I am at Cesco (CRU) World Copper conference in the world’s largest copper producing country, Chile, surrounded by the world’s largest copper producing companies.
Katie Jackson, CEO of Rio Tinto Copper, who was recently hired from the energy sector, had a fresh perspective on the copper industry and said that it’s a good time to be in the copper business. She said that it is rare to have such strong consensus across an industry optimistic about long-term demand. Kathleen Quirk, CEO of Freeport McMoran, noted, however, that meeting copper demand will be challenging just to stay even, as maintaining current production is already harder, more expensive, and takes longer. This has led to collaborations between two of the world’s biggest copper companies, BHP and Codelco (National Copper Corporation of Chile), on infrastructure, such as desalination, and other technologies to bring more copper to the world. Alejandro Tapia, President of Escondido BHP, and Ruben Alvarado, CEO of Codelco, agree that with technology and industry collaboration it is possible to get more copper from their existing assets (they are also the largest taxpayers in Chile). Ivan Arriagada, CEO of Antofagasta, said that even sharing geology is a way forward, and discussed the other disciplines such as human sciences and artificial intelligence that are required to meet the diverse needs of the mining industry and to attract the next generation of talent to exciting careers in mining. He agreed that it is more costly to build copper mines and he is seeing capital intensity running in the range of $20,000 to $35,000 per tonne of annual production for expansions and new copper mines.
Demand for copper is notoriously hard to predict, and analysts tend to lean towards conservative estimates, particularly underestimating new growth industries. Shaun Usmar, CEO of Vale Base Metals, made the comparison about McKinsey in the 1980’s, who famously predicted that by the turn of the century mobile phones would make up only 900,000 total units. By 1999, the world was selling 900,000 mobile phones every 3 days and has sold almost 6,000,000,000 (Billion) phones to date. Erick Heimlich, Head of CRU Copper Research agreed that, looking back, it was difficult to predict exponential copper demand for the electric car movement. However, the unexpected increase in EV copper demand more than offset the unexpected Chinese residential construction demand decrease over the past 5 years (copper demand has continued to rise in China, regardless). Laura Whitton of BHP Copper Strategy, said even still, China has 1/2 of the copper use per capita of western nations, and India is 1/5 per capita the copper usage of China. Thus, there is still a long way to go to supply these copper markets. As for aluminum substitution, don’t count on it says Henry Van, Trafigura analyst. Looking forward, aluminum has some of the same structural problems as copper to bring on new supply as copper, and it’s not nearly as good a conductor.
The Chinese copper demand continues to look strong driven by growth industries such as EV’s, renewable energy and major grid expansions (increasing every year), along with conventional demand uses like air conditioners.
Look for a China stimulus announcement on Friday. Also, look for global defense spending increases, like what we’ve seen in Germany, being a new driver of incremental copper demand.
Aurora Williams, Chile Minister of Mining, speaking at the World Copper Summit in Santiago, Chile
Chile’s Minister of Mining, Aurora Williams, said that we are entering an era where it is necessary to produce more copper, but also an era to produce better copper. Carbon emissions in Chile have decreased by 12% over the last decade primarily through the use of copper intensive renewable energy.
For Camino, the timing is right to bring a new copper mine online in Chile, especially with our highly competitive capital intensity of around $16,000 per tonne of capacity and low overall Capex. We are in the final stage of closing the Puquios copper mine transaction with partners Denham Capital and Nittetsu Mining. The world is relying on a relatively small copper industry to provide the enabling metal to realize global growth of per capita GDP, greater energy needs, the energy transition to renewables and continued global electrification. Chile and Peru have some of the largest and best copper reserves and production in the world and currently supply approximately 35% of the global copper market. Copper mines are multi-decade investments that can create tremendous value in a strong market. To get the copper, you’ve got to go to the jurisdictions with the best geology and comparative advantages.
Please join our journey at Los Chapitos in Peru (copper discovery), and at Puquios in Chile (copper production).
Jay Chmelauskas, President & CEO
Camino Corporation COR.V
