa Medina, Marimaca sees an opportunity to increase future production capacity using shared infrastructure.

CEO Hayden Locke commented on MARI's Integration of the Pampa Medina project:

"We believe Pampa Medina offers us a fantastic opportunity to increase the future scale of production from the capacity being considered in the MOD DFS. Developing these assets synergistically, utilising the planned infrastructure of the MOD, can capture significant capital cost benefits."

The PEA will provide investors with a first look at the potential for Marimaca to become a larger-scale, low-cost copper producer in a tier-1 jurisdiction.

Click here to watch an interview with Hayden Locke, President & CEO of Marimaca Copper.

Hot Chili

Hot Chili's recent La Verde discovery marks a potential game-changer for the company, with the prospect of doubling the 1 billion tonne resource base of its Costa Fuego copper project in Chile. Drill results include long intercepts of high-grade copper-gold from surface, with mineralization remaining open. CEO Christian Easterday emphasized the significance of Hot Chili's Major Copper-Gold Discovery, Large Scale Appeal.

"We always envisioned a much larger production hub on the coastline of Chile, taking advantage of our low elevation and all of the infrastructure advantages. We always envisioned something that was around a 150,000 tonne per annum copper project being delivered on this part of the coastline."

Hot Chili is advancing a PFS for an integrated 150ktpa copper operation, with major miner Glencore as an off-take partner and 8% shareholder. The La Verde discovery looks set to elevate Hot Chili into the top ranks of global copper developers.

Here is our most recent interview with Christian Easterday, Managing Director & CEO of Hot Chili.

Pan Global Resources

Pan Global Resources' Escacena Project in the Iberian Pyrite Belt of southern Spain continues to deliver high-grade drill results. However, the recent discovery of near-surface, bonanza-grade gold mineralization at the company's Aguilas Project in northern Spain has been a positive surprise. Rock chip and channel samples returned grades up to 33g/t gold in a zone of strong dolomite alteration. CEO Tim Moody stated:

"It's surprised us, finding this gold mineralization. We're still excited by the copper-nickel-cobalt mineralization but now that we know there's some gold there and we actually got some indication of PGE's as well, with up to percent levels of platinum plus palladium in the soils."

Upcoming drill results from both projects should provide steady news flow and potential catalysts for Pan Global as it aims to become Europe's next copper producer.

Click here for our latest interview with Tim Moody, President & CEO of Pan Global Resources.

Key Takeaway

The Investment Thesis for Copper

• Invest in copper to capitalize on the global transition to sustainable energy and electrification
• Consider copper mining stocks and ETFs for long-term portfolio exposure
• Monitor leading copper developers for potential outsized returns as the supply deficit grows
• Diversify across geographies and development stages to manage risk
• Act now to position ahead of the projected peak in the copper price cycle

The global shift towards electrification and sustainable energy is set to drive significant long-term demand for copper. With supply constrained by declining ore grades and mining challenges, the market is likely to face a growing deficit in the coming years. This creates a compelling investment thesis for copper, with investors able to gain exposure through ETFs, mining stocks, and futures contracts.

Leading copper developers like ATEX Resources, Marimaca Copper, Hot Chili, and Pan Global Resources are well-positioned to benefit from this macro backdrop and are worth considering for investors looking for outsized returns. As with any investment, diversification and risk management are key.

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References:

1. Cole, Andrew (October 2024). Copper Prices in 2024 and 2025: A Global Overview and Analysis
2. Reuter (February 2025). US Copper Price Premium Soars to Record After Trump Tariff Moves