IGO to record impairment against nickel assets in strategy shift
IGO has been undertaking a strategic review in an attempt to revaluate its resources.
A week or so ago, America’s preeminent financial paper, the Wall Street Journal, in a section called Heard on the Street, made this claim:
To those who happened upon your humble reporter’s work for the first time after being piqued (I know I was) by the WSJ article, let me start by saying:
You’re welcome!
MINING.COM has always believed Orange Metal Good (OMG) and we appreciate a hard hitter like the WSJ joining us in banging the drum for copper.
And congratulations for such a dramatic entry into the annals of copper market predictions.
Even this website – where we are not afraid to talk our book – hasn’t made calls this bold.
The piece starts with “I was today years old…”.
Okay not really, but Heard on the Street articles don’t usually sound like overheard conversations in line at the Subway on 30 Broad Street, which is the level of this:
“Traditionally seen as an economic indicator, copper is also poised to play a role in the world’s green transition. [Extra mayonnaise please, hold the mustard]”
Indicator? Poised? A role?
Whoa, there WSJ. Don’t get your readers too excited about copper’s coming kick up. May we suggest different phrasing for your big bull market prediction:
Traditionally seen as essential for all facets of modern life, copper is also what makes the world’s green transition possible.
“Traditional economic indicator” is a reference to Dr. Copper, the metal so smart it has a PhD in economics (ugh).
Wall Street deity Dr. Alan Greenspan, 97, whose first job in 1948 was analyzing metals demand for the National Industrial Conference Board, ditched that old chestnut fifty years ago:
“Shifts in the economy’s makeup have reduced the role of industrial commodities, including copper, as indicators of growth and inflation.
“In the 1950s and 1960s, when timely data on industrial trends were lacking, I found copper prices a very useful proxy. That, of course, is less so today.
“But I still cannot resist checking prices on both the London Metal Exchange and Comex on a daily basis.”
You and me both, Alan: At 10:48 33 CT 19 May 2023 Comex Globex Code HGN3 Most Active Jul 2023 $3.7305/lb & LME 3-month Grade A $8271.00 Open Outcry.
Apparently not much happened in the decades since Dr. Copper lost tenure because after that intro Big Bull continues:
Glencore’s “aggressive pursuit of Teck Resources has put a spotlight on the race to secure access to copper.”
Leaving aside the fact that Glencore first approached Teck in 2020, MINING.COM would like to think that the spotlight “on the race to secure access to copper” (or as we would put it “on copper”) has been shining a little bit longer than a month.
None other than Glencore at its 2017 Investor Day, made the green energy transition (GETTM) connection to copper explicit.
“Electric vehicles will be disruptive to the world,” Chief Executive Ivan Glasenberg said in a thick Johannesburg accent.
Hardly a revolutionary statement from the world’s top commodities trader – the first Tesla Model 3 had rolled off the assembly line four months earlier, but still beat the WSJ by five years.
The boys from Baar said additional demand from GETTM will total 4.1 million tonnes by the end of this decade.
That turned out to be conservative. Big Bull cites a Goldman Sachs study forecasting overall 40 million tonnes demand by 2030 and that GETTM will be responsible for 47% of demand growth through 2040.
You can’t go wrong quoting vampire squid numbers (or can you?), but when it comes to the other side of the market the WSJ’s case for a new high looks stomped on.
The International Copper Study Group has been doing the lord’s work since 1986 and predicts mine supply of 22.5 million tonnes in 2023. That’s after the Lisbon-based organisation revised down growth expectations.
It’s always downward btw, underpromising and overdelivering is just not a thing in this industry. Look up Olympic Dam or Oyu Tolgoi or an exception that proves the rule, Kamoa-Kakula.
That leaves copper supply in need of a good number of escondidas (MINING.COM’s official measure of copper production equaling one million tonnes) between now and 2030.
To be fair, WSJ’s copper bull market prediction acknowledges the copper industry’s supply challenges:
“Current investment plans would probably fall far short of meeting that.”
