Copper prices have been at an all-time high over the past 2021 year as supply continued to barely meet the high demand for the red metal. This is due to a number of factors including a small supply deficit for copper for 2020 and 2021, production is slowed down due to the global covid-19 pandemic, and high demand for the metal, particularly in China.
However, a balance between supply and demand is expected to even out more in 2022, along with an increased supply forecast, according to the International Copper Study Group, (ICSG.) To meet those production estimates, some companies are turning to increasing ownership in current projects where they may not already own 100% of a given project.
A recent example of a junior copper company increasing its ownership in a project is Canada's Three Valley Copper (TSXV:TVC) and its Minera Tres Valles (MTV) project in Chile. The company increased its ownership in 2021 from 70% to 95.1% to help support the operations at MTV.
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MTV is made up of 46,000+ hectares of land with 170,000 meters of completed diamond drilling, 70 artisanal exploitation points registered and over 100 outcrop copper occurrences marked. The operation hosts two main deposits called Papomono and Don Gabriel. Less than 10% of MTV has been explored and MTV recently initiated its 2021/2022 drilling program on approximately 1% of its landholdings. Further exploration is in its future.
Three Valley Copper also has an open-pit expansion underway for the Don Gabriel deposit, and its Papomono Masivo underground development construction has started with expected completion in early 2022.
The recent increase in ownership has given Three Valley Copper further operational control, at a critical time. Goals for 2022 include further expansion at MTV for which a large percentage of the property remains unexplored, and advancing production of copper cathodes. Considering the imbalance for copper supply and companies' targets to balance it out, this is exactly the kind of company with exactly the kind of project to contribute to that mission in the long run. In the short term, rising prices and a supply dearth will continue to dominate the narrative, benefitting all copper miners and explorers.
The global refined copper market saw a deficit of 479,000 mt in 2020, and ICSG expects a small deficit of around 42,000 mt in 2021. For the following 2022 year, the copper supply is actually expected to exceed demand by 328,000 mt.
The 2022 surplus is based on the assumption of a 3.9% increase in refined output, which is the biggest increase in eight years, ED&F Man Capital Markets analyst Edward Meir mentioned in a note on December 7, 2021.
Many analysts believe the supply surplus in 2022 will come from a rise in mine output by 3.9% due to the commissioning of several new projects and the expansion of existing mines, along with an increase in secondary copper production, scrap copper.
As far as copper prices go for 2022, most analysts believe prices should begin to lower as the new year rolls around, and supply begins to increase.“Many are calling for lower prices heading into 2022,” Meir said, with ED&F's December copper price range between $9,315-$9,880/mt.
For 2021, the annual concentrate benchmark was settled at $59.50/mt, Meir said.
“For 2022, it could settle in the high $60's, reflecting higher mine production (+3.9% projected by the ICSG), but we would not be surprised to see some pricing clauses inserted in the event that back surface with the same intensity as they did over the past few months,” the analyst said.
Global copper mine production has been mostly stagnant for the past few years, inching up marginal growth of just 0.3% in 2020, according to the ICSG. That forecast is set to accelerate to 2.1% for 2021 and to 3.9% in 2022 thanks to an increase of new mine projects.
Over the last four years, only two major copper mines have begun production ICSG notes, but over the next year five major projects will arrive, including – Kamoa Kakula in the Democratic Republic of Congo, Quellaveco in Peru, Spence-SGO and Quebrada Blanca QB2 in Chile and Udokan in Russia.
Updated on Jan 20, 2022, 4:04 pm
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