Why Copper Query Is Skyrocketing

Demand for copper issurging. The red metal, considered abarometer for economic health, is a vitalcomponent for the construction and defenseindustries, as well as a key ingredient in electriccars, wind turbines and the power grid. Offshore wind,for example, requires about three times as much copperas does coal-fired power generation in terms of tonsper gigawatt of capacity. The outlook for copper isvery positive.

I've never been moreenthusiastic about it. But mining companies arehaving a hard time keeping up. There's this growingconsensus that demand fueled by the energy transition isgoing to outstrip supply, and that's why analysts arenow saying we're simply not going to have enough of it. And so copper really is thebackbone of decarbonization goals.

There's going to be a realproblem with this transition over the next ten years, isthat it is very, very hard for these companies to evenmaintain the level of production that they haveat the moment. Globally, existing mines andprojects under construction will meet only 80% ofcopper needs by 2030. That has analystspredicting the red metal is at the start of a new bullmarket. In recent years, priceshave soared.

To keep up with demand theindustry is faced with a number of obstacles,including the shortage of mining workers navigatingregulatory hurdles, as well as pushback from localstakeholders. There are areas where youcan mine and areas where you can't mine. The mine beingit's it's a sacred site for the Apaches. The other partis that that's where we get our water from. On top of that, mining isdifficult, costly and often.

Dangerous work. Mining is a very capitalintensive business. It takes 10 to 15 years tobuild these mines. Imports made up about 40% ofcopper usage in 2023, and that could jump to twothirds by 2035. So what impact will thelooming global copper shortage have on thetransition to renewable energy sources? To look at the challengesfacing copper producers,.

CNBC got a behind thescenes look at Rio Tinto's Kennecott mining operationoutside of Salt Lake City, where about 200,000 metrictons of copper are produced annually. Copper is essential tomodern life, delivering electricity to our homesand powering our electronic devices. Because of itsstrength, efficiency and reliability copper is alsothe most economical conductor available, makingit ideal for wiring systems.

It is also a bellwether ofthe global economy. Directly and indirectly thecopper industry supports more than 395,000 US jobsand more than $160 billion in economic output. Global demand in recentyears can be attributed largely to the economicgrowth and urbanization in China, which made up 54% ofthe world's consumption in 2021. But copper is also acritical mineral central to the energy transition inthings like EVs and solar.

Panels. An EV, for example,uses about 3 to 4 times the amount of copper as atypical combustion engine vehicle. In addition tobeing used in EV motors, batteries, and powercables, because of its high conductivity, it is thepreferred choice for high speed data wires used invision systems and sensors. It's also essential for theinfrastructure that carries that power, so thinkdistribution, transmission lines, all the wiring, allthe updates to the grid.

That's all going to requireso much copper. Increasingly, it'srecognized that the move towards AI and data centersis going to increase copper demand. Copper is also 100%recyclable, with the majority of the 550 millionmetric tons produced since 1900 still in use today. Recycling constitutes about17% of the world's refined copper supply.

The America's dominateglobal copper production, with the region hosting 75%of the world's largest mines. Chile holds the topspot among producer nations at 22%, followed by Peru,the DRC, China and the US. But demand may already bestarting to outweigh supply. The amount of copper neededin the 28 years between 2022 and 2050 will exceed theamount consumed between 1900 and 2021. But while copper isabundant globally, only a.

Fraction can be extractedcost effectively due to today's prices andtechnology. High grade economic copperresources are not abundant. These things aren't allover the place. You have to go find them,and they're in risky regions or in very geographicallychallenging regions. You know, high in themountains in Chile or in the Gobi Desert in Mongolia. So you have to go intodifficult regions of the.

World where there's noinfrastructure, maybe there's no water. You needa lot of water, maybe there's no people. You needworkers. Roughly 2.1 billion metrictons of copper reserves globally have beenidentified, and an estimated 3.5 billion metric tons arebelieved undiscovered. The US has the world'ssixth largest copper reserve, behind Chile andfour other nations. Constrained by investorpressure for dividends and.

