As the world wakes up to the fact that the copper supply crunch might happen a lot sooner than what the market initially anticipated, copper deposits in all corners of the earth are being pounced upon in efforts to bring enough copper into production before time runs out, so to speak.
Geopolitical instability, a decline in grade and productivity, resource nationalism and a dearth of greenfield exploration have all combined to create the perfect storm. Predictions are now that the shortfall of mined copper might be upon us as soon as 2025.
The calm landscape of southern Idaho looks more and more like the ideal mountain retreat during stormy waters, especially when you’re risk-averse and looking for some form of stability.
Idaho at a distinct advantage
Idaho Copper‘s CuMo project aims to move towards a pre-feasibility study for its exceptional copper asset within the next year and a half and its goal is to start producing copper before the end of this decade. CuMo is advanced, with Measured and Indicated, and Inferred copper, molybdenum, and silver identified Resources, where over US$50 million has been expended over decades to bring the project to where it is today. Currently, CuMo has close to four billion pounds of copper, one and a half billion pounds of molybdenum, and nearly 180 million ounces of silver in just the Measured and Indicated Resources category.
This puts the company at a distinct advantage over greenfield projects in other parts of the world, where it might take up to 10 years to bring a new mine into production.
Being in such a stable location and having done such extensive groundwork puts Idaho on the front foot at a time when the much talked about Just Energy Transition (JET) is slowly gaining momentum and demand for those critical minerals (including Copper and Molybdenum) needed to drive the JET is at an all-time high.
Demand and protectionism
According to the International Energy Agency’s World Energy Outlook 2022, demand for critical minerals is expected to rise sharply, more than doubling by 2030 and quadrupling by 2050, with annual revenues reaching USD400- billion.
“The demand for major clean energy technologies and the need to deliver on the energy transition requires huge quantities of critical minerals, for which announced supply capacity will not be adequate.
The market is recognizing this, as demonstrated in recent price hikes, for many critical minerals. This, in turn, has triggered increased investment in mineral exploration and production.
Meanwhile, the USA’s move towards protectionism might well play into the hand of local USA copper mining producers like Idaho.
In August 2022, the USA signed into law the Inflation Reduction Act (IRA). Among other things, the law only permits subsidies for electric vehicles if 40% of their critical minerals were mined or processed in the USA, or a country with which the USA has a free trade agreement.
Other clean energy technologies such as wind and solar do not need domestically sourced critical minerals to qualify for the subsidies. However, the Act includes a 10% bonus credit to incentivize companies to use locally sourced critical minerals in their clean energy components.
As demand for locally sourced copper increases, the USA will be hard-pressed to bring enough domestic copper mines online before the end of the decade or even, as some pundits predict, before the end of 2025. It is telling that out of 224 copper deposits found worldwide between 1990 and 2019, only 16 have been discovered in the last decade.
According to consulting firm McKinsey, the electrification trend is expected to increase annual copper demand to 36.6 million tonnes (Mt) by 2031, with supply forecast to be around 30.1Mt (from the current 22Mt), creating a 6.5Mt deficit at the start of the next decade.
Where is the wave of new supply from?
In an article by Reuters, new copper supply will come from primarily African and South American operations. A wave of new supply is expected from Ivanhoe Mines’ massive Kamoa-Kakula in the Democratic Republic of the Congo (DRC), where geopolitical risks are high, Anglo America’s Quellaveco in Peru, Teck Resources’ Quebrada Blanca II in Chile, and BHP Biliton’s Spence-SGO in Chile.
South American copper operations in both Chile and Peru have recently been plagued by operational and geotechnical issues, equipment failure, adverse weather, landslides, and community actions. Additionally, new left-oriented governments in both countries are examining the imposition of royalties and higher taxes, thus disincentivizing new mining investments.
The big problem, according to Reuters columnist Andy Home, is that there is precious little copper supply in the pipeline beyond the four mines mentioned above.
“Clearly, the world needs new copper mines, but they can’t be built and commissioned that fast. In North America, as many as 20 years can elapse between initial discovery and first production. We’ve got less than seven years,” writes Home.
Many challenges in remote regions
In contrast to the CuMo project where most of the infrastructure is already in place or can be readily provided, new mines or exploration projects in remote parts of Africa and South America need to deal with the challenges of putting in place sufficient water and adequate rail, road, and port infrastructure. Moreover, a stable and reliable electricity supply is a major concern in most mining jurisdictions around the world outside of the US.
In Chile, resource nationalism and higher taxes imposed by newly elected president Gabriel Boric have hampered production and cut back the appetite to develop new mines. In addition, the lack of surface and groundwater has become a major limiting factor in the expansion of current operations or the development of new ones. Virtually every new mine in Chile must install a costly desalination plant that uses seawater for process purposes.
Last year, Chile experienced the 13th year of a historic drought, leading the capital city Santiago to roll out unprecedented water rationing among residents. Miners are also feeling the pinch.
Anglo American’s flagship Los Bronces mine in central Chile saw production fall 17% year-on-year in the first quarter of 2022, partly due to water scarcity.
Copper mining requires lots of water, and as in South America, projects in the remote and arid regions of Africa might be affected by inadequate supplies of water, while resource nationalism, security of land tenure, and political insecurity are risks that companies like Idaho Copper do not need to deal with in the USA.
Idaho is rooted in mining history
Much further north in the USA, the people of Idaho are getting excited about the development of their mineral resources.
Southern Idaho is rooted in mining history. A recent survey by Boise State University highlighted the overwhelming support of Idahoans for responsible mining with 80.4% of respondents affirming their belief that mining can be conducted without negatively impacting the environment.
Local, state, and federal governments have shown great interest in declaring their support for the CuMo Project. Furthermore, a shift to pro-development policies within federal agencies, emphasizing the need to rely on US minerals, has created momentum for strategic minerals projects like CuMo.
The rapidly changing geopolitical landscape, and rising commodity prices, have placed copper projects like CuMo, on the map again after being dormant for a long time.
Now, more than ever, there is an appetite to see Idaho reopening and commissioning new copper mines. Development companies like Idaho Copper present a real chance for the region and America at large to again become meaningful players in what is arguably the world’s most important metal.
