Copper Is Now the Most Valuable Metal for Gold Miners

Sun Apr 07 2024
Gil Ecker (242 articles)
Copper Is Now the Most Valuable Metal for Gold Miners

Recently, gold miners rejoiced as the precious metal achieved an all-time high price. Much of that money is going back into copper investments.

Newmont and Barrick Gold, two of the world’s largest gold producers, are increasing their stake in copper through acquisitions and investments, a commodity crucial to the worldwide energy shift. This is happening all the way from central Mexico to the Australian Outback. When it comes to solar panels, electric cars, and wind turbines, copper is king.

In November, Barrick’s Chief Executive Mark Bristow informed investors that the company’s goal is to become “a major-league copper producer” by constructing a facility in Pakistan and increasing the capacity of the Lumwana mine in Zambia’s Copperbelt province. According to Barrick, the Reko Diq project in Pakistan will be one of the top ten biggest copper mines in the world when it starts producing in 2028.

In November, the copper division of Colorado-based Newmont paid around $15 billion to acquire Newcrest Mining in Australia. Evolution Mining of Canada and Agnico Eagle Mines of Australia are two other major gold miners that have lately made substantial acquisitions of copper mines.

Regis Resources’ chief executive Jim Beyer stated, “We’re looking for copper as much as we are gold.” The company’s geologists are now prospecting territory a few hours west of Sydney.

Coexisting with gold is copper. However, gold-mining executives tended to ignore it for a long time, using industrial metal revenues to artificially inflate the perceived value of their gold in financial reports. Companies that mined multiple metals used to command a premium price in the stock market from gold miners.

Investors are starting to take notice of the rivalry for copper supply as the world electrifies and shifts its focus away from fossil fuels, which is changing that. In many areas, gold miners encounter community opposition, deteriorating pits, and increasing costs.

“The world is going to have a massive copper deficit within the next decade,” declared Tom Palmer, chief executive of Newmont.

Some predict that by 2050, copper demand will have nearly doubled. Copper consumption by electric vehicles can be around four times that of gasoline-powered vehicles, and by wind and solar power plants, the copper requirement per megawatt can be several times more than that of fossil fuel power plants.

Copper miners may have to wait a while for their investments to pay off. Following a record high in March 2022, copper prices have experienced a precipitous decline of over 20%. There have been even more precipitous price drops in other energy transition essential commodities.

Some of the decline in copper prices is attributable to larger worries about the future of the American economy and a leveling off in the increase of sales of electric vehicles in the United States. Copper consumption in the future may be affected if certain car firms decide to postpone electric-vehicle spending plans.

Harmony Gold Mining of South Africa has an opportunity to hedge against the cyclical nature of metals prices with the purchase of a copper and gold project in Australia for a potential $230 million. Many people think that copper prices are a good indicator of the state of an economy. However, investors want a hedge against inflation and other financial concerns, which typically leads to an increase in the price of gold as the economic picture becomes darker.

Also, there are naysayers who refuse to acknowledge the presence of gold, which is a problem for producers. The environmental, social, and economic problems caused by the gold mining industry have prompted academics at Oxford University to demand its abolition. They claim that the amount of gold available for trade and technological purposes is sufficient.

Shareholders see gold as an important part of the global financial system, but Beyer of Regis Resources claims the miner is not pressured to invest in copper because gold is still the company’s raison d’être.

Nonetheless, the mood music isn’t going unnoticed by Beyer. “Renewables and the stories around forward-facing metals, as they’re called these days, are loved by everybody,” he said.

There is already a lot of competition amongst global gold miners for known resources of copper, and now there is an even bigger influx of explorers looking to hit copper. The importance of copper in the energy revolution has prompted some international mining companies, such as BHP Group and Rio Tinto, to prioritize the metal.

The San Nicolás copper and zinc property in Zacatecas state, Mexico, was acquired by Agnico Eagle last year in a daring gamble. Zacatecas is a state that was a center for silver mining throughout Mexico’s colonial era. Despite focusing more on gold than any other metal at the moment, the miner is venturing into industrial metal with its $580 million investment.

Agnico Eagle CEO Ammar Al-Joundi predicted record profits for shareholders from the copper project and reduced the miner’s part of precious metals income to 93% from 99%.

Since acquiring Newcrest, Newmont has seen a 10% increase in its copper revenue, which it hopes will reach 20% or higher as it moves on with its planned projects. This copper has increased Newmont’s reserve concentration to almost 30%.

The value of copper is expected to rise, and its importance in the portfolio will grow, according to Palmer of Newmont.

Gil Ecker

Gil Ecker

Gil Ecker is Charting & Technical Analyst. He has more than 10 years experience of Global Stock Markets.