Widening Copper Supply Issues Presents Compelling Opportunity for Investors

• Copper prices have risen significantly, with majors like BHP attempting to acquire copper assets through M&A rather than building new mines
• Copper supply is constrained as existing large mines face declining grades and reserves while few new major projects are being developed
• Copper demand is expected to surge due to the clean energy transition, electric vehicles, and new applications like AI and data centers
• Junior copper explorers provide investment exposure to potential new discoveries that could help alleviate the supply deficit
• Successful exploration results from several junior copper companies indicate promising projects in the pipeline

Why Invest in Copper

Copper is poised to be one of the most critical metals of the 21st century. As the global economy accelerates its transition towards clean energy and electrification, copper's unparalleled thermal and electrical conductivity properties make it an essential material across industries. Demand for copper is surging, driven by its crucial role in electric vehicles, renewable energy infrastructure, and emerging technologies like AI. However, a significant supply crunch looms as the pipeline of new copper projects remains constrained. This widening supply-demand gap presents a compelling opportunity for investors to gain exposure to the red metal.

Copper Price on the Rise

Copper prices have embarked on a strong upward trajectory, recently hitting $4.59/lb ($10,000/t), a level not seen in many years. The spot price has advanced considerably from its $2.80/lb range just 5 years ago. Copper's rise reflects the market's recognition of the metal's crucial role in the future economy and the increasing tightness in supply. Despite this upward move, analysis shows copper prices still remain below their long-term inflation-adjusted average, suggesting room for further appreciation.

Supply Constraints and Underinvestment

The copper industry faces a structural supply deficit in the coming years. Current production is heavily reliant on a small number of aging mega-mines, many of which are seeing declining ore grades and depleting reserves. Meanwhile, a dearth of new copper discoveries and the multi-year lead times required to bring new mines online have resulted in a thin project pipeline.

Even the world's largest miners have underinvested in new copper supply. Major copper producers like BHP elect to acquire existing mines rather than build new ones, as evidenced by their attempted acquisition of OZ Minerals. The reluctance to develop new supplies stems from the risks of cost overruns and delays, as showcased by Teck's challenges with the QB2 expansion project. If the world's largest, most experienced miners are shying away from building new capacity, it underscores the industry's supply challenges ahead.

Surging Demand from Multiple Fronts

On the demand side, copper consumption is poised for substantial growth, driven by the global transition to clean energy and electrification:

• Electric Vehicles: EVs use four times more copper than internal combustion engines, and demand will increase as EV adoption accelerates globally.
• Renewable Energy: Massive amounts of copper are needed in solar panels, wind turbines, energy storage, and upgrading electrical grids.
• Infrastructure: Governments worldwide are embarking on large-scale infrastructure investments that are copper intensive.
• Decarbonization: Efforts to decarbonize industries, buildings and transportation will require significant amounts of copper.
• New Applications: Emerging demand drivers like AI and data centers are projected to add 1 million tonnes to annual copper demand by 2030.

Extraordinary demand growth against the backdrop of constrained supply is expected to generate a deepening structural deficit in the copper market through the end of the decade. Higher copper prices will be needed to incentivize new supply. Estimates suggest prices of $15,000-$20,000/t ($6.80-$9.10/lb) could be required to make new projects economically viable and bring the market back into balance.

Junior Explorers: The Solution to the Supply Gap?

With the major miners underinvesting in copper exploration and development, junior exploration companies will be critical in discovering the new copper deposits the world needs. Juniors are taking risks to explore in prospective geologies and find the projects that will help alleviate the supply deficit in the years ahead. For investors, juniors provide direct exposure to the potential value creation from new copper discoveries.Promising Projects on the HorizonThe video reviews recent exploration results from several junior copper explorers. While still early-stage, the drill results show potential for meaningful new discoveries:

• Aldebaran Resources: Its project in Argentina has intersected broad zones of porphyry-style copper mineralization, which has good potential to expand.
• C3 Metals: Identified new high-potential copper-gold targets at projects in Peru and Jamaica to be prioritized for drilling.
• Metallic Minerals: Expanded the mineralized footprint at its copper-silver project in Colorado, with significant step-out drilling planned.

Copper's Role in the Future Economy

Looking ahead, copper will be one of the most important metals in enabling the technologies and infrastructure needed to support a more sustainable global economy. Its superior properties make it difficult to substitute across applications. As the world electrifies and decarbonizes, copper's role will only become more essential. The resulting supply-demand imbalance is expected to be a strong tailwind for copper prices in the years ahead. Investors positioning for this structural shift stand to benefit as the gap between supply and demand becomes more acute.

