Surging copper demand for the energy transition creates long-term opportunities, but miners must navigate supply challenges to power electrification.

Imagine a world powered by clean, renewable energy. Electric vehicles glide quietly down city streets. Solar panels glisten on rooftops. Wind turbines spin gracefully on the horizon. This is the electric future we are striving for - one that copper will play an indispensable role in building.

As the world charges towards electrification, one metal above all will serve as the irreplaceable conduit: copper. The red metal is truly the lifeblood of the energy transition. Copper's unmatched thermal and electrical conductivity makes it a critical component in EVs, charging infrastructure, renewable power systems, and the grid. It's no exaggeration to say an electric future simply isn't possible without copper.

Just how much copper will the energy transition require? Estimates suggest demand could surge 20-30% by 2030 as electrification accelerates - amounting to 5-6 million metric tons of new copper demand per year. This is a staggering figure, equivalent to building over thirty Eiffel Towers out of pure copper annually! EVs alone will be a major driver, using 3-4x more copper than conventional cars. A single EV can contain upwards of 180 pounds of copper. Charging stations and associated infrastructure will further amplify copper needs.

The greening of the power sector will also translate to a copper boom. Solar and wind power are extremely copper intensive, using 5-10x more copper per megawatt than traditional fossil fuel plants. Massive transmission line build-outs to support renewables will create additional copper demand. The EU alone will require up to 4.5Mt of copper for power grids by 2030.

However, the surging demand won't be met without challenges. Copper producers are already grappling with dwindling ore grades, permitting obstacles, and geopolitical risks that could constrain new mine development. Average Chilean copper grades have slipped below 1%, while acquiring permits for a new U.S. mine can take decades. Much of the world's untapped copper lies in high-risk jurisdictions like the DRC. Competing land uses and ESG concerns create further hurdles.

To overcome these headwinds and seize the electrification opportunity, copper miners will need to employ innovative new approaches. Advanced leaching technologies could help unlock production from low-grade ore stockpiles and waste rock. Increased recycling and the processing of scrap like old wiring and e-waste will be key to supplementing mine production. Improving the efficiency of mineral processing and smelting could also boost output.

On the policy front, governments are increasingly recognizing copper's role as a strategic metal. In the U.S., the Biden administration has underscored securing critical minerals supply chains as an economic imperative. Bipartisan momentum is building for permitting reform to support domestic mining projects. Internationally, efforts to "friend-shore" supply chains could direct investment to U.S. copper mining allies like Chile, Peru, and Australia.

Higher sustained copper prices will also be essential to incentivize new production. Fortunately, the compelling demand outlook is likely to support elevated copper prices for years to come. For investors, this creates a tantalizing opportunity. Companies with quality copper assets, experienced management teams, and strong ESG track records could generate impressive returns. The key is identifying miners positioned to capitalize on surging demand while deftly navigating supply headwinds.

The long-term investment thesis for copper is a powerful one. We are on the cusp of a global energy transformation that will require an unprecedented amount of the red metal. The question is not if copper demand will boom, but rather which projects and companies will emerge as the winners to supply an electric future. For investors who believe in the electrification megatrend, gaining exposure to copper is a simple yet potentially lucrative way to plug into the biggest energy shift in a century. The renewables revolution will be built on a copper foundation.
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Interview with Mark Selby, Nickel Market Expert & Commentator

Our previous interview: https://www.cruxinvestor.com/posts/nickel-price-rebound-supply-cuts-rising-ev-demand-4874

Recording date: 3rd March 2024

Less than 2 weeks ago, BHP in a half-year report commodity outlook:
*“While the supply glut was still contained mainly in the Class-II segment of the industry, operating conditions for integrated sulphide businesses, globally, remained solid. However, since the LME began to take delivery of Sino-Indonesian nickel cathode to its warehouses, thus catalysing price convergence between product classes*, loss-making has become widespread. If the LME nickel price is set to $16,000/t, close to the spot price in mid-February, as much as one-half of global production could be loss-making on a cash plus sustaining capex basis.  Producers adopting more sustainable practices could be disadvantaged in this environment, with their efforts not yet recognised with a commercial premium that could help buffer profitability when the base price declines to cyclical lows. Due to the deterioration in the short-term and medium-term outlook for nickel, we have lowered our nickel price assumptions

