Structural Copper Deficits Soon - Strategies to Capitalize from Bull Market Ahead

• Copper prices are currently rangebound due to tight supply and weak economic conditions, especially in China
• Many major copper mines are old and declining in production; new mines are needed through higher prices
• Hot Chili recently increased resource estimate to over 1 billion tons at the coastal copper project in Chile
• Several exploration companies like Tribeca, T2 Metals, and Aldebaran are finding mineralization that could add resources
• Larger companies like Filo Mining, NGEx Minerals, and Foran Mining continue to have significant exploration success and expand deposits

The Coming Copper Supply Crunch

Copper prices have fluctuated within a range recently, held back by weak global growth and soft Chinese demand. However, many major copper mines worldwide are old and declining in production due to ore grade deterioration over decades of exploitation. This sets up a structural supply deficit over the next decade that can only be filled by new mines requiring higher prices for economic viability. With electric vehicle adoption and electrification charging infrastructure buildouts accelerating, copper demand looks poised to surge. Several exploration and development-stage mining companies profiled show potential to supply the copper that will be critically needed. A reminder takes 15 to 20 years from discovery to get a mine into production...and it needs to be economic.

Advancing Large-Scale Projects

"These are major engineering projects," emphasized Christian Easterday, CEO of Hot Chili Ltd. The company is rapidly advancing its major Coastal Copper project in Chile, which now contains over 1 billion tons of resources. After extensive drilling and study, they have increased indicated resources to 800 million tons, with an additional 200 million tons inferred. Importantly, there is a high-grade core of 173 million tons grading nearly 1% copper within.

As Easterday explained, developing a mine of this scale takes years of work across metallurgical, environmental, social, and infrastructure permitting fronts before even considering construction. However, Chile provides a relatively stable operating jurisdiction with access to key infrastructure like ports and power. With copper potentially facing supply deficits within a few years, Hot Chili's rapid resource expansion positions it well for a development decision when prices eventually rise to economic thresholds.

Exploration Upside in Emerging Areas

Earlier-stage explorers are also making discoveries that could pay off handsomely if additional drilling continues to augment resources. For example, T2 Metals in the prolific mining jurisdiction of Manitoba, Canada is uncovering high-grade zinc and copper intercepts at shallow depths. CEO Mark Saxon believes “it’s early stage, but don’t write this thing off” given the strong grades and intervals they are seeing currently from the exploration site. Tribeca Resources in Chile has also extended mineralization substantially to the north through recent drilling. The potential scale of these projects provides huge upside leverage to the pending copper bull market.

Majors Expand Flagship Assets

Even major copper producers like Filo Mining are likely to keep expanding resources as exploration continues unlocking additional value. Filo has already drilled over 5,400 meters this year, consistently growing its Aurora zone through step-out holes. As CEO Jamie Beck emphasized, the latest three holes “expand the deposit to the West along that entire distance.” Mature projects this sizable with solid exploration upside often sustain stable production for decades after reaching development. While they offer less headline resource expansion upside compared to juniors, investing in majors provides relative stability during cyclical copper downturns.

The Investment Thesis for Copper

• Structural deficits forecasted over the next decade as demand growth outpaces sluggish supply
• Development projects and explorers can expand rapidly when prices rise, providing upside leverage
• Target quality projects with strong grades, widths, infrastructure access, and expansion potential
• Majors offer stability during fluctuations, but likely muted share price upside versus juniors
• Use balanced exposure across juniors and majors based on risk preferences

Copper presents a highly compelling investment case today before widely projected supply shortfalls push prices potentially much higher. Both explorers and near-term developers appear well-positioned to benefit. Even copper majors expanding flagship assets have an upside. While fluctuations will continue, global decarbonization policies underpinning renewable energy, electric transport, and advanced power grids provide a structural tailwind for copper demand in the 2020s. Investors would do well to evaluate and calibrate their portfolio exposure accordingly.

Decarbonization and increasing electrification globally over the coming decades are set to drive strong secular demand growth for copper.

As CEO Jamie Beck of Filo Mining summed up: “You’re going to need higher prices to get new production...the only way you’re going to get new production coming on is through higher prices."

The raw amount of copper required keeps growing despite the lack of new large-scale projects in the pipeline.z

This looming mismatch between rising copper demand from green electrification and sagging mine supply growth sets up a structural deficit for much of the 2020 decade. The likely result will be recurrent periods of spiking copper prices as demand grows faster than miners can mobilize capital to expand production capacity. This pending copper supply squeeze offers a 3-5-year window where copper investments could enjoy a strong bull run while new projects are explored and developed to meet demand a decade out.

