?? - Copper to $40,000?

CEO.CA Presents the Chairman's Briefing - May 30th, 2024

“If the world does well, gold will be fine. If the world doesn't do well, gold will also do fine...but a lot of other things could collapse.”

–Thomas Kaplan

Metals/Crypto Price

In Today's Briefing

Gold

While the longer-term trend for precious metals points up, short-term noise—the Fed's recent minutes suggesting a 'higher for longer' monetary policy, for example—is generating volatility, resulting in the chop we're experiencing now.?

The hawkish tone born out from the Fed's April/May FOMC minutes: "Participants noted disappointing readings on inflation over the first quarter and indicators pointing to strong economic momentum and assessed that it would take longer than previously anticipated for them to gain greater confidence that inflation was moving sustainably toward 2 percent."

Meanwhile, sentiment in the analyst community swirls about in a favorable light - The gold price rally is not over; UBS is calling for $2,700 by next year.

In its updated gold market outlook, published last week, commodity analysts at UBS said they expect gold prices to run to $2,500 an ounce by September and hit $2,600 an ounce by year-end; the forecasts are up from the original estimates of $2,400 and $2,500 an ounce, respectively. At the same time, UBS also released its 12-month forecast, predicting that gold prices will rise to $2,700 an ounce by June 2025.

For those with an appreciation for the technicals, the daily chart shows evidence of a potentially potent reversal pattern of the Japanese Candle kind (from short-term bearish to bullish) - Gold futures shine bright with a strong gain, forming a "3 river morning star".

The pattern consists of a large red candlestick within a defined downtrend, followed by a small-bodied candle (either red or green) that opens and closes below the first red candle. The final candle is a large green candle that opens above the middle candle and closes above the center of the body of the first candle.

Some believe it's only a matter of time before this market goes parabolic (we stand to watch).

Silver

Clearly, silver is outperforming gold (there are new reports of strong demand out of China). It appears a wave of short selling is entering the fray to counter the sudden speculative interest driving prices higher. But the gray metals' recent weakness, after tagging decade-plus highs, made for a sweet (trade) setup off the $30-ish level, now deemed strong support.

The commodity analysts at UBS also weighed in on the silver market, revising their forecasts due to robust demand and (potentially) lean supply chains - UBS raises silver prices forecast. Here's the new target.

The financial services firm increased its silver forecasts by $4 per ounce across various future dates, anticipating the metal to reach $34 per ounce by the end of September, $36 per ounce by the end of 2024, and maintain that level through the end of March 2025.

The analysts over at TD anticipate something a little more extreme -?Booming silver demand may lead to 'extreme price action,' TD strategist says.

Daniel Ghali, a senior commodity strategist with TD Securities to BNN Bloomberg on Tuesday: “I think that silver is probably the most exciting trade in the energy transition theme within the commodities complex today. What we're talking about here is a market that has been in a universally-recognized structural deficit… essentially driven by the boom in solar capacity across the world and the growing trend of electronics being embedded in everything that we do, but particularly so in vehicles.”

Copper

Amidst a price correction, after a short squeeze and a misalignment in above-ground inventory, the bullish bias persists.

In a Financial Times piece, Pierre Andurand, a hedge fund manager with $2B in play, suggests copper may test $40,000 per tonne over the next few years - Copper prices could surge to $40,000, says top trader Andurand.

“We are moving towards a doubling of demand growth for copper due to the electrification of the world, including electric vehicles, solar panels, wind farms, as well as military usage and data centers,” Andurand told the Financial Times. Further: “I think we could see prices up to $40,000 per tonne ($18.18/lb) over the next four years or so. I’m not saying it will stay there indefinitely; eventually, we will get a supply response, but that supply response will take more than five years.”

Here's a sobering thought -?Study: The Amount of Copper Needed for EVs Is 'Impossible for Mining Companies to Produce'.

