by Jill Baker
That so many analysts have been caught napping as the copper price ‘unexpectedly’ broke to new highs is something of a surprise, particularly given the compelling economic drivers that have been clearly signalling a supply squeeze for some years.
Copper is thought to be the first metal humans discovered, dating back well over 10,000 years. Previously the price was kept in check due to the fact that in general copper is more abundant than the majority of non-ferrous metals. It’s historical uses in cookware, tools and fittings, along with its durability, conductivity and even anti-bacterial properties have ensured copper’s iconic status in the world of metals.
However, the emergence of new industries in clean technology and EV production have created an added impetus and urgency to sourcing new copper supplies. This increase in demand has also coincided with a forecast fall in production for the next few years (see Fig 1 – courtesy Refinitiv) opposite.
The first few months of 2024 has seen copper analysts hastily rewrite their scripts and switch to forecasts for deeper deficits, while striking redlines through previous forecasts for expected surpluses.
Some copper bulls have stuck to their guns: Goldman Sachs sees copper trading at $10,000 / tonne by the end of 2024, Capital Economics forecasts a year end price of $9,250 and ANZ sees the metal trading above $10,000 / tonne over the next 12 months.
But with the price rocketing skywards, even these latest forecasts are looking out of date. Along with gold, copper has broken out of a recent trading range and at time of writing (April 19 2024) stands at $9,651 / tonne (see Fig 2 opposite – courtesy Markets Insider).
And Jeremy Weir, CEO of commodity giant Trafigura believes that there will be a potential supply gap of 8m tonnes by 2034, fully supporting $10,000 / tonne and possibly as high as $12,000 / tonne.
So copper is faced with a perfect backdrop: an increase in demand and a fall in production. Both are combining to drive the copper price much, much higher. The ramifications for Governments seeking to meet net zero commitments are huge. Equally, the fortunes of mining juniors holding copper assets looks set to change dramatically. Historically uneconomic and / or dormant projects are being hurriedly revisited as the record high copper prices validate and bring back to life historically uneconomical projects.
Two companies outlined here both have copper projects at different stages of development, and in each case the share prices of both companies have yet to catch up with the rocketing copper price and benefit from the perfect storm and copper bottomed squeeze.
Early Stage:
Aquis listed VVV Resources (AQX: VVV) is building a new portfolio in a user-friendly, low-risk, prolific and historic copper region of Austria. Last October, VVV acquired the Mitterberg Copper Project in Austria, considered the largest copper occurrence in the area defined as the Eastern Alps and also a “brownfield” site. It is reported that copper mining commenced during prehistoric times and recommenced around 1830 until 1977 when the mines were closed due to low copper prices at the time.
According to historic data, more than 120,000 tonnes of copper have been extracted and during the 1970’s it is reported that approximately 200,000 tonnes of copper-rich mineralisation with an average copper grade of 1.4% was mined annually. Mitterberg is located approximately 60 kilometres south of Salzburg, Austria and comprises 198 contiguous exploration licences over an area of some 90 square kilometres.
Although trading at 10.5p per share with a market cap of just £730,000, VVV has just appointed Ben Hill, former Head of Legal at RAB Capital and Senior Advisor for The Growth Stage to the board in order to structure a funding package to enable VVV to fast track Mitterberg development. Chairman and mining industry veteran Jim Williams said that the surge in copper prices, and expected supply squeeze, meant that the development of Mitterberg was “of the utmost importance”, and that Ben Hill and his network “possessed the necessary corporate skills to assist in generating traction and liquidity.”
Later Stage:
Aside from owning a 50% stake in the Grängesberg Iron Ore Project in Sweden and 11% of Labrador Iron Mines Holdings Ltd in Canada, AIM listed Anglesey Mining (AIM: AYM) is the owner of the famous Parys Mountain mine in Anglesey, Wales. Currently engaged in a drilling programme, Parys Mountain hosts a significant polymetallic zinc, copper, lead, silver and gold deposit. A head frame and a 300m deep production shaft already exists, along with planning permission for operations and freehold ownership of the minerals and land. Added to this the local infrastructure is good, political risk is low and the project enjoys the support of local people and government.
Early results from a recent drilling campaign have indicated potential for significant upside to an existing 5 million tonnes of copper within the 2021 Preliminary Economic Assessment. Current drilling has demonstrated good continuity with previous drilling results, further supporting the integrity of the geological model and identifying a large mineralised zone in excess of 100m thick. In the words of Chairman Andrew King, Parys Mountain is “demonstrably the largest and most advanced copper project in the UK with substantial resource upside still evident.”
Anglesey have made a prescient appointment in the form of mining engineer and former Rio Tinto investment committee head Rob Marsden as its new Chief Executive to fast track the drilling programme and bring the Parys Mountain onstream. Despite the pace of developments, the existing infrastructure and new appointment, bafflingly the share price remains rooted at 1.4p, giving Anglesey a current market capitalisation of just £6m.