It’s been interesting to watch the push and pull between the copper bears and the copper bulls over the past few weeks.
Goldman Sachs sounded a significant note of caution earlier in the month when it argued that the recent upward momentum in the copper price is unlikely to be sustained, and that the metal is actually likely to go into a small surplus in 2026.
On that analysis copper might weaken, and Goldman expects the price to be somewhat rangebound between US$10,000 a tonne and US$11,000 into 2027.
JP Morgan is slightly more upbeat, reckoning on a 160,000 tonne deficit next year. Even so, its own long-term price forecasts are broadly in line with Goldman’s, at US$11,000.
But not everyone agrees.
Around half the world’s copper output comes from just 20 major mines. The top six mines account for 40% of production, and any disruption to any one of them is likely to cause supply chain kinks and price spikes.
What’s more, these big mines are pumping out a lot of copper. But when it runs dry, will it be replaced? Thus far, it doesn’t look like it. Copper exploration continues apace at many levels. But no-one’s discovering the kinds of deposits that would match an El Teniente, a Collohuasi, a Kamoa Kakula or an Escondida.
Even if more deposits of this size were being discovered, it would likely take a long, long time to get them into production.
It’s more an instinctive analysis than a technical one, but at some stage it looks like the world is going to run into a copper supply issue.
No coincidence, then, that the USA just added copper to its list of critical metals.
No coincidence indeed that governments the world over are beginning to move into the mining business. The industrial revolution has been going for more than 300 years, and during that time a huge amount of metal has been extracted from the earth. How much is left?
That’s the great imponderable.
Surely, mid-sized copper projects, of the kind that Asiamet (ARS) recently sold for US$105 million, will continue to come along. But the argument has to be that in the absence of any huge new discoveries, mid-sized projects like these will become increasingly desirable.
Even if the big banks are somewhat cautious on a two-year view, the outlook further ahead seems much more positive. Admittedly, this is more an instinctive than a technical analysis, but its hard to find fault with the broad argument.
China’s economy continues to consume huge amounts of copper, India is industrializing at a rapid rate, the US powers on, albeit with a question mark around tariffs, and the Arab nations are diversifying fast. Electric vehicles use miles of copper wiring, and if their takeup has been slower than expected, it’s coming. And what about AI? – more electrification means more copper.
Even now, it’s a good time to be in copper. As Tony Manini, Asiamet’s executive chairman, said the other day: “If you can’t make money at this price, you shouldn’t be in the business.”
So, the likes of Atalaya (ATYM), Central Asia Metals (CAML), Taseko (TKO) and Phoenix (PXC) all look well positioned for the long-term. Atalaya has already built up significant momentum this year, having risen by around 75% since April. Taseko’s shares have more than doubled. Central Asia has been up and down as its acquisition strategy has been hit and miss, but it’s got a great track record and a history of giving back to shareholders, so don’t count it out. Indeed, it may be the producing company that still offers the most upside.
Meanwhile, as Phoenix moves forward with development work, the benefits of its US location will be at the forefront of investors’ minds. The US administration has been falling out of its way to remove roadblocks from local mining companies. Also to encourage development inside the tariff wall.
And in Africa, there’s still hope that another really big discovery is still possible. Serial entrepreneur is pressing ahead with his stable of companies, including Bezant (BZT) and African Pioneer (AFP), while others continue to explore in the Copperbelt too – companies like Tertiary Minerals (TYM), and Midnight Sun. Further south, in the Kalahari, companies like Kavango (KAV) continue to be active.
Will they find the next Kamoa-Kakula? Perhaps not. But even a mid-sized copper asset would be a significant win in the brave new world that’s emerging.