Global demand for copper continues to surge on the back of growing electric vehicle demand, and this demand is forecast to continue to grow over the next couple of decades. China’s “Belt and Road Initiative” (project aimed at connecting infrastructure corridors within China) is also estimated to generate another 2.2 million tonnes of copper demand (US$13.3 billion at US$2.75/lb copper) between now and 2030.
We know that the world is growing and China and India are spending heavily on infrastructure upgrades which inevitably consumes enormous amounts of copper. Moreover, A boom in demand underpinned by renewables, global electrification, and electric-vehicles will not be offset by committed new mine and scrap metal growth. This likely means that the copper price will need to move high enough in order to incentivize marginal projects to come online. However, this is not a simple solution because of mining lead times (it takes a minimum 5-7 years to go from pre-feasibility stage to production). This means that those marginal projects are going to need to come online right now in order to fill the projected 2025 gap.
Many of the “possible projects” in the chart above are massive projects that have two things in common: 1. Permitting challenges and 2. Enormous capex requirements. Investors who want to profit from surging global copper demand need to find projects that will be able to turn on production as global demand kicks into overdrive, and supply drops off, in 2022/23 and beyond.
According to this forecast for global electric vehicle sales, electric vehicles will account for an additional 300 million kilograms of copper demand by 2023 (75kg per EV x 4 million additional electric vehicles).
The few massive lower grade copper projects out there such as Northern Dynasty’s Pebble Project in Alaska not only have multi-billion dollar capex requirements but most of these projects are facing 7-10 permitting processes which makes it unrealistic that any of these projects will be able to move into production before 2030. This leaves much of forecast deficit left to be filled by existing mine upgrades (which are quite costly) and smaller, but higher grade projects which are currently in the development stage.
One such higher grade copper project which has a relatively fast track to production (~5 years) is Canadian copper developer Kutcho Copper’s (TSX-V:KC) Kutcho Project in British Columbia, Canada. The Kutcho Project boasts an average grade of nearly 3% CuEq (2.92%) across the project’s probable reserves of 10.4 million tonnes. Kutcho is currently in the midst of an infill and exploration drilling program with the aim of delivering an updated resource estimate by Q1 2019.
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