Image coutesy of BHP

No other metal can be said to enjoy such universal appeal as copper does today. Copper is used in everything from traditional fossil-fuel power plants to solar panels, windmill turbines and nuclear plants; from conventional internal combustion cars to components of the electric vehicle; and from the oldest applications in construction to the most high-tech uses in AI infrastructure. Copper fits in the future as steadily as it has fit in throughout its 6,000 years being used by humans, turning gradually into the third most used metal today. Now, copper is evolving past its relevance as a barometer of economic activity, securing a position as potentially the biggest winner of the energy transition as it has become indispensable for both an old and a new economy, an economy that is electrified and digitized. This universality makes demand less elastic to global cycles.

Analysts read copper’s recent record performance, with copper futures hitting US$5.20/lb, as a harbinger of a supercycle. While speculators betting on higher values do influence the metal’s price, copper is underpinned by matter-of-fact structural market conditions. The International Energy Agency (IEA) projects copper demand to rise by 50% by 2040 in a net-zero emissions scenario, with a market value of US$330 billion, the highest among energy transition minerals. According to the IEA, the world will require 40.7 million t/y of copper in 2040, outstripping the available supply of raw copper by 25.9 million t/y. The AI boom alone could amplify copper demand by 1 million t/y by 2030, according to an analysis from commodities trading group Trafigura. 

What differentiates copper from other minerals linked to the energy transition, like lithium, is the size and nature of the supply market. Unlike lithium, which has a small volumetric demand and narrow supply base, triggering huge reactions in price (boom and bust), copper is one of the most mined metals by volume and has a diversified supplier base, defined by large, multi-generational assets managed by the leading miners. The capital-intensive nature of the business as well as the long lead times make it a slower, heavier industry with higher-entry barriers. When a deficit is in sight, it tends to be large and difficult to fill, which is why analysts speak of a supercycle rather than using more fleeting terms like ‘bubble’ or ‘boom’. The IEA estimates the supply risk at 31% (medium). Recent closures, like First Quantum’s abrupt mine close in Panama, or the ban on Russian copper deliveries on the London Metals Exchange and Chicago Mercantile Exchange heightened that risk. While the current refined market remains balanced, a squeeze seems imminent, at least in the longer term.

The mining industry is eagerly turning to copper. BHP’s offer for Anglo American’s copper assets in Peru and Chile put the spotlight on the red metal. Anglo has since announced a massive restructuring, prioritizing its copper and iron ore assets while selling its coal and demerging its platinum and diamonds operations. Teck Resources has also sold its coal steelmaking business to Glencore for US$9 billion last year while doubling down on copper projects. Gold miners are also fixating on copper. The second-largest gold producer in the world, Barrick, announced it wants to double its copper output in the coming years. Barrick has since made a US$7 billion investment in a Pakistan copper project as well as a major expansion at its Zambian mine. In Africa, coal miner Exxaro and PGM South African players Sibanye Stillwater and Impala Platinum have shown interest in copper deposits.

Africa’s copper pitch

Globally, copper supply comes mainly from Latin America (Chile, 23% and Peru, 10%), and Africa, the DRC taking the lion’s share of the market at 14%, followed by Zambia at 4%. 

Africa offers two key zones for copper mining. One is the Central African Copperbelt, which stretches from the Katanga Province of the Democratic Republic of Congo through to the Northwestern Province of Zambia. This Copperbelt is recognized by geologists as the largest mineralized sediment-hosted copper province. The second, less explored belt, is the Kalahari Copper Belt, trending across northern Botswana in a northwest direction into Namibia. 

Within the Central African Copperbelt, the DRC has distinguished itself the most in recent years, with 65% of newly announced copper reserves identified worldwide in 2023 coming from DRC’s Katanga Basin, according to S&P. The biggest discovery was Ivanhoe’s Kamoa-Kakula, expected to produce this year between 440,000 and 490,000 t at a C1 cost between US$1.50 and US$1.70/lb. The addition of a third concentrator will catapult Kamoa-Kakula to more than 600,000 t/y – making it the third largest copper mining operation globally. Other major operations in the country include Glencore’s Mutanda Mining (MUMI) and Kamoto Copper (KCC); CMOC’s Tenke Fungurume; ERG’s Comide and Frontier mines; China Molybdenum’s Tenke Fungurume Mine (TFM); and MMG’s Kinsevere mine. 

