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Epic & Msn data

Epic	FND
Time:	07:37:31
Mid Price:	13.00
Change Today:	0.00
Change % Today:	0.00
Fifty Two Week High:	51.50
Fifty Two Week Low:	13.00
Market Capital:	10.93

Period & price data

Period	Price
Now:	13.00
3 Months ago:	24.50
6 Months ago:	42.00
1 Year ago:	47.50

Additional information

Additional	Information
Market:	AIM, ASX
Sector:	General Mining
News:	Latest news
Web Site:	Finders Resources
Other Articles:	22-12-200815-10-200801-10-2008

Copper: Long term fundamental demand

by Jackie Steinitz

Copper’s properties – it is malleable, ductile, corrosion resistant, recyclable, a good conductor of electricity and heat, and it can be easily alloyed to make bronze and brass – make it an essential raw material with many uses. The two biggest uses are in wiring and plumbing; the average new home in the US uses 200kg of copper in construction (not counting the copper used in the appliances, the PC, the cooking pans or the car). It is also used in power cables, transformers, electronics, roofing, motors, radiators, heat exchangers, coinage, statues, (72 tonnes of it in the Statue of Liberty), and the list goes on.

In 2002 China overtook the US to become the biggest consumer of copper. By 2007 it accounted for 23% of global consumption. Yet its intensity of consumption – the amount of copper consumed per capita - is less than a third of that used in Europe, Japan and the US. But it is growing fast - Chinese copper usage in 2007 grew 36% according to figures recently released by the International Copper Study Group (ICSG), while ‘first use’ copper in the US, Europe and Japan demand fell 3%. It is therefore the development of China, and to a lesser extent India and other emerging markets, which will dictate the pace of future demand growth for the metal.

BHP, the world’s largest mining company, is certainly bullish on the demand outlook. In a recent presentation the company demonstrated that if the 3%pa growth rate of the last decade continues then the world will require more copper in the next 25 years than it has needed throughout history.

Of course the more the price increases the more incentive there is to substitute away from copper, into aluminium for electrical uses, and into plastics for plumbing. Certainly this will happen to some extent. But there are good reasons why electricians and plumbers prefer everything about copper except its price, (though rats, by contrast, prefer to chew on plastic pipes rather than copper!).

So will there be sufficient supply to meet demand? In 2007 15.5 million tonnes were mined, and 18.1 million tonnes were refined, with the difference being accounted for by recycling scrap. According to the ICSG the copper market was broadly in balance with usage just 40,000 tonnes (or 0.2%) above refined production. Supply was below capacity because of supply disruptions, but even if these cease, (which seems unlikely in the current tight mining climate), it is clear that new projects will be required to cope with additional demand and the maturing and depletion of existing mines.

A number of new projects are scheduled; Credit Suisse, in a recent report, identified 66 projects in the pipeline by 2015 which could potentially add 45% to world capacity. But the authors are sceptical about this being achieved as it is becoming ever more difficult to bring new projects on stream due to a combination of competition for scarce resources, ever more stringent licensing requirements and the fact that new projects tend to be either lower grade and/or in more remote areas. Most analysts are therefore forecasting that long term copper prices will remain high, albeit not at current levels. Typical long term price projections range between $1.50 and $2/lb, compared to a previous long term average of below $1/lb. The outlook seems bright for any successful explorer, developer or producer who succeeds in bringing copper to the market at a viable cost, (so it perhaps no surprise that a record $2bn was spent exploring for copper worldwide in 2007).

Short term there is considerable uncertainty about the price outlook. Copper has enjoyed one of the strongest price growth trajectories of all the metals over the last 5 years, with the price driven by demand from the emerging markets, restricted supply, dollar weakness and investment fund interest. To date in 2008 copper prices have continued to rise, reaching an all time high in April of more than $4/lb. Although the economic slowdown has subdued copper demand growth this year this has been more than offset by further supply disruptions in Chile and Mexico leading to tight stock conditions and fresh flows of investment money. Investment money and potential supply disruptions hold the key for the next few months (and following a recent decision by the Supreme Court in Chile further strikes by the militant unions seem eminently possible). A few analysts are forecasting that copper will soon exceed $5/lb though the majority expect some price softening.


There are a number of companies on the ASX which offer significant exposure to the copper market. We have listed three below. As with all resource companies the winners among them will be those who can offer the best combination of geology/grade, accessibility, favourable jurisdiction, access to labour and equipment, and management expertise.


Finders Resources (ASX: FND) is developing its 72%-owned 245,000 tonne copper resource at Wetar in Indonesia, to produce up to 25,000 tonnes of copper each year from end-2009. A feasibility study is underway and a demonstration plant will be commissioned in July. The project is high grade (2.5%), near surface and is 5km from the coast with no competing land use. The area was previously operated by Billiton in the 1990s who mined the sand barite gold deposit above the sulphide copper. Finders will be able to use and refurbish much of the mine infrastructure, including a 250-person camp, the port and some roads which will save considerable capex. The key uncertainty is the metallurgy as the ore is of an unconventional type and in this respect the learning from the demonstration heap-leach plant will be critical. Finders also owns 72% of an advanced gold and silver exploration project at Ojolali, and has a 16.7% share in ASX-listed Geopacific Resources which has a copper and gold exploration portfolio in Fiji.

Discovery Metals (ASX: DML) has two major projects in Botswana, which is sometimes described as the ‘Switzerland of Africa’ because of its political stability. The inferred resources at the 100%-owned Maun copper project, which covers 6,435 square kilometres in the Kalahari Copper Belt, currently stand at 600,000 tonnes at a (high) grade of 1.3% near surface copper. The company is on target to complete a Pre-Feasibility Study by mid-year. If all goes well it will begin a bankable feasibility study in the second half of 2008, mine construction in 2009 and production by 2010. Discovery’s other project is an 85% share in the Dikloti Nickel project with inferred resources of 4.1 million tonnes at 0.7% nickel and 0.5% copper

CopperCo (ASX: CUO) is in the midst of a merger with London and Sydney listed Mineral Securities (MXX), which will bring a wide range of assets under one roof. CopperCo, as the name suggests, commenced copper production from the first of five ore bodies in October 2007 at the Lady Annie Operations located approximate 120 km north of Mt Isa. The mine employs the heap leach solvent extraction – electrowinning technology. Lady Annie is producing at an annualised rate of 19,000 tonnes per annum of copper cathode and will increase production to 30,000 tonnes per annum early in 2009. The Mineral Resource is 40 million tonnes @ 0.9% copper for 358,700 tonnes of contained copper. The Ore Reserve is 16.4Mt at 1.0% for 142,160 tonnes of recovered copper.

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