Why Copper is the next Metals Super-Cycle

2021.11.29

Institutional investors are interested in big markets and Copper is a very big market. Periodically the global economic cycle creates major cycles in the price of metals, but once in a lifetime, the world enters a new age of economic advancement that pushes a normal Bull cycle into a Super-Cycle, something that every investor wants and needs to see and participate in.

Electricity has been with us for at least 150 years, but about 18 months ago, the world recognized a Modern Age of Electricity. This recognition seemed to suddenly develop because of rapid technological innovation over the past decade in such diverse fields as electric vehicles, cryptocurrencies, and renewable energy along with Climate Change and ESG-investment factors. Call it convergence or whatever, but the world is now focused on the power of electricity more than at any time in decades.

Simply put, the world needs Copper to conduct electricity. Because of this massive new demand for electricity, the price of Copper over the past 18 months has more than doubled.

The following points taken straight from a corporate presentation of World Copper Ltd present a compelling case to invest heavily in Copper today.

  1. 75% of copper demand is for conducting electricity.
  2. 50% of final energy will be delivered using copper by 2040, leading to a doubling of global copper demand.
  3. Over 20 Billion lbs of additional copper supply will be required in 2040 just to meet the copper demand for electric vehicles.
  4. Although $17 Billion was spent on exploration 1990-2017, there have been few new discoveries.
  5. The average grade mined by the top 15 producers has decreased from 1.20% to 0.72% Cu in this decade.
  6. In 2007 Escondida’s (world largest copper mine) copper grade was 1.72%, and now its remaining grade is a mere 0.52%.
  7. Worldwide average reserve grades have fallen to 0.40% Cu, and what was once considered low-grade is now considered average.
  8. The copper industry needs to spend upwards of $100 B to close what could be an annual supply deficit of 12.5 Blbs by 2030.
  9. Over 200 copper mines are expected to run out of ore before 2035.
  10. 23% of global copper reserves are in, and 28% of global production comes from, Chile
  11. In Chile, the world’s major copper producer, copper grades have declined about 25% in the past 10 years to 0.67% CuT in 2019.
  12. Accelerated demand for copper is fuelled predominantly by urbanization, world population growth, and electrification.
  13. By 2050, the demand for copper could reach 130 Blbs per year, which is 2x the current demand.
  14. It is difficult to see how the world will replace the current production – let alone meet anticipated demand.
  15. As older producing copper mines continue to deplete their resources, there are few new copper discoveries.
  16. Goldman Sachs argues that this new era could herald a structural bull market comparable to the 2000s and that commodities are the best inflation hedge.
  17. According to Goldman Sachs, Copper is the “new oil” and will be essential to create a new clean infrastructure.
  18. As demand continues to increase, copper could be priced at $6.80 per lb by 2025 – a rise of 66% from current prices.
  19. New discoveries are scarce: only 4 major discoveries in the last 10 years and just 1 in the last 5.
  20. In the last decade, $ 50 B was spent on exploration & development, and only 225 Blbs of copper in new discoveries was found in that period (more copper was found in 1991 alone).
  21. 45% of global supply comes from politically unstable and mining unfriendly jurisdictions.
  22. The shift to a clean energy system is set to drive a huge increase in the requirements for copper. Clean energy technologies are becoming the fastest-growing segment of demand – directly affecting copper.
  23. Climate scientists have made it clear that greenhouse gas emissions must be reduced drastically by 2050 to stave off catastrophic levels of global warming. To do so, the rate of transition to carbon-free technology alternatives is increasing exponentially.
  24. Wood Mackenzie reports that limiting the rise in global temperatures to 2 °C will require nearly 200 Blbs of copper to feed the energy transition over the next 20 years.
  25. Keeping pace with the 2050 emissions reduction goal could increase demand for critical minerals, by as much as six-fold by 2040 says the International Energy Agency.
  26. Technology that will need to be deployed for this transition includes wind turbines, solar panels, EV batteries, and large-scale energy storage, of which copper is a critical component.
  27. By 2027, copper demand for Electric Vehicles will rise by 900% – ICA.
  28. Each generation of cars needs more copper wiring.
  29. A significant new copper-based infrastructure will be needed to support electric cars (such as charging stations).
  30. In 20 years, Bloomberg estimates that copper miners need to double the amount of global copper production (adding additional 44 Blbs), just to meet the demand for a 30% penetration rate of electric vehicles.

All of the above data is published on the corporate presentation of World Copper Ltd.

https://worldcopperltd.com/wp-content/uploads/2021/11/WorldCopper_Fall_2021-11-10.pdf

The World Copper Ltd website shows the depth of expertise at the management and board level.

I bought a small amount of the stock (WCU.V) after meeting the company’s founder and chairman Henk van Alphen at the CEM Conferences in Muskoka and Florida. Today, I just started to do in-depth research with a zoom call with the CEO Nolan Peterson who phoned in from London UK where he is attending the Mines & Money show. If in the next few weeks I am sufficiently interested that company resources will be expanded, then I believe the value of the company would warrant a significant investment. But, for now, World Copper Ltd represents a blue-sky opportunity that is large. I will be writing it up as I gain more information that may be helpful.


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