The end of the commodities super-cycle has left just one new major copper mine on the verge of production. Its owner says prices need to recover further before others are built.
Cobre Panama, a sprawling open-pit mine being developed by First Quantum Minerals Ltd. in the central American nation, is set to begin production as early as next year and reach full output by the end of 2019. Its timing couldn’t be more fortuitous: the market for the industrial metal is set to swing into its first deficit in six years and remain in shortage to 2020.
The price of copper -- often used as a barometer of global economic health -- has gained about 25 percent in the past six months on mine disruptions, Chinese demand and expectations of a U.S. infrastructure build up, making it the top gainer in the Bloomberg Commodity Index. That’s still not high enough to prod a new cycle of investment, says First Quantum President Clive Newall.
"Good copper projects are scarce at these prices," Newall said in a phone interview Monday from London, Bloomberg reported.
"There is an incentive price to build new greenfield sites, which is significantly above the current price."
Copper prices need to rise another 15 percent to about $6,700 a ton before mining companies commit to new greenfield projects, meaning the industry is unlikely to boost capital spending until 2019 at the earliest, Citigroup Inc. forecast in a February report. Wood Mackenzie estimates a price of around $3.30 a pound ($7,275 a ton) would be sufficient to prompt investment, assuming miners will require a 15 percent rate of return, mining and metals analyst Chang Khoo said in an email.
Source: Bloomberg