We, we note that Wood Mackenzie’s long-term Indonesian nickel production forecast has increased by more than +200% between late–2019 and late–2023. Wood Mackenzie utilises a methodological framework for project assessment based on the kind of hurdle rates of return that a listed Western producer would be familiar with. Consequently, they have been continually surprised when Indonesian projects kept coming forward. These projects were also being delivered at significantly lower costs (and ramping up to nameplate more smoothly) than was thought likely just a few short years ago. Clearly, capital has been committed in the Sino–Indonesian nickel complex based on very different return parameters to those that underpin shareholder expectations of capital allocation processes in the West.

Jim Lennon at Macquarie, one of the only banks that invests time in some fundamental commodity research said that after travelling through China said that demand had been understated by more than 100ktpa and that 40-50 kt of supply had been not properly counted and has revised surplus for 2023 from more than 250kt to 150kt and acknowledgement that some of this is in-process inventory build rather than inventory for sale.  More importantly said that the forecast for 2024 now 40kt – that is just 1% of supply – and acknowledged that if Indo supply fails to grow by 13% of forecast than could potentially move into deficit. 

You see forecasts from 20-30 banks, but in reality, they all come from a combination of 4 sources:  Wood Mackenzie, CRU, Shanghai Metals Market, and in the case of nickel and a few other commodities, the study groups like International Nickel Study Group. (other is copper,lead/zinc)
The banks take one or more of these forecasts, depending on how much focus commodities are at that bank, they then tweak the demand and supply numbers and it becomes “their” forecast so these groups Woodmac/CRU/SMM/INSG basically drive most of bank commodity and even consulting firm analysis. 

International Nickel Study Group generally does a good job but depends on countries to provide forecasts and can do some work but doesn’t have a budget to do lots of fundamental analysis 
Am going to focus on the most guilty – WoodMac’s demand forecasts for nickel have been ludicrous.  They understate trend stainless and nickel demand growth, they overstate the rate at which scrap will grow and then (as BHP noted) do not get Indonesian supply right (that is a tough
In their Q4-2019 demand forecast, they had demand getting to 3.2 Million tonnes by 2030, and 4 million tonnes by 2040 (CNC forecast since 2019 is for 5 million tonnes by 2030, our current thinking is close to 6 million tonnes).  WE ACHIEVED 3.2 MILLION TONNES IN 2023. 

As a concrete example of the “cancer” that creeps in – WoodMac had the most ludicrous example that somehow demands for stainless was going to slow to less than half historical trend growth and that nickel scrap growth was going to increase so primary nickel demand for stainless was going to DROP by 2030 !

This completely crazy forecast has then showed up in reports by McKinsey and BCG who each assured me that the “do their own analysis” but had forecasts that were eerily similar to that flawed *WoodMac* forecast.

*CRU* not as bad, but nowhere close their 2023 forecast in 2019 was 2.75 Mt – again actuals will be close to 3.25 Mt when done – so missed by 500kt …..  That  2019 forecast for 2030 was 3.7 million tonnes, more than a million tonnes lower  than CNC forecast (and where we will likely end up in 2025-2026)

Nickel has grown at 4-5% over long periods of time.  EVs wil drive that higher for next decade so why did they have effectively just trend demand growth until 2030.

Recording date: 29th February 2024

Major Supply Squeeze Coming in Copper

Fundamentally, copper markets look poised to face substantial global supply deficits in the coming years. As emerging explorers and developers race to provide new sources of production, substantial upside exists in copper mining stocks today before this pending supply squeeze fully materializes.

