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Copper price jumps to highest level since June 2018 on supply crunch, demand recovery

The surge in copper price was underpinned by fears of disruption at Chile’s state-run Codelco, the world’s largest copper producer.

Lundin Mining Corporation - Copper price jumps to highest level since June 2018 on supply crunch, demand recovery
China’s economy, particularly metal intensive industries, continued its expansion in the third quarter

Copper prices surged to their highest level since June 2018 on Tuesday underpinned by a looming supply crunch for top producer Chile and robust Chinese economic growth.

The London Metal Exchange copper price closed at US$6953 per tonne yesterday which is a 51% increase from its March-low and a return to levels last seen in mid-2018.

Supply crunch in Chile

Copper prices are surging on fears of disruption at Chile’s state-run Codelco, the world’s largest copper producer.

Codelco workers took to the streets on Monday to reject layoffs announced during the COVID-19 pandemic.

The workers’ agitation is yet another challenge for the country’s copper industry which has already seen production dipping due to reduced staff and spiking contagions.

Workers’ unions toted banners and chanted “No more layoffs in a pandemic” and “Enough of layoffs and persecution against women” outside company’s headquarters in the capital Santiago.

Leaders of the Federation of Copper Workers said that the miner is using the pandemic as a pretext for privatising some divisions, and outsourcing functions to contractors.

In another development, Lundin Mining Corp (TSE:LUN) (STO:LUMI) (OTCMKTS:LUNMF) said it is suspending production at the Candelaria copper mine in Chile after failing to strike a wage deal with unionised employees.

Chinese industrial activity rebounds

China’s economy continued its rapid expansion in the third quarter, with the GDP growing 4.9% during Q3, up from 0.7% in the quarter to end-June.

Notably, metal intensive industries showed the strongest quarterly growth, with a further pick-up in industry and construction, from 4.7% year-on-year to 6%.

Monthly industrial production also came in above expectations, rising from 5.6% in August to 6.9% in September compared to the same months last year.

Drilling in Mt Isa copper-belt

The recent surge in copper prices are raising the prospects for emerging copper explorers and developers including Castillo Copper Ltd (ASX:CCZ) (LON:CCZ), which is embarking on a strategic transformation to morph into a mid-tier copper group.

Castillo will start drilling next week at its Mt Oxide Project in the Mt Isa copper-belt in northwest Queensland, focusing on the high-grade Big One deposit followed by the Ayra prospect.

While the drilling team is working on the Big One deposit, which is estimated to take 3-4 weeks, the logistics team will complete the access road to Arya so it can accommodate heavy equipment.

Castillo managing director Simon Paull recently said: “We are delighted our drilling contractor has agreed to be partly compensated in script as that reflects a high degree of confidence in the Mt Oxide Project.

“Work is slated to commence at the high-grade Big One deposit, then move on to the Arya prospect where there are three principle interpreted targets including a sizeable potential massive sulphide conductor that is 130 metres thick.”

Copper targets near BHP’s Oak Dam discovery

Argonaut Resources NL (ASX:ARE) is another copper explorer attracting investor attention with its recent share purchase plan (SPP) more than twice oversubscribed with the target subsequently increased to $2.5 million from $1.2 million.

Money raised under this SPP and from the recently completed $2.7 million share placement will be used to drill copper targets at Murdie Project in South Australia.

It is worth noting that the copper targets at Murdie are gravity anomalies in the style of BHP Group Ltd’s (ASX:BHP) high-grade Oak Dam discovery, 45 kilometres to the northwest.

The company will also use the funds to complete a scoping economic study of the Nyungu copper-cobalt deposit at Lumwana West in Zambia.

Argonaut shares were last trading 14% higher intra-day, at 0.8 cents.

Emerging multi-mine company

Copper and gold producer Aeris Resources Ltd (ASX:AIS) generated record cash flows during the September quarter from its Tritton Copper Operations in NSW and Cracow Gold Operations in Queensland.

In FY21, Aeris is targeting copper production at Tritton of between 23,500 tonnes and 24,500 tonnes and gold production at Cracow of between 70,000 ounces to 75,000 ounces.

Aeris is also planning to pursue strategic acquisition opportunities to add value, complement existing portfolio and transform it into a mid-sized, multi-mine company.

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