ORRCF - Copper Forecast 2020: CEOs Optimistic on EV Boom
Copper’s 2019 was a year that moved with the US-China trade war, with the price waxing and waning in tandem with the progression of the talks, in addition to rising supply concerns.
Copper started off the year on the upward, posting gains throughout the first quarter. The metal reached a high of US$6,570 per metric ton on March 1, but by about a month into the second quarter, copper’s price began to take a nosedive. The red metal’s price dropped by nearly US$200 in one day at the beginning of May.
The price drop in the second quarter coincided with US President Donald Trump’s doubling of tariffs on Chinese imports as a response to waning trade talks. Copper’s price has not recovered since these drops, decreasing by 2.3 percent from its price of US$5,964 on December 31, 2018, to US$5,822 on December 5.
President and CEO of Nevada Copper (TSX:NCU) Matt Gili, Copper Fox Metals (TSXV:CUU,OTC Pink:CPFXF) President and CEO Elmer B. Stewart, CEO of Foran Mining (TSXV:FOM) Peter Soares and Oroco Resource’s (TSXV:OCO,OTC Pink:ORRCF) CEO Craig Dalziel all offered their thoughts on 2019 and what’s ahead for the red metal in the new decade.
Copper forecast 2020: Looking back on 2019
Before talking about what will come in 2020, INN talked to CEOs about how copper fared during 2019.
For Dalziel, 2019 was a year marked by surprise.
“At the end of 2018, our awareness of the increasing gap between projected production supply and world copper demand led us to believe that 2019 would bring a significantly stronger spot market for copper than what we have witnessed,” said Dalziel.
Soares was ultimately disappointed by copper’s performance this year, remarking that the politics just did not allow for the flourishing the red metal deserves.
“Foran expected the economy in the US to continue to be strong and the demand for zinc and copper to grow,” said Soares. “The reasoning behind our thinking was that in an economy where infrastructure projects are needed to ‘Make America Great Again,’ and where the demand for electric vehicles continues to grow, the commodities that are needed to support these projects would get bid up in price as demand rises.”
He added that Foran underestimated the lack of will in the US to advance infrastructure projects. As well, it did not foresee the slowing of the Chinese economy.
Stewart echoed this sentiment as well.
“We expected copper prices to be higher in 2019 and they collapsed in April 2019,” she said. “We believe the rapid decline in the copper price was the most challenging aspect which resulted from a variety of issues including the US-China trade dispute.”
Nevada Copper also struggled this year, but the company remains hopeful that 2020 will bring good news.
“It takes a lot of reserve; it takes a lot of persistence and resolve when you see that the current copper price is not what you would hope it would be,” said Gili. “We always go back to the fundamentals of supply and demand, and the demand fluctuates somewhat, but generally it stays relatively steady at about a percent, percent and a half. Where we see our advantage is supply.”
Copper forecast 2020: The EV boom looms
Despite the downturn during 2019, many CEOs are optimistic regarding the new year, pointing to a push for the red metal due to electrification and the eventual solution to trade talks as their main reasoning.
“We do believe that the tide is turning and that the interest in commodities is growing. Smart investors are making investments now and positioning themselves for the next few years. For investors looking for value investments, the only cheap sector remaining in the stock market is the commodity space,” said Soares.
“The developed world governments are going to have to rebuild infrastructure, an area in most western countries that has been ignored for far too long,” he added. “(Banking chairs) have publicly stated it is time for governments to strengthen the economy by spending. The fiscal spending push is on. This is going to be great for copper.”
Copper Fox Metals was a little more conservative with its assessment of the future, but shared Foran’s belief that copper would prevail in the long-term.
“We believe 2020 will be more of the same as all commodity prices are at low prices,” Stewart said. “However, a stronger copper price may evolve as the demand continues to increase. There are currently issues with civil unrest, and delays in new projects coming online and into production exist.
“Copper is a good ‘long’ term prospective, especially as the world moves toward EVs, urbanization and renewable power. Investors should always perform their own due diligence, and we would recommend them to focus on safe geo-political jurisdictions,” she added.
For Dalziel, the lack of copper available to quench the growing demand is a concern, and something his company will try to combat in 2020.
“For companies like Oroco, the challenge relates more specifically to a lack of understanding of the critical supply or production shortage that is developing,” he said. “Simply stated, while global consumption demand is increasing, the availability of viable production opportunities necessary to meeting that demand is not occurring, and that condition is not expected to change.
“It is our assessment that the pending supply shortage will first manifest itself in M&A activity globally as the major miners look to secure copper production opportunities,” he added. “This, in fact, is already happening. In time, which we are estimating will be in latter 2020 or early 2021, spot copper prices will reflect the developing production shortages, particularly for the reason that, as an industrial metal, there is no practical substitute for copper.”
Gili echoed this sentiment, with high hopes for Nevada Copper’s deposits.
“What you’re seeing is a lot of competition for a few remaining resources regarding copper deposits out there. We’re very fortunate to have (Pumpkin Hollow), very fortunate to be in development,” he said.
Copper forecast 2020: What’s ahead for companies
Many of the companies in the copper sphere are optimistic regarding their projects in 2020, with many making progress or planning on breaking new ground in the new year.
Copper Fox Metals plans on completing its updated resource estimate on the Van Dyke project, in addition to completing the 2019 work program on its Schaft Creek project.
In 2020, Soares expects the electrification boom to really take off and push base metals prices to all-time highs.
“The bargain that investors are getting in the current space is unbelievable,” Soares said. “They need to do their homework and invest carefully now before the demand rises. The developed world governments are going to have to rebuild infrastructure, an area in most western countries that has been ignored for far too long.”
Nevada Copper also expects a fruitful 2020 given the projected raise in demand. The company is particularly focused on innovating the type of mining at copper sites in order to maximize production.
“There’s not a lot of other deposits that are in production right now, many of the existing deposits that have historically been major copper producers are starting to change — you see the trend in copper head grades, you’ve got the grade of ore declining,” said Gili.
“You see a lot of energy that’s being shifted from open-pit mines into underground mines… we’re kind of going the other way — we’re going to start the underground and we’re going to ramp up with the open pit,” he added.
Oroco Resource also has a lot of projects down the pipeline, which Dalziel is excited to see come to fruition in the new year.
“Oroco has a number of catalysts pending, including shareholder approval of the acquisition of the controlling interest in Santo Tomás, a large porphyry copper project in Mexico; the formal registration of that controlling interest in Oroco’s operating Mexican subsidiary in January of 2020; and the commencement of a confirmation drill program on the Santo Tomás property around the end of the first quarter of 2020,” he said.
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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Copper Fox Metals, Nevada Copper and Foran Mining are clients of the Investing News Network. This article is not paid-for content.
The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.