May 25th, 2021 | 09:52 CEST
Daimler, QMines, Freeport McMoRan, Glencore, BMW - The Gold of Energy Transition
It is not without reason that copper is currently at a 10-year high. On the one hand, the recovering economies in China and the USA have enormously boosted demand for the metal. On the other hand, copper is one of the most important metals in the energy transition. Demand for solar modules, wind turbines and electric cars already exceeded supply last year. Yet, the new technologies are only at the beginning of a new cycle. The copper shortage is expected to increase dramatically in the next ten years. Profit from the new gold.
time to read: 3 minutes
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Author:
Stefan Feulner
ISIN:
DE0007100000 , AU0000141533 , US35671D8570 , JE00B4T3BW64 , DE0005190003
Table of contents:
Author
Stefan Feulner
The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
He is passionate about analyzing a wide variety of business models and investigating new trends.
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Long-term supercycle
The future should be Co²-neutral. It would be interesting to find out whether the " Fridays For Future" disciples know what raw materials and metals it requires to establish a new earth and under which conditions these are mined. The fact is that lithium, cobalt, nickel, rare earth metals and co. are all extremely rare and the demand cannot be procured in the next few years.
Moreover, most materials come from China, which has a hand in the markets here with a production of around 80%. Due to the swelling trade war between the Middle Kingdom and the USA and the substantial increase in domestic demand, bottlenecks are unlikely to disappear soon. We are currently seeing a shortage of chips for the electric car industry, leading to short-time work and production stops at carmakers such as Daimler and BMW.
Copper more in demand than ever
While copper is not one of the "China-dependent metals," the metal's excellent electrical conductivity, good workability and durability put it among the frontrunners when it comes to shortages caused by the massive increase in demand. Already in 2019, the market was short 383,000 tons. In 2020, the supply deficit rose to 559,000 tons, the highest value in more than a decade.
No wonder, after all, it takes around four times more copper to produce a new type of electric car than it does to produce a vehicle with an internal combustion engine. The world's largest copper deposits are located in Chile. Reserves of the non-ferrous metal there totaled 20 million tons in 2019. Australia and Peru follow far behind. Anyone who wants to participate in the supercycle should take a closer look at the world's largest copper producers.
In first place is the unlisted Company Codelco. The Chilean market leader produced around 1.73 million tons of copper in 2020 and further expanded its global top position. It is followed by the Swiss Company Glencore with 1.4 million tons, ahead of the American commodity giant Freeport-McMoRan with 1.17 million tons. The Australian-British conglomerate BHP Group operates the largest copper mine, Escondida, in Chile.
Second-tier on the rise
Overall, global production is currently handled by about 10 larger mines and another 20 smaller ones. New copper projects, on the other hand, are rare at the moment. In addition to promising second-tier candidates such as Kodiak Copper or Nevada Copper, the Australian Company QMines, which has focused on the development of copper deposits in addition to the exploration of gold, stands out. The Queensland-based explorer holds the sole rights to a total of 4 projects at an advanced stage of development. The 983 sqm property has excellent infrastructure and is located close to the ports of Gladstone and Brisbane.
Mt. Chalmers stands out as the most important project at the moment, containing a historic mine operated between 1898 and 1982. During this time, around 1.6 million tons of ore were mined there. Today, initial estimates still see an inferred resource of 3.9 million tonnes at grades of 1.15% copper, 0.81 g/t gold, and 8.4 g/t silver. The Company was listed on the ASX in Sydney just a few weeks ago. Due to strong demand from European investors, the stock is now also tradable in Frankfurt.
Share price jumps
Last week, the share price was set ablaze by news of outstanding drilling results at the Mt. Chalmers copper project, well above the mining industry average. Test drilling was carried out in a total of 11 drill holes over 1,587 meters. Maximum values of 13.4% copper, 6.1g/t gold and 31g/t silver were recorded. A further 3000m is now to be drilled. The encouraging drill results are likely to result in an upward revision of the official resource estimates.
The goal of the management of QMines is to expand its resource base, combine the projects in the region, and explore appropriate marketing opportunities. As a result of the announcement, the share price shot up from EUR 0.17 to currently EUR 0.27 last week. The project around Mt. Chalmers is interesting in any case, also given further rising copper prices.
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