The Future of Copper - Projects, Timelines, and Demand

• Hayden Locke, CEO of Marimaca Copper, discusses the growth and timelines of the copper industry
• Increased regulations, especially regarding sustainability, are extending the timelines for mines to reach production
• The bigger the mining project, the slower its progress, largely due to the challenges in permitting, technical aspects, and more.
• The copper demand profile is steadily growing, aligning with global electrification goals.

Copper is essential for electrification and the transition to renewable energy. Demand is poised to grow substantially in the coming years and decades. However, bringing new copper projects online takes time. In this environment, investors should pay close attention to new projects and how companies plan to develop them.

Kamoa-Kakula: A Model for Swift Development

One of the most impressive recent copper developments is Ivanhoe's Kamoa-Kakula project in the Democratic Republic of Congo. The discovery was made in 2008 and reached commercial production just 14 years later in 2022. This remarkably quick timeline is partly thanks to the project's advantageous geography in open savanna with a low population density. However, the ability to move so swiftly was also due to CEO Robert Friedland's willingness to invest heavily in exploration and development over decades in the Congo, even when prospects seemed dim. Investors should look for management teams with similar long-term conviction in their projects.

Lengthier Timelines for Many New Projects

While Kamoa-Kakula shows progress can be swift under the right conditions, many projects face longer timelines. Mining consultant Richard Schodde has found the average timeline from discovery to production is 17 years for a copper mine. Larger projects tend to take longer due to more complex permitting and greater capital requirements. Investors should be skeptical of claims that massive new mines can be built quickly without reason to believe special conditions like those at Kamoa-Kakula are present.

Complexities of Andean Copper

One region where major new copper discoveries have been made recently is the Andes Mountains in Peru. Canadian miner Lundin Mining has made impressive finds at its Barreal Seco and Chapitos projects. However, developing mines high in the Andes brings added challenges like managing glacial water sources and building extensive infrastructure for access and ore transport. While these projects have terrific potential, investors should expect extended development timelines due to the complexities involved.

Assessing Project Readiness

In assessing copper investments, investors should look at how advanced the company's engineering studies are. A Preliminary Economic Assessment (PEA) gives a conceptual overview of potential project economics to determine if further study is warranted. More detailed Pre-Feasibility and Feasibility Studies require extensive modeling and analysis of mining methods, metallurgy, environmental impact, permitting, and infrastructure. These studies help provide certainty but are expensive and take significant time. Investors should be wary of companies touting projects at the PEA stage as near-certain future mines.

Impact of Mining Methods

The choice of mining methods can also impact timelines. One approach some majors are considering is block caving. This method involves undercutting deposits to collapse ore into an underground recovery space. It can enable high production rates, but the upfront development takes years. The approach reduces capital intensity compared to other underground mining methods. However, marginal projects may have their economics stretched too thin by the long ramp-up period. Investors should look closely at how mining method choices like these align with the project timeline and a company's financial resources.

Demand Upside for Patient Capital

Demand projections indicate the copper market could face significant shortfalls in the coming decade without substantial new production. With mines taking over a decade to reach full output, the need for major investments is urgent. While risks exist, investors who select quality projects with management teams capable of delivering may be handsomely rewarded for their patience on project timelines. The copper market offers perhaps some of the most compelling fundamentals among commodities for long-term investors today.

Risks and Opportunities for Investors

Investing in copper comes with substantial risks. Project timelines may be delayed, causing budgets to inflate. Changes in resource nationalism and environmental regulations can halt projects entirely. Even with permits secured, construction challenges can impede progress. Once in production, costs may overrun estimates and political unrest can disrupt operations.

However, copper presents a tremendous long-term opportunity. Demand growth from electrification and renewable energy appears virtually guaranteed. Supply struggles to keep up due to declining ore grades and pandemic disruptions. This supply/demand imbalance suggests higher real copper prices will be needed to incentivize adequate investment in new mines. Those projects that successfully reach production can deliver outsized returns.

Risks can be mitigated by choosing companies with strong technical expertise valued in the jurisdiction where they operate. Investing in diversified portfolios with exposure to multiple projects evens out individual project risks. The projects with the most challenges likely require avoidance. Yet there are still quality copper assets positioned for success in stable countries. For investors with appropriate time horizons, risk tolerances and prudent diversification, copper offers perhaps the most bullish fundamentals among metals sectors.

Conclusion

The road from copper discovery to production is long and complex. Investors must evaluate management expertise, project fundamentals, and market conditions across extended timeframes. Risks exist, but copper’s essentiality in global electrification makes it a compelling long-term investment. By targeting high quality projects with experienced teams, investors can prudently access the upside copper presents. Though patience is required, copper offers among the most exciting fundamentals of any metal. The future for copper appears bright, and those investors who secure positions in promising deposits poised for production have much to gain. With thoughtful analysis and diligent monitoring, the coming copper boom can reward those willing to withstand the risks and ride out the lengthy timelines inherent to the industry.

About Marimaca Copper

Marimaca Copper is a TSX-listed company with an exciting copper discovery - the Marimaca Copper Project in Chile's Antofagasta region. This is the only major new copper discovery globally in the past 5 years and is considered low risk with significant exploration potential. Marimaca's vision is to create value for shareholders by realizing the full potential of Marimaca, which could become one of the most significant recent copper-oxide discoveries, as well as exploring for other large-scale deposits in the region. The Marimaca deposit challenges accepted exploration wisdom as an intrusive-hosted system unlike the typical volcanic-hosted deposits nearby. Its prime coastal location near excellent infrastructure enables potentially low-cost development. As one of the most important new copper projects in Chile in the past decade, Marimaca is a high profile development opportunity in a country with limited new copper exploration success.