According to GlobalData, there are over 709 operational copper mines worldwide, with the Escondida mine in Chile being the largest, producing an estimated 882,100 tons of copper in 2023. Despite this seemingly huge output, the rapid pace of electrification globally is outstripping the mining industry’s ability to keep up. In fact, the authors state that, “We show in the paper that the amount of copper needed is essentially impossible for mining companies to produce.”

EVs require gobs of the soft malleable metal—three to five times more than traditional fossil fuel vehicles. As professor Adam Simon from the University of Michigan points out, "A normal Honda Accord needs about 40 pounds of copper. The same battery electric Honda Accord needs almost 200 pounds of copper." To charge the tens of millions of EVs set to roll off assembly line floors in the not-too-distant future, required upgrades in the nation's electrical grids will see the metals' demand surge exponentially.

Between now and 2050, the world will need to mine 115 percent more copper than has been mined in all of human history up until 2018, just to meet current copper needs without considering the green energy transition. To meet the copper demands of electrifying the global vehicle fleet, as many as six new large copper mines must be brought online annually over the next several decades, with about 40 percent of the production from these new mines being required for EV-related grid upgrades.

This University of Michigan study concludes that, rather than attempting to fully electrify the entire US fleet of vehicles, hybrids might represent a more practical, feasible approach.

General Mining Sector News

Concerning Your Company's Zip Code...

The new Fraser report?is out for those wondering, “Is my junior exploreco operating in a mining-friendly jurisdiction?” - Annual Survey of Mining Companies, 2023.

Twitchy governments, those without a clear and fair set of values where mining interests are concerned, can wreak all kinds of havoc on your junior company's trek along the exploration and development curve. There are plenty of (recent) examples of this reckless behavior.

This report / survey is designed to assess mineral endowments and public policy factors (taxation and regulatory uncertainty) and their impact on the flow of exploration dollars.

As per a Mining.com piece: The ranking encompasses 86 jurisdictions around the world, based on their geologic attractiveness (minerals and metals) and government policies that encourage or deter exploration and investment, including permit times. To arrive at the ranking, the Fraser Institute surveyed approximately 2,045 mining-related firms globally between August 16, 2023, and January 9, 2024, tallying their opinions on both mineral endowment and policy factors.

Based on Fraser's Investment Attractiveness Index, Utah ranked number one in this year's survey, stripping Nevada of that top-shelf distinction. Nevada, Saskatchewan, Quebec, and Western Australia rounded out the top five (Canada's Manitoba, Newfoundland & Labrador, and Ontario made the top ten).

The five least attractive jurisdictions—The Bottom Five—starting with the worst: Niger, China, Solomon Islands, La Rioja, and Mozambique.

Elmira Aliakbari, director of the Institute’s Center for Natural Resource Studies and co-author of the report: “A sound regulatory regime coupled with competitive taxes make a jurisdiction attractive to investors. Policymakers across the globe should understand that mineral deposits alone are not enough to attract investment.”

Argentina Has Bigtime Cu Potential

Argentina shares a long border with Chile, the world's top copper producer, but produces precious little of the highly sought-after green metal. That could change as a new government under President Javier Milei welcomes foreign investment to tap its mineral-rich Andean subsurface layers - Copper Frenzy Draws Mining Giants to Argentina After Milei's Reforms.

The global mining community—Lundin Mining, Glencore Plc, First Quantum, etc—is interested and appears ready to deploy fat stacks of cash to this resource-rich jurisdiction.

Should just six of the two-dozen-or-so copper projects being contemplated in Argentina come to pass, the nation could be a major supplier by 2035, churning out more than 1 million metric tons a year. Annual exports could top $8 billion, according to local mining group Caem.

Marcelo Awad, chief executive of Antofagasta from 2004 to 2012 (when his company tried and failed to launch operations in Argentina): “With the change of government, I think Argentina will now become a huge rival to Chile. The pro-business policies clearly make it a big competitor for attracting capital flows to copper projects.”

On course for its sixth recession in a decade, opening the door to mining might trigger the economic stimulus President Javier Milei needs to turn things around.

