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“ There is less than a

week’s consumption
in warehouses, so any
news – whether positive
or negative, demand or
supply side – has the
ability to drive huge

fluctuations in the price.

s the LME copper price streaked past timeframes and price tags mean the world’s
A$US10,000/t, mining equity investors had largest copper miners are still cautious about
only one question on their minds; how best to responding with new investment.
hitch a ride on the red metal bandwagon. The In April, Iván Arriagada, chief executive of
problem is, while the global top 10 of copper one of the world’s largest copper producers,
producers are benefitting from greater margins, Antofagasta Inc, said the previous “super-cycle”
their ability to take advantage of the recent price had left many miners wary about committing
rise and adapt to the changing demand narrative to expansions and developments which could
appears limited. prove marginal in future years.
Instead, it could be Australian mid-tiers – such “Investors are cautious,” Arriagada told Reu-
as First Quantum Minerals Ltd and Oz Minerals ters. “I do not see an impetus to accelerate and
Ltd – and juniors – Sandfire Resources Ltd and make investments that do not reflect a very
Aeris Resources Ltd – who are best positioned thoughtful process of how likely they are to be
to use the copper demand surge as a spring- profitable.”
board to growth. New production should be enough to meet
In other commodities, major miners are able short-term demand. CRU International expects
to react to price rises swiftly. As spot gold went copper to average $US9,300/t in 2021 as gov-
on its bull run from 2016, majors and mid-tiers ernment efforts to fire up their post-COVID
rapidly reassessed their assets, lowering cut-off economies rely on infrastructure and housing
grades and approving expansions, while juniors projects.
fast-tracked exploration programmes and de- “Moving into 2022, we expect the price to re-
velopment plans to capture the price surge. treat with the influx of new mines and smelting
In contrast, the copper mining sector’s re- capacity,” CRU senior base metals analyst Paul
sponse to the recent price rise is likely to be Wiggers de Vries said.
muted. Unlike gold miners who are still finding However, with warehouse inventories on the
and developing Tier 1 high-grade orebodies, LME, CME and SHFE shrinking, further volatil-
copper miners have stuck resolutely to large- ity can be expected.
scale, low-grade investments with big price “That inflection point for the copper price
tags and long payback periods over the past can be mapped closely with copper exchange
two decades. inventories,” Wiggers de Vries said. “There is
It has been a highly successful policy, with less than a week’s consumption in warehouses,
long mine lives and low operating costs allowing so any news – whether positive or negative, de-
miners to ride out price fluctuations. However, mand or supply side – has the ability to drive
it has also limited the development pipeline. huge fluctuations in the price.”
While porphyry deposits deliver the amount of The arrival of Kamoa Kakula (500,000 tpa
contained copper required to justify multibillion copper concentrate), Quellaveco (300,000 tpa),
dollar investments, they also take 10 years or Spence-SGO (185,000 tpa), Quebrada Blanca
more from discovery to first production. QB2 (316,000 tpa) and Udokan (130,000 tpa)
Since 1994, copper mining supply has dou- will likely tip the market into surplus in 2022, but
Oz Minerals’ Carrapateena bled while the supplies of other base metals this new production will only offset losses over
mine is already set for have tripled. And, although there are five ma- the rest of the decade.
expansion just two years jor projects starting in the next 18 months, the BHP Ltd – which has spent $US2.5 billion
after operations began longer-term development pipeline is bare, and on the expansion at Spence-SGO – forecasts

aUSTRaLIa’S PaYDIRT JUNe 2021 Page 19