Many existing copper mines are aging, with ore grades declining over decades of exploitation. Yet copper demand keeps rising steadily thanks to decarbonization policies and rising electrification hitting energy infrastructure and consumer products worldwide. This demand picture conflicts harshly with the supreme lack of new large-scale copper projects in the development pipeline. The supply lag sets up for recurrent periods of spiking copper prices in the future as demand grows faster than additional mine capacity.

Several mining juniors profiled are advancing projects rapidly or finding high early grades that provide leverage to the pending copper bull run. Hot Chili for example continues expanding their major Coastal Copper resource in Chile, now over 1 billion tons. Meanwhile in Canada, both T2 Metals and Tribeca Resources are uncovering impressive grades that could augment resources substantially with tighter drilling.

Even copper majors like NGEx Minerals offer some protection but with muted upside, as their vast deposits expand potentially for years to come through multi-phase exploration like at the Los Helados project. Investors should evaluate their copper exposure based on risk tolerance, timeline expectations, and desired leverage to cyclical peaks. Fundamentally though, the winds are clearly at the back of copper exposure for those with some patience to ride out the likely turbulence ahead.

Hot Chili
Rapidly advancing major 1+ billion ton copper-gold project at Coastal Copper in Chile with over 300 million tons already at higher grades. Exploration and engineering moving project towards production.

Tribeca Resources
Early-stage explorer finding strong initial grades under shallow cover at Copper Gold project in Chile, recently extended strike length 40% through drilling.

Filo Mining
Majors advancing flagship Filo Del Sol deposit which contains high-grade feeds and continues to expand through extensive exploration like 5400m drilled in January. Massive scale bodes well for production lifespan.
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Recording date: 22nd February 2024

As Chinese New Year comes to an end, nickel prices have moved up to the upper end of the recent range over $17,000 per tonne trading at 3 month high of $17,200. Will wait to see commentary by Monday on current market conditions in China. We will need to see whether it can be sustained but a good start to Year of the Dragon.

Some more capitulation moments – BHP taking multi-billion dollar write-downs on nickel business, threatening to put entire Nickel West operation on care & maintenance as a business lost $200 million in the most recent period. 

Glencore also announced it's not funding Koniambo any further and looking to sell its 49% interest.  The Australian government has now put a nickel on the critical minerals list allowing some (not sure why wasn’t on in the first place) and has announced a royalty cut to help provide further financial support to the sector. 

France offering to provide $150 million in funding for Prony Resources (Goro project) to keep it afloat.  

Canada Nickel announced results at Bannockburn and a new discovery at Mann Central. Holding a conference call on Friday to talk through the exploration plan.

Updated Horizonte estimate came through: $454 million and 18 more months to completion.  Looking to put finance in place by Q2-2024 and complete by Q1 2026. The updated capital cost is now US$1,004 million, approximately 87% higher than the previously disclosed capex budget of US$537 million.

Magna Metals released some good footwall orebody drilling results at their 109FW zone. MCR-234-061: 0.6% Ni, 1.0 % Cu, 9.5 g/t Pt + Pd + Au over 14.7 metres, MCR-24-065: 0.2% Ni, 1.1 % Cu, 11.4 g/t Pt + Pd + Au over 10.2 metres with some higher grade intervals as well

Power Nickel announced results of 6 holes – 4 holes intersecting mineralization - hole PN-23-40 and PN-23-42 carrying some attractive high-grade zones of 12.77 m @ 0.62% Ni, 0.63% Cu, 0.04% Co, 0.78 g/t Pd and 0.22 g/t Pt and 7.77 m @ 0.71% Ni, 0.12% Cu, 0.04% Co, 0.42 g/t Pd and 0.03 g/t Pt respectively.

