Copper Supply Grows, Putting More Pressure on Prices

A growing copper supply is not exactly what copper producers wanted to hear, as a new mine with a 100-year life span has been announced.
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Prices have been depressed all year, with worries about deteriorating trade and surplus supply weighing on sentiment.
Anglo American’s $5 billion copper project at Quellaveco in Peru could potentially hold enough reserves to supply a century of production, according to company CEO Mark Cutifani, as reported by the Financial Times.
The article reports the extensive ore body has so far only been defined to a depth of 400 meters. However, with ore grades at over 1%, the mine’s economics are solid.
Further drilling will be required to map the full extent, but preliminary sampling suggests mineralization could extend to 1,000 meters, the company says.
Quellaveco is due to start production in 2022. Once it reaches full capacity, it will produce an average 330,000 tons a year of copper in its first five years; in the company’s words, it will be a license to print money, the Financial Times reported.
Two adjacent mines in the same area have been in production for more than four decades at much greater depths than Quellaveco’s current boundaries, suggesting mineralization is far more extensive than current sampling has identified.
Copper demand is widely expected to rise in the coming decade due to the electrification of cars and the expansion of renewable energy. Currently, however, the market is oversupplied, with RC/TC charges at smelters depressed and little to support prices.
A recent upturn has reversed, as Antofagasta averted a labor strike, reaching a labor agreement with the union at its Los Pelambres mine. Prices subsequently resumed their weak showing, as supply fears quickly eased.
Supply from Quellaveco will not hit the market for some years, even assuming Anglo American manages to bring its project to production on time, which is by no means certain. One of its other major projects, its iron ore mine at Minas Rio, was severely delayed and horribly over budget, for example.
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The company has performed better under Cutifani. The timing for Quellaveco to reach full production in the early to mid-part of the next decade may indeed significantly improve the firm’s prospects if, as widely expected, copper prices have recovered by then.