Zambia has trodden behind the DRC, an uncomfortable change after once being the top copper producer in the continent. The government wants Zambia to regain that spot, with plans to grow the copper output to 1 million t/y by 2027, and to 3 million t/y by 2031. This may sound overly optimistic considering Zambia only produced 699,000 t/y in 2023, its lowest in 14 years. However, several multi-billion investments underway provide reason for hope. Barrick’s current US$2 billion expansion at Lumwana will see the asset grow from 118,000 t/y to 240,000 t/y in 2028. In 2022, First Quantum also announced a US$1.25 billion expansion at Kansanshi, which would expand the life of mine until 2040. The Canadian miner accounts for most of Zambia’s copper production. Its Sentinel mine produces over 200,000 t/y and Kanshansi over 130,000 t/y. Vedanta also wants to restart the Konkola underground mine, where operations had halted through a long legal battle with the previous government.

New actors are also entering the market. One development that made headlines is the recent discovery made by KoBold Metals, an AI-driven Californian startup backed by Bill Gates and Jeff Bezos, at the Mingomba copper project in Zambia. Zambia’s president, Hakainde Hichilema told the press the company plans to invest US$2.3 billion to develop the project, which could produce 300,000 t/y of copper – the biggest in the country. 

Abu Dhabi-based International Resources Holding (IRH) also entered the Zambian copper scene after buying 51% of Mopani Copper Mines for US$1.1 billion last year. The miner made a subsequent bid for the Lubambe mine, also in Zambia. On the exploration front, Galileo Resources, Zamare Minerals, Be Metals, Midnight Sun Mining, and Mimosa Resources are looking at Zambian development projects. 

The second region of copper exploration is the Kalahari belt, covering Botswana and Namibia. This is a region of mostly juniors, with only a few mines: Khoemacau and Motheo in Botswana, and Kombat in Namibia. The bidding for Botswana’s Khoemacau copper mine last year drew in diverse interest from coal companies (Exxaro) and platinum companies (Implats, Sibanye Stillwater). Copper producer MMG eventually sealed the US$1.9 billion deal. Khoemacau produces about 60,000 t/y of copper and 2 million oz/y of silver. The new owners believe they could more than double copper output. Botswana's second mine, Motheo, is owned by a subsidiary of ASX-listed Sandfire Resources, which is looking at an expansion. Botswana has primarily attracted attention for early-stage opportunities: BHP shook hands with copper explorer Cobre, a successful participant in the BHP Xplor program, to look for copper-silver deposits in the country. Other explorers looking for opportunities in the country include Kavango Resources and Aterian, both at an early stage. 

On the other side of the belt, Namibia is also seeing increased copper activity. The country, primarily known for its uranium riches, saw the restart of the Kombat mine after 14 years of closure under Trigon Metals, a Canadian explorer. Trigon acquired the Kalahari Copperbelt project this year, expanding its footprint in the country. Another TSX-V listed player, Koryx Copper, is also progressing with its flagship Haib copper project, previously owned by Rio Tinto and Teck Resources (the latter remaining an important shareholder). Koryx is focused on drilling to improve grades, currently at between 0.47% and 0.49% copper. Omico Mining Group is also working towards a BFS at the Omitiomire copper project in the country, while Consolidated Copper Corp has acquired brownfield assets that it plans to re-open. 

Outside of these two major belts, South Africa is also home to copper prospects. Previously operated by Rio Tinto, Palabora is the country’s only copper mine, held by HBIS. Two junior miners advancing new copper outputs in the country are newly JSE-listed Copper 360 and ASX-listed Orion Minerals. Meanwhile, Angola enters the conversation on African copper after Ivanhoe announced last year taking greenfield prospecting rights over 22,195 km2 in the Moxico and Cuando Cubango provinces, which present Kalahari and Karoo volcanics similar to what they see at Kamoa-Kakula. 

