Mike Beck: Battery metals part 4 – Unprecedented demand picture forming in copper
Mike discusses the copper market. It is a massive market with 20 millions of tons production per annum which is ten times larger than nickel. In this series, we’ve worked from the niche battery metals all the way to the largest which is “big copper”.
Copper is particularly interesting as Electric Vehicles represent a new area of incremental demand. The average E.V. requires 80kg more copper than a regular vehicle. There is also significant copper needed to build out E.V. infrastructure in the power grid as well as battery charging infrastructure.
Last year there was a detailed study published by Glencore which looked at how much incremental copper demand would come from this new market. They showed that E.V. would create 4 million tons of new demand by 2030. This is 17% of last years world mine supply and where it will come from is anyone’s guess.
Currently, there are serious issues with declining grades, permitting issues, and environmental constraints. The industry has been under-invested in new supply due to low prices. The current copper price is $7200 per ton, and this structural deficit will likely grow.
The industry is not going to invest in new capacity until incentivized by much higher prices. The capital intensity of a new ton of metal is about $10,000 per ton. Four million tons multiplied by ten thousand implies a need for a 40 billion dollar capital investment.
He discusses three copper plays each with their own risk profile. First Quantum, Nevada Copper Corp., and Gold Reach Resources.
The copper demand picture is unprecedented in comparison to anything in the last twenty years. Copper demand is linked to GDP growth, and the E.V. market will thus bring additional somewhat unexpected demand.
Talking Points From This Week’s Episode
• Copper is not getting cheaper to find.
• The world will need a lot more copper for everything.
• E.V. demand is likely not priced into the copper market.
• Higher prices are needed to incentivize exploration and mine development.
Mike Beck is the founder and Managing Director of Regent Advisors LLC, a corporate finance advisory and investment firm. He has advised on equity and debt financings for private and public companies in the natural resources sector. These including Signet Petroleum Limited, West African Minerals Corporation, Polo Resources Limited, Direct Petroleum Exploration Inc., Titanium Resources Group, Copper Development Corporation, UraMin Inc., Diamond Fields International Ltd., Weda Bay Minerals Inc., Regent Pacific Group Limited and CCEC Ltd.
Mr. Beck was a Managing Director at N M Rothschild & Sons with responsibility for the firm’s mining, oil and gas advisory and investment activities. Prior thereto, Mr. Beck was the founder and President of Librion Group Inc., a corporate finance boutique. He also was with the International Finance Corporation of the World Bank Group, where he oversaw the structuring and financing of a large number of natural resource projects in Africa. Mr. Beck has also been a founder or co-founder of several companies listed on the Canadian, Australian and London stock exchanges. He has an M.S. in Engineering from Princeton University and a B.S. (High Honors) in Engineering from Rutgers University.