Copper deficit arrives early

The expected copper shortage has slowly crept up on the world earlier than previously predicted. Citi analysts reported the copper supply deficit will move into 2017, a supply problem that hasn’t lifted the commodity in more than six years. The price of the red metal has risen by 30% over the past twelve months, which analysts believe is linked to the continuous growth in demand from China as well as the steadily increasing time it takes to go from discovery to production.

Copper is a globally fundamental pre-requisite to the survival of civilisation as we know it, and the socially driven high pressure commitment to urbanisation. Copper is the second best metal for conducting electricity, making copper wiring crucial to modern day life. As technology improves and people’s preferences transition from oil and gas to renewable energy, copper will be highly sought after. Citi said it expects copper prices to move above $8,000 a tonne before the end of 2020.

China accounts for an astonishing 40 percent of the world’s copper consumption, and the recent reports have indicated a further increased demand for the commodity. China’s five year plan, examined the five key markets projected, representing more than fifty percent of its total copper market. A rise in construction building, power infrastructure, transportation, home appliances and manufacturing potentially give a 15% growth in the market over the next five years reported Copper Alliance last September.

The deficit of copper predicted for the next five years has the potential to skyrocket prices due to upcoming supply issues.

Topped with the current strike at the world’s largest copper mine, BHP owned Escondida, copper prices don’t seem to show any signs of slowing down. Mining giants BHP and Rio Tinto have seemingly realised the strong upcoming demand for copper and set out to find new deposits. BHP increased its annual exploration spending by 29% this year, allocating nearly all its $900 million budget to finding new copper and oil deposits. BHP, looking to have copper as one of the pillars for its future growth, is already searching for more across a number of different countries and eyeing new partnerships.

The deficit predicted for the next five years has the potential to skyrocket copper prices due to upcoming supply issues. “Copper is not being discovered fast enough to be mined to meet upcoming demand” Western Copper and Gold reported. The past six years has only seen marginal increases in new copper development.

The current timeline from discovery to production is longer than it has ever been before. On average, it takes twenty years due to geological complexity and environmental and political changes. As well as the extended time frame, there has been long-running trend of dropping grades in the world’s established copper mines. Escondida has seen a dramatic decrease in grade as the life of the mine grows.

As the world comes to terms with the inevitable shortfalls in copper over the next decade, London listed SolGold has been quietly stitching together this tier one copper gold resource that looks increasingly likely to find itself in development right about when copper hits its greatest frenzy.

Continuous high-grade, world-class results from its 85% owned Cascabel copper gold porphyry project in northern Ecuador, has re-enforced CEO Nick Mather’s belief the project is in fact, a tier 1 discovery.

Mr Nick Mather remarked that Cascabel and the string of additional copper projects he expects SolGold could become a significant producer in the next five years.

The Cascabel; project is characterised by fourteen identified targets with only one drill tested so far. SolGold has completed 29,100m of drilling for 19 drill holes (plus three in progress), of which 19 have hit the orebody and 6 of which (Holes 5, 9, 12, 15R2, 16 and 17) delivered world class intersections – consisting of over 1km of continuous mineralisation grading over 1% Copper Equivalent. The SolGold team continues to drill at the Alpala deposit, with assay results for holes 20R, 21 and 22 expected soon.

“Hole 19 demonstrated that we still haven’t found the edges on this thing. We don’t want to clip its wings by putting out a resource statement too early. We want to know just how big the discovery is before putting a number on it.” Mr Mather noted.

SolGold has applied for more ground in Ecuador and plans to use the Cascabel blueprint in other parts of the highly prospective country.

Copper demand is headed towards a global frenzy, and it seems SolGold is paving its way to become a copper company in no better place than the riches of the northern Andean Copper Belt.

Sources: Copper best performing commodity 2017 – analysts
Copper Alliance (2016): New Study Shows 15 percent Growth in Demand for Copper Under China’s Latest Five-Year Plan
Western Copper and Gold (2015): The Looming Copper Supply Crunch