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Recording date: 16th February 2034

The Battery Show (Copper Bottomed, Episode 13)

Copper prices continue to absorb pressure in early 2024 from a strong US dollar and weak economic data from China. Prices have dipped to US$3.70 / lb and end the week at US$3.80 / lb. Meanwhile it is still hard to define simple metallurgy, good grade, easy geometry, shallow resources. Right on cue American West Metals delivers a maiden mineral resource for Storm which ticks all of those boxes, although investors will need to assess the impact of extreme weather conditions and the indium asset. Elsewhere, the explorers have their drill rigs turning. Merlin discusses two weeks’ worth of results, some excellent, some less good, from the following companies Filo Corp, Surge Copper, Hercules Silver, Copper Fox, Koryx Copper, Trigon Metals, Arizona Sonoran, Amaroq, T2 Metals, Callinex; Xanadu, Benton, Barksdale and Emerita.

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Recording date: 14th February 2024

Nickel prices continue to trade in the $16,000-$17,000 range we’ve been in since mid-December, trading down towards the bottom end of the range after moving towards the upper-end last week.  Expected inventory build emerging with LME inventories continue to move up to 70,000 tonnes level. Have seen a few bumps below $16,000 and may see a bump down to the $15,400 level again before we’re done but moves last day and comments on seeing restocking by the EV chain through Chinese New Year. Optimism that should see restocking after Chinese New Year at end of Feb/into March (Chinese New Year keeps China quiet for about 2 weeks)

Have talked about the impact of destocking in batteries – 4% demand versus underlying consumption growth of closer to 40%. On the stainless front, shook off impact of Chinese economic slowdowns  - China’s CSSC, the stainless steel industry body in the country, has released the full year 2023 stainless output volumes. This shows a 12.6% y/y gain to 36.7Mt, cementing China’s place as the dominant producer of stainless in the world. Within this, nickel-rich 300-series stainless steel grew 11% y/y to 18.5Mt, while 400-series rose 15.7% to 6.5Mt. With imports falling, apparent consumption rose 10.6% y/y.

On company news front over last few weeks:

Canada Nickel announced plans to develop North America’s largest nickel downstream processing plant and largest stainless and alloy plant in Canada at a press conference with the Provincial mines minister, Timmins mayor, and one of the First Nations chiefs.

The Canadian government made a $5-million investment to support the construction of North America’s first cobalt sulphate refinery, dual-listed Electra Battery Materials reported on Friday.

Buxton Resources had another high-grade interval at Dogleg prospect from JV with IGO. 2.6 metres (true width) of over 4% nickel. Starting with this one because I want to highlight how to show intervals to indicate what the interval means (size/orientation of geophysical target, how drill holes relate to previously reported holes)  - if someone has something good (not just promotional), they will do a good job showing the scale of the target and what the data means.

NiCan released a drill hole at the Wine project – shallow, good Ni-Cu grade over good width but again is 15-metre stepout based on scale shown - not sure how relates to prior historic drilling as well.

Some decent results as well from LifeZone Metals – several holes over nearly one kilometres successfully connected one resource to the zone previously drilled (graphic and results highlight new holes plus ones in 2007 and follow-up holes in 2021/2022). Some good grades similar to Kabanga resource, but they were narrower in a few places and some missed along strike so overall scale will be interesting

PNRL had a couple of good sets of results - released some good grade results (had previously shown visual core) and show verify - good to get some real description of dimensions:

SNUG-23-056 (South Limb): 30.45 metres of 2.88% NiEq (1.78% Ni; 1.81% Cu; 0.09% Co) including 15.80 metres of 3.00% NiEq (1.73% Ni; 2.15% Cu; 0.09% Co) and 12.10 metres of 3.14% NiEq (2.06% Ni; 1.73% Cu; 0.11% Co).  

Is beyond old workings and the existing resource – it would be good to get some sense of the true width of these intersections to understand scale.