The Investment Thesis for Copper

• Copper demand is set to surge, driven by clean energy transition, EVs, infrastructure, and new technologies
• Supply is heavily constrained, with declining production from existing mines and a lack of new development projects
• Structural supply deficit is expected to widen through 2030, putting upward pressure on prices
• Copper equities provide exposure to rising prices and the potential for new discoveries
• Investors can gain exposure through major producers, mid-tier operators, and junior explorers
• Junior explorers offer the potential for outsized returns on new discoveries, but with higher risk
• Copper equities have underperformed the copper price, presenting a potential catch-up opportunity
• Consider investing in a basket of copper producers and developers to diversify risk
• Monitor exploration results and development milestones that could be catalysts for re-rating

The combination of surging copper demand and constrained supply growth is expected to generate a widening market deficit through the end of the decade. Significantly higher prices will likely be needed to incentivize new supply to meet demand. This structural shift presents a compelling opportunity for investors to gain exposure to copper. A diversified approach across producers and explorers can provide an upside to rising prices while mitigating risks. Investors should monitor ongoing exploration and development results, which could be key catalysts for copper equities going forward.

Copper's Critical Role in the Future Economy

Imperial Metals

Imperial Metals reported positive exploration results from its Mount Polley copper-gold mine in British Columbia. Drilling successfully extended mineralization in the Springer pit, with multiple long intercepts of high-grade copper-gold mineralization. With the potential to convert waste rock into additional mill feed, these results underscore the exploration upside at Mount Polley. As Imperial continues to optimize the mine and extend its life through discoveries, it is well-positioned to benefit from the positive copper market fundamentals.

Aldebaran Resources

Aldebaran Resources delivered encouraging drill results from its Altar copper-gold project in Argentina. The holes focused on expanding mineralization beyond the historical resource. While grades were modest, the drilling successfully extended the footprint of mineralization and generated vectors for ongoing exploration. The results validate Aldebaran's approach of making new discoveries at Altar. With a large mineralized system situated in a prospective region, Aldebaran offers investors exposure to exploration upside in a rising copper price environment.

Western Copper & Gold

Western Copper & Gold is advancing its flagship Casino copper-gold project in the Yukon. With a large resource base and ongoing engineering studies, Casino is one of the most significant undeveloped copper-gold projects globally. While the market awaits a construction decision, Western Copper continues to derisk and optimize the project. Recent metallurgical drilling will provide sample material to refine processing parameters and help unlock additional value. As the copper market moves into deficit, projects of Casino's scale will become increasingly strategic.

C3 Metals

C3 Metals is advancing prospective copper-gold projects in Peru and Jamaica. Ongoing exploration continues to intersect new mineralisation zones and expand these assets' potential. In Peru, drilling confirmed the potential for a significant new discovery at the Arya target. In Jamaica, multiple targets are demonstrating the potential for resource growth. With a disciplined approach to generating drill targets and focusing on value creation, C3 is well-positioned for exploration success in these emerging copper jurisdictions.

Nine Mile Metals

Nine Mile Metals is advancing its flagship project in the Bathurst mining camp of New Brunswick. Ongoing drilling continues to intersect zones of high-grade volcanogenic massive sulphide mineralization, confirming the exploration potential of this camp. Nine Mile is focused on discovering new deposits in this productive region to build the next generation of copper-lead-zinc mines. With a strategic land position, promising drill results, and a supportive commodity price environment, Nine Mile is positioned for exploration success.

Atico Mining

Atico Mining is a copper-gold producer actively exploring extending the life of its El Roble mine in Colombia. Recent drilling has extended mineralization below the existing workings, highlighting the potential to grow resources and reserves to maintain production. Exploration remains a key focus for Atico as it seeks to sustain and grow the mine. With an experienced team, strong cash flow generation, and organic growth potential, Atico presents a compelling investment opportunity in the copper space.

BeMetals

BeMetals is advancing the high-grade Pangeni copper project in Zambia. Ongoing drilling continues to extend zones of mineralization and identify new targets for follow-up. The results underscore the potential for discovery in this prospective region. With a robust pipeline of drill targets and a strengthened balance sheet, BeMetals is well-positioned to unlock the value of this asset. As the copper market moves into deficit, BeMetals exposes investors to the upside of exploration in a world-class copper jurisdiction.

Camino Minerals

Camino Minerals is exploring its Los Chapitos copper project in southern Peru. Ongoing drilling has identified multiple new zones of copper mineralization across the property. Step-out drilling at the Adriana zone successfully extended high-grade mineralization, highlighting the potential to define a significant resource. With a large land package in a productive copper belt, Camino offers investors exposure to exploration upside as it systematically advances Los Chapitos. As the copper market strengthens, Camino is well-positioned for further discoveries.

Arizona Metals

Arizona Metals is exploring the past-producing Kay mine and surrounding area in Arizona. Recent drilling has extended zones of high-grade copper-gold-zinc mineralization, confirming the potential for a significant VMS deposit. Ongoing step-out and infill drilling continues to expand the resource potential, with multiple priority targets yet to be tested. With a strategic land position in a Tier 1 jurisdiction and exposure to multiple metals, Arizona Metals offers investors a compelling exploration story in a strengthening commodity price environment.

Teck Resources

Teck Resources, one of the world's largest diversified miners, is developing the Quebrada Blanca Phase 2 (QB2) copper project in Chile. As one of the few large-scale copper projects currently in construction, QB2 will be a cornerstone asset for Teck as it pivots towards copper. While the project has faced COVID-19-related challenges and cost pressures, Teck's experienced management team is actively working to bring QB2 into production. With a long life and low-cost profile, QB2 will generate significant cash flow for Teck as the copper market strengthens.