Copper is an integral resource required in the development of critical projects in the power sector. The commodity has garnered significant attention over the past decade due to the expansion in innovative use cases. Copper is essential for global innovation and broader development in multiple other sectors, from electric vehicles to hardware development. However, the supply of Copper has failed to keep up with the surging demand over time. This has been a result of underinvesting in the sector over a long time period.
The trend has finally started to change, with increased capital funding being directed into copper production projects. Despite the efforts made to increase copper production, the material supply is expected to trail demand over the next five years. In broader consumer markets, the result is emerging in the form of surging copper prices. Mining companies are attempting to explore capital strategies to navigate the balance between market competitiveness and increasing coverage.
According to DIF research, total investments across sustainable sectors increased by 34% in key markets, including the US, Australia, Japan, and Canada.
Sustainability has emerged as an integral priority for mining companies in this transforming landscape. Leaders in the industry are looking to invest based on their ESG targets and governmental regulations. Subsequently, capital allocation into the sector is also becoming ESG compliant to ensure that investors are able to maintain sustainable portfolios.
Increasing Global Reserves with Sustainable Efforts
Over the past decade, global copper reserves have exhibited consistent growth with a CAGR of 3.3%. The average price increase was lower than the incentive price range for the commodity at $6726 per ton. Despite this price range, investment allocation in the industry increased on a broader basis as leading investors aimed to capitalize on acquiring operational assets in the industry segments.
In the last ten years, leading players invested over $40 billion on acquisitions and explorations in the segment. The investments enhanced the operational copper assets by 168 Metric Tons. Strong demand forecasts and consistent price increases are all significant factors attracting investors to expand their market positioning and enhance asset acquisition. The growth of the electric vehicle (EV) market and the telecommunication sector has subsequently fueled the expansion of copper investments.
Initiatives introduced under the climate change policy have collectively enhanced copper demand for the near future and have forced players to expand their investments to retain market share and cater to client requirements.
Enhancing New Underground Deposits and Lower Grade Copper
The biggest challenge in the existing copper industry is to secure newer deposits. Miners are countering this challenge by shifting to methods of maximized ore extraction from lower-grade deposits. The process has been integral in helping mining companies enhance production. However, efficiency can only be optimized to a limited extent. Companies are starting to explore innovative technologies to expand large-scale extractions.
In an example of this phenomenon, Jetti Resources has committed an additional $50 million to expand the deployment of its catalytic technology to enhance copper production in low-grade deposits
Widespread deployment of these technologies across the globe can lead to a significant increase in global copper extraction and could allow mining companies to extend mine life significantly.
Miners are also investing in the development of underground mining operations to supplement their operation viability. Despite the elevated production cost of underground infrastructure, companies are expanding operations based on the projected impact of higher production.
Coldeco is transforming its Chuquicamata infrastructure into an underground mine to benefit from an additional 320,000 tpa of Copper over the next four decades.
Enhanced Focus on ESG Integration
With leading investors focusing on sustainability across the value chain, mining operations are expected to transition to align with ESG targets. Critical environmental requirements are leading to governmental input and expansive regulation to prevent carbon abatement. Investors are looking to support companies that prioritize ESG management in their internal structures.
Decreasing Emissions and Energy Consumption
Copper has been conventionally considered to be a high emissions industry due to the nature of the mining procedures. Significant greenhouse emissions are associated with underground operations in the copper segment. The industry produces higher emissions compared to steel which adds to the challenges of meeting ESG goals in the segment. Despite the efforts made by leading stakeholders in the mining sector, current progress still lags behind established goals by global initiatives. With energy-intensive avenues like low-grade mining, miners are exploring energy-efficient solutions to drive down consumption.
Improving Sustainability in the Copper Sector
Stakeholders in the copper industry are focusing on multiple metrics to improve sustainability efforts. Community development, safety management, and climate change are all central areas with a significant increase in investment across the copper mining sector. However, miners still need to enhance their focus on innovative business models and shift to green financing alternatives.
The International Copper Association (ICA) has been a leading authority in addressing sustainability in the copper segment. The organization has established a definitive standard to evaluate companies that are performing well on sustainable parameters. The company’s process has integrated globally accepted metrics and provided a platform for the industry to shift to sustainable production.
Transforming Copper Marketing – Changing Business Model
Copper’s role is changing from a conventional asset into a high-demand commodity across new segments, including mobility and sustainable power generation. High-intensity applications are creating extensive demands for Copper on a much larger scale. Electric vehicles require over five times the Copper used in conventional combustion-based vehicles. This demand is dictating Copper’s shift into a different industry segment.
Conclusion
Copper has emerged as a critical resource to address the transition to clean energy generation. The transformation is pushing the mining industry to explore improved forecasting standards and implement broader technological tools to increase the productivity of existing mining operations. DIF anticipates a sustained bullish outlook for the copper industry with increasing demand requirements. The industry needs to shift to uniform standards to ensure that sustainability remains a key priority during the transition.