SNUG-23-060 (South Limb-north): 36.35 metres of 1.64% NiEq (1.01% Ni; 1.00% Cu; 0.05% Co) including 15.40 metres of 2.00% NiEq (1.14% Ni; 1.42% Cu; 0.06% Co) and 4.10 metres of 2.11% NiEq (1.44% Ni; 1.00% Cu; 0.08% Co) and 5.60 metres of 2.76% NiEq (1.84% Ni; 1.41% Cu; 0.10% Co)

SNUG-23-060 (South Limb-south/N2): 38.20 metres of 1.67% NiEq (1.06% Ni; 0.97% Cu; 0.06% Co) including 25.05 metres of 2.03% NiEq (1.27% Ni; 1.20% Cu; 0.07% Co) including 8.30 metres of 3.07% NiEq (1.98% Ni; 1.72% Cu; 0.10% Co)

SNUG-23-062 (N2 Limb): 20.85 metres of 1.64% NiEq (0.85% Ni; 1.35% Cu; 0.04% Co) including 10.85 metres of 2.10% NiEq (1.06% Ni; 1.79% Cu; 0.05% Co)

SNUG-23-064 (South Limb/N2): 102.80 metres of 2.23% NiEq (1.41% Ni; 1.30% Cu; 0.08% Co) including 86.75 metres of 2.64% NiEq (1.66% Ni; 1.55% Cu; 0.09% Co) including 12.95 metres of 2.89% NiEq (1.92% Ni; 1.49% Cu; 0.10% Co) and 14.70 metres of 3.26% NiEq (1.91% Ni; 2.23% Cu; 0.10% Co) and 19.70 metres of 2.93% NiEq (1.99% Ni; 1.43% Cu; 0.11% Co) and 12.25 metres of 2.71% NiEq (1.69% Ni; 1.62% Cu; 0.09% Co).

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Recording date: 23rd January 2024

The Battery Show (Copper Bottomed, Episode 12)

Betting on Copper’s Supply Crunch

Copper prices have pulled back recently amidst a stronger dollar and concerns over a cooling Chinese economy. However, a compelling opportunity is emerging for investors willing to look past short-term volatility – the coming copper supply crunch. New discoveries and mine capacity expansions are not keeping pace with global demand growth and existing operation grade declines. As major producer Chile highlights, copper output could fail to surpass 2% annual growth this decade versus estimates near a 3% historical rate. Yet copper’s essential applications from electric vehicles to power infrastructure leave consumption marching steadily higher. This backdrop points to material pricing power shifts toward copper miners as buyers compete for inadequate future supply.

Astute investors can position early with select copper developers and explorers ahead of the crowd. These companies offer substantial upside potential before positive supply-demand fundamentals grab wider attention across the copper sector. For example, QC Copper & Gold already holds 12 billion pounds of copper resources amenable to open pit mining in Quebec, but trades around a paltry $25 million valuation. As permitting and feasibility studies progress, QC’s fundamentals plainly outweigh its current market capitalization. Targeted explorers like American Eagle Gold also offer huge lift potential from new discoveries before enough drill success gets priced into share values. American Eagle recently hit an impressive 302 meters at over 1% copper equivalent on its British Columbia project.: 

The copper market outlook offers perhaps the most bullish set-up among commodities this decade. Yet it remains overlooked relative to historic copper bull runs. Value-focused investors can capitalize early on coming pricing strength by identifying assets and equities substantially disconnected from copper’s positive underlying supply and demand drivers.

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Recording date: 24th January 2024

We have seen the 5% move – to the downside - from our last discussions when nickel prices were bumping up against the top end of their recent range in the $16,800-$17,000 and we’ve tested $16,000 level multiple times with a few minor breaks below.
 
This is creating the capitulation which heralds a bottom – I had been calling for a turn to happen in the New Year (either post the calendar or Chinese New Year – the latter most likely) – recent events make that even more likely and seeing some green shoots of the positive turn already
 
The Capitulation

Wyloo putting its Mincor operation on care & maintenance which it just bought a year ago. Cassini 1.2 Million tonnes at 3.3% nickel.

BHP in turn is putting its Kambalda concentrator (fed by Mincor) on C&M which effectively cuts out a number of operations paths to market.  It also impacts the amount of Mt.  Keith concentrate which can be processed because the flash furnace needs to blend feeds.