Copper prices have been fluctuating in a range recently, held down by weak global economic conditions, especially in major buyers in China. However, on the supply side, many major copper mines around the world are old and declining in production. This sets up a structural supply deficit that can only be filled by new mines requiring higher prices for economic viability. With demand expected to increase over the long term due to decarbonization and increasing electrification globally, copper presents an appealing investment case right now while prices remain subdued.

Several exploration and development companies show strong potential to supply the copper that will be needed. Companies like Hot Chili are advancing sizable projects rapidly, while explorers like Tribeca and T2 Metals are still finding high grades early that provide upside. Even major producers such as Filo Mining are likely to see resources expand further through successful exploration programs.

With copper prices subdued presently but long-term supply issues looming, now presents an opportunity. Investors can position themselves in select development and exploration plays to capitalize on the coming copper bull market. Major producers also offer stability and income over time. As rising demand collides with lagging supply, copper looks set to shine as an investment.

With oil and gas majors like Glencore now expecting copper to flip into deficit as soon as 2025 or 2026, the market could start pricing in shortages ahead of time. This offers a 3-5-year window where copper investments could enjoy a strong bull run while new projects are explored and developed to meet demand a decade out.

Companies Discussed

Hot Chili

The rapid advancement of the 1+ billion ton copper-gold project at Coastal Copper in Chile. The latest resource estimate expanded indicated tons by 800M tons with an additional 200M tons inferred. Importantly also contains a high-grade core of 173M tons at nearly 1% copper. Substantial infrastructure in place and drilling progress positions well for development when copper prices eventually rise to needed thresholds.

Tribeca Resources

Early-stage explorer that recently extended copper-gold mineralization 40% northwards through drilling at their project in Chile. Located only 10km from the coast with nearby infrastructure. Grades and intervals encountered showing potential, require further tight-spaced drilling. Significant room for resource expansion upside.

T2 Metals

Explorer at Sheridan zinc-copper project in Manitoba, Canada. Impressive high-grade copper and zinc intercepts hit at shallow depths over sizeable widths from recent phase drilling. CEO sees big upside potential despite early stage. Additional results pending and successful drilling can rapidly expand scale and resources.

Aldebaran Resources

Operating complex copper project with multiple targets in Argentina. Recent step-out drilling hit lower but still substantial grade copper mineralization in wall rocks of an untested area. Indicates further potential to add resources beyond current zones through broader district-scale exploration across holdings.

Native Mineral Resources

Half-owned copper project progressing through drilling phases in Argentina, supported by JV partner South32. Ongoing program continuing to expand known mineralized zones through successively positive drill holes. Advancing towards initial mineral resource estimate.

Atex Resources

Explorer with a deep but high-grade copper project at Valeriano in Chile. Seeing exceptional long, high-grade copper intercepts indicating potential major new higher grade “early mineralization” area discovered at depth. Could be transformative for economics through further drilling.

NGEx Minerals

Exceptional ultra-long, high-grade copper-gold-silver drill intersections at Los Helados deposit in Chile. Newly discovered zones rapidly expanded known deposits with each successive drill program. Strong potential to substantially expand current resource size through further exploratory drilling.

Foran Mining

Active 6 drill program at McIlvenna Bay copper-zinc-silver-gold project in Saskatchewan. Continued step-out drilling successfully expanding known strike zone over 1km and counting. Assays pending on new shallower intercepts signaling more resource growth potential in multiple zones.

Ivanhoe Electric

Large resource base in U.S. copper mining assets from past producing mines. Mixed drill results recently in Arizona with plans to test additional copper targets in the region. Unclear objectives and exploration strategies, difficult to decipher continuity between results and geologic target models. Opaque news reports and corporate communications hamper adequate investor-informed analysis and conclusions on overall prospectivity. Share price drop reflects broader market skepticism.

Faraday Copper

Canadian base metal developer pursuing multiple U.S. copper projects with mixed results to date from two active drill campaigns. Uninspiring grades and widths from latest drilling testing new deeper zones in Arizona, while still defining shallow resource in B.C. asset. Rejigging exploration strategy attempting to improve overall economics through resource optimization. Outlook positive long term but dampened currently.

Corazon Mining/Corx Copper

Active drilling at Lynn Lake Nickel-Copper project in Canada with the goal of establishing JORC resources in the relatively near term. Recent capital raise will help fund continued delineation drilling and feasibility assessment work this year. Local infrastructure is a plus but very early stage. One to watch for those investors drawn to new nickel opportunities amid battery metal demand forecasts.

Barksdale Resources

Focusing on copper replacement deposits at Sunnyside project in Arizona, but very deep drilling makes little economic sense currently for junior explorers to pursue alone. Instead shifted attention to San Javier copper-gold project in Mexico where building out shallow resource is more feasible. The exploration upside is still very speculative without further favorable drill results.