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Copper is one of the most abundant metals among the world’s mined commodities, but getting your hands on a new copper mine is getting tougher and tougher. Despite the major miners wanting to add new supply to their pipelines, nobody wants to sell, and that is putting a renewed focus on high-quality development projects like the Ootsa project being explored by Surge Copper Corp (V:SURG).
Bloomberg explains the dilemma being faced by potential acquirers:
So what’s the problem? For a start, nobody who owns a copper mine wants to give it up. Even when Glencore (LON:GLEN) and Anglo American (LON:AAL) Plc were crippled by debt during the 2015 commodity slump, neither was willing to entertain an offer from Rio for their holdings in the giant Collahuasi deposit in Chile, according to people familiar with those talks, who asked not to be identified.
When it comes to listed companies, there aren’t that many options — U.S.-based Freeport-McMoran Copper & Gold Inc (NYSE:FCX) and Canada's First Quantum Minerals Ltd (TO:FM) are among the only copper-focused producers of any real size.
They all see the potential in copper, with its multiple uses including in construction and telecommunications, and its growing demand due to its importance for renewable energy applications and electric vehicles, where copper is used in the electric motor, batteries, inverters, wiring and in charging stations.
They also know about the coming copper crunch. Mine supply has failed to come to fruition due to regular labor disruptions at the world’s major copper mines like Grasberg in Indonesia and Escondida in Chile. KPMG is predicting that by 2020 global copper demand will outstrip mine output.
Lower ore grades are also expected to be painted into the waning supply picture. Copper grades have declined about 25% in top producer Chile in the last decade - highlighting the urgent need for grassroots exploration to arrest the trend. Producing copper mines are feeling the pinch, having noticed a significant decline in resources.
London-based commodities analyst CRU says unless new investments arise, existing mine production will drop from 20 million tonnes to below 12 million tonnes by 2034, leading to a supply shortfall of more than 15 million tonnes. That’s because over 200 copper mines are expected to run out of ore before 2035, with not enough new mines in the pipeline to take their place.
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