Surging prices excite copper bulls

A record market for copper is giving junior Australian miners a major opportunity to capitalise on. Anthony Fensom writes.

Superior started a major drilling program in September.

Soaring prices have sparked excitement among copper bulls, with the red metal hitting record highs amid low stockpiles.

Known as “Doctor Copper” for its ability to predict global economic activity, the metal has enjoyed rising demand as the world economy recovers from the coronavirus pandemic.

On October 15, copper for delivery in December hit a record high on New York’s Comex market, touching $US4.781 per pound ($US10,518 per tonne, or around $14,200) on the back of a global energy shortage and as stockpiles hit a 47-year low.

London Metal Exchange warehouses reportedly held just 14,150 tonnes of available copper, in an industry that consumes around 25 million tonnes a year.

Production from Chile and Peru, the world’s two largest copper producers, has also dropped due to disruptions including the suspension of output from Peru’s Antamina mine due to protests.

Although prices have since eased to below $US10,000 on fears over China’s property sector, analysts point to the increasing green demand driven by ‘net zero’ targets of major economies, together with the infrastructure spending plans of the Biden administration in the United States and other economies.

Analysts Fitch Solutions project that green demand from the power and renewables sector as well as autos will each account for 7.9 per cent of total copper demand by 2030.

It notes that renewables are “12 times more copper intensive” than traditional energy systems, while an electric vehicle contains around five times more copper than its internal combustion engine rival.

“With its significant use in solar photovoltaic panels, wind power generation and electric vehicle production, copper will be the key beneficiary of the energy transition,” S&P Global analysts Aline Soares and Mitzi Sumangil explain in a November 2 report.

“We forecast global copper demand from solar and wind energy generation to reach 852,000 tonnes in 2022 and the growing electric vehicle market to account for 1.1 (million tonnes) in 2022.

“In addition, we expect rising demand due to expanding electrification infrastructure and upgrades to telecommunications infrastructure, particularly in China and the U.S.”

NEW DRILLING

For copper explorers such as Brisbanebased Superior Resources, the timing could not be better.

On September 17, it announced the start of drilling at its Bottletree copper prospect, with four diamond core holes totalling 2300 metres planned.

Located around 210 kilometres west of Townsville, Queensland, the company describes Bottletree as its “most exciting copper prospect.”

“Bottletree is a standout copper target, both in terms of its size and grade potential and is a key part of the company’s copper strategy,” Superior managing director Peter Hwang says.

The company has also established an exploration target for its Wyandotte copper prospect, with a resource definition drilling program and mining studies planned. The prospect has not seen any exploration since 1975.

Superior also aims to deliver a JORCcompliant resource at its Cockie Creek copper prospect by year-end, which is seen having the potential to host a significant

porphyry copper deposit.

The company could also benefit from the “clean and green” power provided by Genex Power’s Kidston project, making Superior a low carbon producer.

“Copper is benefitting from strong energy metal markets and rising demand for world-class deposits in Tier 1 jurisdictions,” Hwang says.

“We look forward to advancing our exploration activities over the year ahead, unlocking value from these highly prospective areas of Queensland.”

EXPORT EARNINGS RISE

Ranked number two in the world for copper resources and currently the sixth-largest producer, Australia’s copper industry is set to benefit from the upturn.

Australia’s export earnings from copper reached $11.4 billion in fiscal 2021 and are projected to reach $14.4 billion by fiscal 2023, according to the Australian Government’s Office of the Chief Economist.

Mine output is projected to reach 910,000 tonnes by fiscal 2023, up 3.6 per cent from the 878,000 tonnes produced in fiscal 2021.

Exports are expected to be supported by a number of new or redeveloped projects, including Golden Cross Resources’ Copper Hill project, KGL Resources’ Jervois project, Havilah Resources’ Kalkaroo project and Cyprium Metal’s Nifty copper mine, according to the Resources and Energy Quarterly for September 2021.

Adding to majors BHP and Rio Tinto and other current ASX-listed producers including OZ Minerals, Sandfire Resources, Copper Mountain and Aeris Resources, a number of copper explorers have emerged in addition to Superior Resources.

These include Stavely Minerals, which is targeting western Victoria’s Stavely Volcanic Belt; Sultan Resources, focussed on the Lachlan Fold Belt of New South Wales; and Sky Metals, which acquired the Galwadgere copper-gold project in New South Wales.

In Papua New Guinea, Mayur Resources spin-off Adyton Resources has developed a portfolio of copper and gold projects within Papua New Guinea’s prolific Pacific Rim of Fire, including its Feni Island copper-gold project.

Miners’ increasing bullishness is shown by surging exploration spending, which reached $120 million in the June quarter 2021, up 44 per cent year-on-year.

Nevertheless, the government forecaster sees prices easing back from $US9122 a tonne in 2021 to a “still strong” $US8650 a tonne by 2023, amid concerns over the strength of China’s post-COVID recovery and expected pick-up in South American production.

NEW IPOS

Initial public offerings (IPOs) are another indicator of investor sentiment and a number of copper-focussed IPOs have reached the Australian bourse in 2021.

Among them, Revolver Resources has announced the start of field work at its Dianne project in North Queensland, with the mine having previously produced more than 63,000 tonnes of high-grade copper during the 1980s.

Other new listings include Askari Metals, which has reported high-grade copper results from its Horry copper project in Western Australia; Copper Search, focussed on South Australia’s Gawler Craton; and Kincora Copper, with its Trundle Park prospect in NSW.

Will the positive momentum for copper continue into 2022?

“Copper is the key ingredient in manufacturing and major economies’ decarbonisation drive,” Hwang says.

“Boosted by COP26 targets, there is every sign this push is only going to further accelerate.”