With much of the world'shigh quality copper resources in geopoliticallyrisky regions, international mining companies capitalspending on new projects has remained subdued in recentyears. For a while back in the2010s, they spent a lot and investors didn't like it. And so now they've pulledback on their exploration and production budgets. They've been payingdividends, they've been.

Buying back stock. And allof that means it's hard to build new mines. So you want to build a minein a region of the world where the rule of law willapply? The mine is not going toget stolen. There are examples ofmining companies that have spent multiple billions ofdollars on copper assets and other mining assets inregions of the world where they end up basicallydealing with government.

Efforts to steal the mine. Inflation and the high costsassociated with building a new mine have also been adeterrent. It's so capital intensive,you need to invest billions up front for a payout thatmight take 10 or 15 years to come in the future, and bythat time, who knows what the economic landscape, whoknows what the geopolitical landscape will look like. And so it's hard forinvestors to give the green.

Light for that. These macro economic factorsare causing companies to be hesitant about investing innew copper supply, which those investments take manyyears to result in new production. But despite those hurdles,there have been a smattering of new projects. Mining giant Rio Tinto, oneof the world's largest mining companies with 2023copper revenue of $6.6.

Billion, has ramped upproduction of its giant Mongolian copper mine. And a startup backed by JeffBezos and Bill Gates has found a large scale copperdeposit in Zambia. At the same time, miningstocks have continued to climb. The top producingcopper companies include Codelco, Glencore,Freeport-McMoRan, BHP and Southern Copper. To mitigate risk somecopper miners are looking to.

The US to expand theiroperations at about two miles wide and roughly amile deep, the Bingham Canyon Mine, owned andoperated by Rio Tinto, is one of the world's largestman made excavations. And the mine, locatedoutside of Salt Lake City, Utah, is about to get evenbigger. To ramp up production, RioTinto is expanding its open pit mining operation andhas begun an underground mining project at the site,where typically the ore is a.

Higher grade than a surfacemine. In addition to its size,the operation is unique for its smelter and refinery,where the ore is processed into almost pure copper. We're able to pull the oreout that's needed. It then goes to aconcentrator where we concentrate that ore toaround 25%, and then get shipped in a via pipelinedown to our smelter. We're then able to increaseit to about 94%, and then we.

Take it to our refinery,where we're able to make it into 99.9999% pure copper. About 95% of what we shipends up directly here in the US. A lot of our customersare in the Midwest, and they either get made into copperwire, which can then go into motors or into the autosector. But about 700 miles awayoutside of Phoenix, the company is struggling toget another project off the ground. Resolution Copper,co-owned with BHP, has the.

Potential to supply nearly25% of US copper demand. The last hard rock mine thatwas permitted in the US was in 2008. So it takes a while andwe've been working like on the Resolution mine forabout 18 years. In addition to regulatoryhurdles, the mine is facing resistance from localstakeholders over concerns about dwindling watersupplies and the preservation of NativeAmerican land.

Henry Munoz is a thirdgeneration miner. Arizona right now we're likein our 23rd year of a drought here. Water is ascarce thing. It is really hard to build anew mine in the US. If you think about it,people don't want pipelines or transmission lines or abig open pit mine in their backyard. And now there's alot more ESG scrutiny of these projects, a lot moreenvironmental concerns. And it can take a decade toeven secure the permits.

While the exact figure isdisputed by Resolution Copper, a water study bythe San Carlos Apache Tribe says the mine will requirebillions of gallons of water over its lifetime. Resolution Copper says ithas stored enough water to sustain our operations,assuming the maximum production for more thanhalf of the mine's operating life. Despite thosechallenges, demand for the base metal is expected toclimb, with copper seen as a.

Key player in the energytransition ecosystem. Theoretically, there areenough reserves in the US that we could becomeindependent for a copper need. We could. It's just how do we dothat? How do we get the permits? How do we get theacceptance of the public? How do we work throughthose challenges? The reality is withoutcopper, without aluminum,.

Without mining, there's noenergy transition. There's no decarbonization. In fact, when you lookaround you, everything around you is either grownor mined. So if we need to build theinfrastructure for the world to continue to advance, weneed mines.

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