Le Dain: Supporting copper is a public service for the energy transition

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Copper is critical to the clean energy transition. That alone should be enough for copper to get some love, but it remains misunderstood, even resented, and much-needed new mining projects are regularly blocked. Instead of supporting copper development and making an important clean energy input cheaper, the world is in a position where we may not even get enough copper for the energy transition to happen. Not enough people are sounding the alarm about this and my in-laws are probably getting tired of me bringing up underinvestment in copper at family dinners.

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In a cleaner world, people imagine transportation as electric, with a robust network to support the load. Let’s take a quick look at those two elements and their relationship to copper. Wood Mackenzie refers to the fact that the average electric vehicle requires 3½ times more copper than a vehicle with an internal combustion engine. If you start looking at buses, they require at least 11 times as much. As we transition to electric vehicles, this difference will rapidly increase the demand for copper.

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Parallel transmission is required to support all those electric vehicles, and the transmission requires copper. The network infrastructure required to support the expected number of charging stations in 2030 is expected to consume 250 percent more copper than in 2019. Keep in mind that this copper will be needed regardless of which power source you win. All those who advocate for different types of renewable energy will need copper to implement that energy.

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The math above is scary. Scary to the point that nearly every major copper executive, the ones who best understand the dynamics of copper, have spent the last two years sounding the alarm that we are sleepwalking into a crisis. “I really don’t see where all this copper is going to come from,” Anglo chief executive Duncan Wanblad warned. The CEO of Freeport-McMoRan said, “There will come a time when the world will be very short of copper.” The former CEO of Glencore put it very well a year ago when he said: “Today, the world consumes 30 million tons of copper per year and by 2050, following this trajectory, we have to produce 60 million tons of copper per year.”

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The warnings of these experts have been met with skepticism and have not received the coverage they deserve. I can understand this initial reflex because if a businessman told you that what he sells is seriously undervalued, you would roll your eyes. However, the largest commodity producers have a long history of trying to avoid booms and busts. Booms are great for traders and speculators, but for people who make a career in commodities they result in demand destruction, government intervention, and structural substitution. These are all things to avoid if you are investing in projects with returns measured over decades.

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The other thing holding copper projects back is us, as stakeholders continue to block a record number of planned projects. Two-thirds of the world’s copper reserves are in Chile, Argentina, Peru, Mexico, and the US. Several of those jurisdictions are tough to invest in on a good day, so let’s focus on the US, which is presumably the friendlier to the environment and capital. In the US, we see projects being consistently blocked despite their role in the energy transition. Rio Tinto’s Resolution copper project in Arizona has been blocked due to environmental concerns. The company refers to the fact that it could supply 25% of the copper demand in the United States. Before that, Twin Metals’ $1.7 billion copper mine in Minnesota was blocked when activist groups pointed out that the mine’s expansion put biodiversity in the area at risk.

Environmental concerns around new mines are always important, but at the same time, if we block every new copper mine for ESG reasons, we will all feel good as we consume more and more fossil fuels throughout this century. Copper needs more immediate support with higher prices, higher inventories and more licensed mines.

Mark Le Dain is vice president of corporate development for Neo Financial in Calgary.

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