Ivanhoe Ahead of Schedule, On Budget at Kamoa-Kakula's Phase 3

Earlier this week, Ivanhoe Mines (IVN.TO) fed its first bucket of ore into the new Phase 3 concentrator at its Kamoa-Kakula copper complex in the Democratic Republic of the Congo - Ivanhoe Mines Completes Construction of Kamoa-Kakula's Phase 3 Concentrator Ahead of Schedule and on Budget.

Kamoa-Kakula, a joint venture between Ivanhoe (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%), and the Government of the Democratic Republic of Congo (20%), is slated to produce between 440,000 and 490,000 tonnes of copper (in concentrate) this year, as per the company's guidance.

With construction completed months ahead of schedule and on budget, the first concentrate is expected early next month—ramp-up to commercial production is on target for early Q3.

Robert Friedland, Founder and Executive Co-Chairman: “Given the outperformance of Kamoa-Kakula's operations to date, including higher than expected throughput and recoveries at the Phase 1 and Phase 2 concentrators, we are now studying options to boost copper production towards our next goal of 800,000 tonnes per annum ... a production rate that would propel the Kamoa-Kakula Copper Complex towards being one of the two largest copper producers on our planet. In addition to the de-bottlenecking of the Phase 3 concentrator and increasing recoveries to 95% via our 'Project 95' initiative, we are now also studying options to accelerate the Phase 4 expansion at Kamoa-Kakula to target a throughput rate of at least 20 million tonnes annually."

First Quantum Sets Sights on Peru After Panama Kibosh

After the Panamanian gov't put the kibosh on its Cobre Panama mine, ranked one of the largest Cu producers on the planet, First Quantum Minerals (FM.TO) is looking to fast-track two of its development projects in Peru (Cobre Panama accounted for roughly 40% of the company's revenue) - First Quantum seeks to speed up Peru projects after Panama debacle.?

The company is setting its sights on La Granja, with a potential output of 500,000 metric tons per year, and Haquira (potential output of 200,000 tons).

La Granja, a JV with mining colossus Rio Tinto (44%), holds an Indicated and Inferred resource of roughly 4.32 billion tonnes at 0.51% Cu. The wholly-owned pre-feasibility stage Haquira project has a reserve base of 1.98 billion tonnes at a grade of 0.2% Cu.

“These are projects that need to be accelerated,” said the mining company’s project development director, Steven Lewis, during a speech at a mining forum in Lima.

"We are very busy building more positive relationships with the communities (in Haquira) to allow it to come to light," said Lewis, who didn't offer a time frame for the build-out of both mines.

Concerning the current status of Cobre Panama,?Lewis again: “We are now working with Panama’s government to ensure the environmental stability (of the project), the integrity of the copper assets, and, most importantly, the safety of our employees.”

Hits of the Week

BHP Group (BHP.AX), opens new tab said on Wednesday it did not intend to make a formal offer for Anglo American (AAL.L), opens new tab, walking away from its $49 billion takeover deal, after the London-listed rival refused to extend the bid deadline - BHP walks away from $49 billion takeover offer for Anglo American

The Greenstone Mine will be Equinox Gold's flagship asset and largest, lowest-cost producer. When operating at capacity, the Greenstone Mine is expected to produce approximately 400,000 ounces of gold annually for the first five years, and average 360,000 ounces of gold per year for its initial 14-year mine life, making Greenstone one of Canada's largest gold mines - Equinox Gold Pours First Gold at its Greenstone Mine

According to a local news outlet, Venezuela’s Ministry of Electric Power has unveiled plans to disconnect cryptocurrency mining farms from the national grid. The move aims to regulate excessive energy consumption and guarantee a stable power supply for the population - Venezuela Bans Crypto-Mining To Protect Power-Grid

Shelter Scotland said several homeless people it supports had been sent via taxi to Aberdeen and Glasgow amid a shortage in accommodation, and one person was offered temporary accommodation as far away as Newcastle - Homeless sent out of city to make room for Taylor Swift fans

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