The Global Scramble for Copper is On
A major shortage of the red metal is looming
The race to secure more exposure to copper is on among major diversified miners, gold producers, offtakers and investors.
FireFly Metals (ASX/TSX: FFM) is developing the brownfields Green Bay copper-gold project in Newfoundland, Canada.
The project has a high-grade resource of 1 million tonnes of contained copper and 550,000 ounces of gold grading 2% copper equivalent and already has around A$250 million worth of mine infrastructure, meaning it can be brought back into production relatively quickly.
The stock has risen by around 32% since the start of the year and FireFly chief executive officer Darren Cooke said the company had received a lot of interest from potential customers.
“We're getting absolutely inundated from all over the world – the US, Canada, Europe and Asia – and the fact that the TCs and RCs are still highly negative to negligible, really shows that there's an excess of smelting capacity and not enough copper concentrate to go around,” he said in an interview.
“And when you look at what's required to meet even half the targets for net zero, there's just not enough new copper being discovered, and what is being discovered are low-grade, porphyries that can cost billions and billions of dollars to bring on and take 10 to 20-plus years from discovery to production.
“That's where we've got the benefit, because we can be in production within three years.”
Evolution Mining (ASX: EVN) managing director and CEO Lawrie Conway said there would need to be around US$2 trillion of investment in copper mines to meet net zero.
“There's got to be 61 new mines brought into production over the next five to six years to meet the demand for copper,” he said.
“You'll have the short-term hit that we're seeing now because of a potential recession in the US, [but] that copper price will go up and will go up materially over the next five to 10 years.”
Market volatility
There’s been a bifurcation this year between COMEX prices in New York and London Metal Exchange prices as the US ramped up imports of copper ahead of potential tariffs.
Earlier this month, the US imposed 50% tariffs on copper semi-finished goods and copper intensive derivative products, but refined copper is exempt until 2027.
Cooke said FireFly was not planning to sell any concentrate to the US.
“When you actually analyse what's happening in the US, they do not produce enough copper for their domestic needs,” he said.
“Let's not mess around – another name for a tariff is an import tax, and if they have to bring in the copper for their own needs, that's going to be passed on to the consumers and other people producing the copper.
“Even if [the US] ramp up their mines, they don't have enough refining capacity to match and you can't build that in a presidential term – you just can't do it – so I think long term, that the copper outlook is still very, very positive.”
For the September quarter, Morgan Stanley is bullish on COMEX copper and neutral on LME copper.
It lifted its September quarter COMEX copper forecast by 10% to US$5.60 per pound, its December quarter forecast by 13% to US$5.94/lb and its March quarter 2026 forecast by 17% to US$6.25/lb.
In contrast, its September quarter LME copper forecast is US$4.31/lb, falling to US$4.24/lb in the December quarter and rising back to US$4.31/lb in the March 2026 quarter.
M&A set to continue
Last week, Hudbay Minerals Inc (TSX/NYSE: HBM) was the latest company to announce a copper deal.
On Wednesday, Hudbay announced that Japan’s Mitsubishi Corporation (TYO: 8058) would acquire a 30% interest in its fully permitted Copper World project in Arizona for US$600 million.
The deal implied a US$1.4 billion valuation for Copper World, which was 1.2x RBC Capital Market’s valuation of US$1.2 billion.
Other recent copper deals include Harmony Gold Mining Co’s (JSE: HAR) US$1.2 billion takeover of MAC Copper (NYSE: MTAL) and the bidding war between successful bidder Kinterra Capital and Central Asia Metals (AIM: CAML) for US developer New World Resources.
Around 25-30% of Evolution’s revenue comes from copper via its Ernest Henry and Northparkes mines in Australia and Conway said the company could go up to 40%.
“We've got capacity there. I think, at the moment, it would be fairly competitive in the copper space if there was an asset like that, but I think it's certainly a good fit for us if we were to have more copper in the portfolio,” he said.
Cooke believes there will be more deals in copper.
“We've already started to see that with the bidding war for New World,” he said.
“What's really interesting is you're seeing a bit of softening in the benchmarks from some of the majors as well.
“It used to be the case where they wouldn't get out of bed for less than 100,000 tonnes of copper production a year, but due to the scarcity, they are spreading the net a little bit wider.”
FireFly, Evolution and Hudbay will be presenting at the Mining Forum Americas in Colorado Springs on September 14-17.