Within this plethora of opportunities, the most promising copper jurisdiction is probably the DRC, which boasts not only the most recent and sizeable discoveries but also very high grades, with Kamoa flaunting a 6% grade in the first five years, which is highly attractive in a market tormented with decreasing grades. The DRC also offers something that no other major mining jurisdiction does: the shortest lead times. According to S&P Global, the DRC’s average interval between discovery to production is the second-shortest in the world (15 years), after Laos. By contrast, Zambia has the longest lead times to production, at 34 years, followed by the US and Canada.

Stumbling blocks 

On the other hand, atrophied infrastructure and fiscal uncertainty make the Central African region something of a wildcard for investors. Africa only accounts for 8% of the world’s total railway length, and the majority (80%) of freight is transported by road, according to African Global Logistics.

Historically, the mining industry has been a strong catalyst for pit-to-port rail investment. Today, the West-East competition for mineral supply sends money to both westbound and eastbound railway lines. For instance, the US is funding a portion of the 1,300 km colonial railway revamp connecting the port of Lobito in Angola to the copper mines in Congo. The project is known as the Lobito Atlantic Corridor and operated under commodities trader Trafigura. While US investors want to ensure connections to Lobito, a getaway port for the Atlantic, China pledged US$1 billion to refurbish an east-bound railway going to the Dar es Salaam port in Tanzania, the getaway to China.

Energy is another big issue for copper projects. In the DRC, the grid is 95% powered by the country’s rivers, which allows companies like Ivanhoe to reduce the total emission footprint. Zambia also draws a big part (80%) of its power from hydro plants, but climate change and weather patterns are threatening the country’s water – and therefore energy - supply. 1,000 MW out of the country’s 3,800 MW hydropower generation is taken down due to severe droughts and evaporation at Lake Kariba. Mining uses half of Zambia’s power, according to the London School of Economics’ International Growth Centre (IGC) report, so the industry must look for alternatives, either by importing electricity or investing in self-generation. This year, Zambia’s largest miner, First Quantum, has entered a partnership with Chariot and Total Eren to develop 430 MW of solar and wind power for its two mining operations in the country. That sort of solution may not be available for a smaller miner. 

Lastly, a complex ore body, a lack of continuity across multiple targets, tough mineralogy, or low grades are also important aspects harder to overcome by junior miners. For instance, at the Haib copper project in Namibia, former operators Rio Tinto approached the project like a Chilean porphyry deposit, conducting vertical drilling spaced widely. According to Pierre Léveillé, Koryx’s executive director: “Haib is around 1.8 billion years old, having undergone many geological transformations, resulting in a complex structure with faults, shear zones, and quartz veins, which are less common in Chilean deposits. Rio Tinto’s drilling was vertical with a wide spacing of 150 m, which likely caused them to miss much of the mineralization since most structures at Haib are vertical or sub-vertical. (…) By mapping these structures and drilling across them, we discovered extensions of 150 to 200 m with grades between 0.47% and 0.49% copper, and even up to 3.95% in smaller sections.”

Technology can help too. KoBold used AI tools at its recent Zambian discovery. The company has agreed to provide its tech expertise to Midnight Sun Resources, as part of a JV for Midnight’s Dumbwa license, where the company identified soil anomaly with good intercepts across a long strike but has not managed to connect the tonnage. KoBold offered to reinterpret the data using its technology. 

Sonia Scarselli, former vice president of BHP Exploration & BHP Xplor, believes there is a great opportunity in the potential for technology to revolutionize exploration. Speaking from her experience in both the oil and gas industry and in metals, she said: “One of the industry’s key opportunities is to adapt existing geophysical technologies from the oil and gas sector and apply them to mineral exploration, for example, using passive seismic methods for sedimentary copper deposits or high-grade IOCG-type deposits. At BHP, we have successfully applied these technologies in some of our discoveries in Southern Australia. We can utilize existing datasets to build predictive tools in areas where direct data may not be available (…) We are also creating machine learning tools that essentially train the system to act like a ‘mineral system brain,’ capable of interpreting information and identifying regions with the highest potential for large-scale mineral discoveries.”