By Anthony Fensom
Copper prices have hit new highs as analysts eye a sustained boom for the key metal. Can Australian miners take advantage?
The price of the red metal hit a seven-week high of US$9200 per tonne on 14 April, amid China’s reopening after its COVID-19 lockdown, low inventories and supply uncertainty.
Copper’s role in global decarbonisation has added to the bullish outlook for the metal, also known as ‘Dr Copper’ for its role as a barometer for the global economy.
‘Copper has long been a fundamental commodity to sustain a strong global economy, and it has now become essential to enabling the achievement of the world’s net zero targets,’ says Peter Hwang, Managing Director of Queensland explorer Superior Resources.
‘With supply constrained and demand continuing to rise, copper’s outlook is excellent, and Australia is well-placed to benefit.’
The Australian Government’s official resources forecaster agrees. Copper prices are expected to average around US$9000 a tonne in 2023, with demand set to outpace supply from 2026, ‘resulting in market deficits and upward pressure on prices’.
According to the Office of the Chief Economist’s March 2023 Resources and Energy Quarterly, ‘Higher production costs (partly due to declining ore grades), higher capex and higher financing costs will add to upward pressure on prices.’
The worldwide energy transition is also expected to increase copper demand. By 2030, 10 per cent of refined copper consumption is expected to be used by electric vehicles, batteries and charging equipment.
Analysts at S&P Global see demand for copper doubling in the coming decade, surging from around 25 million tonnes in 2022, to 50 million tonnes by 2035, due to global electrification.
Similarly, Wood Mackenzie cites the need for new projects, saying nearly 10 million tonnes per year of new production is required to close the supply gap.
‘To successfully meet zero-carbon targets, the mining industry needs to deliver new projects at a frequency and consistent level of financing never previously accomplished,’ says Wood Mackenzie’s Nick Pickens.
Australia’s export volumes are expected to reach 868,000 tonnes in fiscal 2023, rising to around 970,000 tonnes by fiscal 2028 on the back of production from new mines and mine expansions.
As a result, export earnings are seen swelling to nearly $13 billion in fiscal 2023, rising to $15 billion by fiscal 2028, according to the government forecaster.
Mined production is expected to grow at an average rate of three per cent through to fiscal 2028, with OZ Minerals’ West Musgrave project the most significant new project during this period, adding around 41,000 tonnes per year to mined capacity.
Several other large projects with completed definitive feasibility studies ‘could come online’ on the back of a copper market deficit and rising prices, adding a potential upside to production forecasts.
Copper exploration has responded to higher prices, being well above the levels of the last decade, the report said.
Major miners have also been moving to increase their copper resources.
BHP’s $9.6-billion takeover of OZ Minerals, which was approved by OZ Minerals shareholders on 13 April, was widely seen as a sign that ‘majors are keen to get their hands on future-facing critical minerals – copper chief among them’.
Research by S&P Global found that copper dominated merger and acquisition deals in 2022, with an average deal size of $791 million, compared to $328 million for gold. BHP’s acquisition of OZ Minerals topped the list, followed by Rio Tinto’s US$3.3 billion takeover of Turquoise Hill.
Copper exploration budgets also hit a nine-year high last year, according to the consultancy.
Ranked second in the world for copper resources, Australia has the potential to further build on its position as the world’s eighth-largest producer, due to new exploration.
Among the explorers, Superior Resources sees its Queensland projects as having the potential to become significant sources of the red metal.
On 12 April, Superior announced the discovery of a large porphyry-style alteration, and copper and molybdenum mineralisation system at its Bottletree copper prospect, located around 210 kilometres west of Townsville.
Superior pointed to the assessment of Bottletree as a copper-gold-molybdenum porphyry system by internationally recognised porphyry and epithermal expert Dr Greg Corbett – giving it greater confidence in discovering a mineralised porphyry core.
‘The several deep holes that were drilled in the last program have demonstrated the extensive effects of a porphyry alteration system with associated copper mineralisation that has been traced for at least one kilometre, both in horizontal and down-hole extent,’ Hwang says.
‘Of particular interest is the newly discovered late-stage molybdenum mineralisation system that has, so far, demonstrated ability to carry spectacular molybdenum grades of up to 5.2 per cent. With molybdenum spot prices currently above US$60,000 per tonne, Bottletree’s molybdenum potential could be transformational in terms of its overall economic potential.’
Superior is also pushing ahead with two maiden drilling programs at its Cockie Creek prospect – considered its most advanced porphyry prospect – where it sees significant potential for the discovery of a large porphyry copper-gold-molybdenum system.
Other Queensland copper explorers include Revolver Resources, which has commenced a scoping study on recommencing operations at its Dianne project – historically the highest-grade copper mining operation in Australia.
Similarly, Renegade Exploration points to the Mount Isa region as being ‘relatively underexplored’ despite being home to two major mines.
On 31 March, it announced near-surface copper mineralisation at its Mongoose copper-gold project near Cloncurry, describing the results as ‘significant’ due to its proximity to the Great Australia copper mine.
Also in North Queensland, Metallica Minerals is planning new drilling at the Clermont copper-gold project, under an earn-in agreement with silica sands developer Diatreme Resources.
Elsewhere, on 17 March, Hillgrove Resources announced that early works had commenced in preparation for underground development at its Kanmantoo copper mine in South Australia. Hillgrove is eyeing an extended mine life and production from the underground resource at the historic mine.
With copper demand on the rise, more exploration activity is likely as Australia’s next wave of producers emerge to help sustain the red metal’s rosy future.