BHP looking at a write-down on their nickel business (based on reported data, their sulphate plant not producing or selling much, cost pressures across rest of the business) and including their Oz Minerals acquisition and ni.

First Quantum suspending mining at Ravensthorpe (will feed plant from stockpiles to save cash).

South 32 reviewing their Cerro Matoso FeNi operation – this is a 40-year-old laterite mine – remember laterites are relatively easy to high-grade.

Majors tend to be behind the curve and the production cuts they announce end up helping create the bottom.

The Green Shoots

Seen a small increase in stainless steel and NPI prices in China (despite the negative mood).

Beginning of restocking in EV and supply chain:

Thesis for this year – restocking to kick in to drive double-digit demand growth and push prices back up to $20K by year-end!

US 2023 year-end sales 1.4 million – up 50% for the year and still exiting with December up 42% - hardly collapsing…..Global plug-in sales up November up 31% (total YTD up 38%)

Company News

SPC Nickel published solid initial resource at West Graham – 19 Mt at 0.42% (0.57% Ni-eq), is an open pit.

Brazilian mining ministry endorsement of the Plan of Economic Assessment (PAE) confirms that Centaurus Metals has met all technical requirements for the mining lease and can implement the project – one step closer to the final permit.

Talon Metals had splashy results 5.93-meter  intercept of high-grade massive nickel and copper mineralization assaying 2.92% Ni and 1.73% Cu (4.09% NiEq), which includes a 2.2-meter (7.2 feet) intercept of high-grade massive nickel and copper mineralization assaying at 6.84% Ni and 3.80% Cu (9.31% NiEq). The other 2 holes released were not too spectacular.

Visionary Metals next set of assays from its Wyoming project – very greenfield project – targets were a little narrow, but still early days.

Archer Exploration – exploring Grasset deposit originally discovered about a decade ago by Balmoral resource.  Some OK grade but narrow and deeper.

Premium Nickel couple of interesting results and decent grades with some width (but no true widths) – but please compare it to Mincor resources which is now going to be closed.
 
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Interview with Mark Selby, CEO, Canada Nickel Corp for The Battery Show

Previous recording: https://youtu.be/2eEQhElc4Tw

Recording date: 19th January, 2024

Nickel Market Poised for Deficit by 2024 as Demand Booms

Nickel prices failed to plunge as low as expected in early 2023 due to destocking along the EV supply chain, but underlying demand growth remained resilient at 9% annually from 2020-2022. While temporary factors kept consumption subdued last year, the electric vehicle revolution continues to drive rapid nickel demand expansion.

With supply growth still reliant on Indonesia in the face of several other operations closing, the stage is set for a potential nickel market deficit by 2024. Export quota changes could see Indonesia constrain supply, just as soaring EV uptake spurs further inventory restocking and double-digit nickel demand growth globally.

Surging nickel consumption in North America as EV penetration accelerates will make the region a major demand driver. Relentless demand against capped supply will require price signals to incentive substantial new mine investment. But after a turbulent 2023, nickel appears gearing up to fulfill its potential as an indispensable metal in a rapidly electrifying world.

The supply challenges emerging just as demand hits its stride likely create a promising risk-reward investment profile for nickel exposure moving forward. As the decade unfolds, the metal could emerge as one of the primary beneficiaries of the unstoppable momentum behind EVs.

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Recording date: 10th January 2024

The Battery Show (Copper Bottomed, Episode 11)

Copper prices have been falling in real-money terms for 20 years and this has to change in the face of sustained demand growth. The incentive price for new copper production is likely to rise as supply falters due to i) depth of resources ii) grade of resources iii) discovery rate of resources iv) higher interest rates and v) inflation.  

Quality shallow exploration projects with good grades, simple metallurgy and infrastructure advantages will trade a premium. Go Explorers! 

Merlin discusses results from Benton Resources, Hercules Silver, and Cascadia Minerals. Hercules Silver produces an almost perfect news release and decent results. Benton Resources remains at unchallenging valuations.

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