Apart from spelling definitely wrong, Big Bull too easily moves onto the positives:
“Still, there are a few bullish trends for supply growth too, mostly related to politics.”
Big Bulls’ bullish politics is the Inflation Reduction Act (IRA) and its tax credits and local sourcing requirements. The IRA will also “wrest from China control of the supply chain for clean power minerals”.
(Here are 10 graphs showing how devoid of reality that statement is. )
“A more bifurcated supply chain will raise costs for everyone, especially in the early phases of the green transition. But those higher material prices will also stimulate investment.
“Mineral processing is the key bottleneck, but that probably implies more upstream mining investment too.”
Apart from spelling definitely wrong again, one must wonder where the idea that processing is the key bottleneck comes from.
Could it be from the Biden official who said this when the IRA was still being shopped around:
“It’s not that hard to dig a hole. What’s hard is getting that stuff out and getting it to processing facilities. That’s what the US government is focused on.”
A cursory glance at US Geological Survey data would tell you that even if the US refines all the copper it mines every year it would still be short 600,000 tonnes.
That the received wisdom in a publication like the Wall Street Journal is that refining is the key bottleneck, especially in an article making a call for the next big bull market, is just… [TK]
Perhaps it doesn’t matter. Bottlenecks aren’t a problem if your bottle is empty.
A quick look at what’s happening on the ground would dispel the idea that you can refine yourself out of a metal supply problem. Or that one copper company buying another adds to supply.
MINING.COM visited Pumpkin Hollow in Nevada in 2018 ahead of commercial production a year later. It was the first copper mine in the US to start up in 13 years. Nevada Copper acquired the project in 2005 and the deposit was discovered in 1960.
This is not an atypical timeline for a mine.
Turns out it is hard to dig a hole, and to keep digging sometimes even harder. Production at Pumpkin Hollow was suspended in July last year.
So that makes the last new copper mine in production in the US 16 years old.
(Fun fact: America’s largest currently producing copper mine, Morenci in Arizona, started production in 1872.)
But the hardest thing to do in the US is to start digging.
Discovered in 1995, the Resolution deposit in Arizona contains over 10m tonnes of copper, making it the sixth-largest in the world.
Resolution ticks the boxes: It’s an underground high-grade mine using the latest block-cave technology that shrinks its environmental footprint.
The world’s number one and two mining companies, BHP and Rio Tinto, have already spent $2 billion on Resolution, including reclamation of a historical mine.
It was a pet project of late senator McCain and Resolution had the backing of both Obama and Trump. But there was no diggity no doubt Biden would block it, and he did.
Calls brought by Arizona Senator Sinema and others for copper to be classified as a critical mineral – another politics-related bullish trend identified by Big Bull – may help Resolution get under the ground. Just maybe.
But it’s likely more wishful thinking. Having the capo di tutti capi of critical battery metals – nickel – in the orebody did not help Twin Metals in Minnesota. Biden torpedoed that too.
“One key uncertainty is the U.S. Congress. Republicans’ opening move in the debt-ceiling battle has included a demand to undo parts of the IRA.”
If you want to be part of the next big bull market, gotta keep an eye on the debt ceiling, WSJ readers.
Not fighting in the DRC, not falling grades in Chile, not protests in Peru, not changes in mining laws in dozens of jurisdictions around the world including top three US supplier Mexico, not regulation in the EU and Canada, not ore export bans in Indonesia and the Philippines, not the rate of EV uptake everywhere, not the fact that global copper mining is Opec on crack tranq, not measly exploration budgets, not lack of new discoveries, not mine construction timelines counted in decades, and not global copper stocks at less than seven days consumption.
No; The Next Big Bull Market Could Be Copper thesis is dependent on US debt ceiling horse trading, subclauses of the IRA and the Republicans.
Dwell a bit on the absurdity of linking the next big bull market to possible alterations by the party most sympathetic to mining to provisions – most of which still need to be codified anyway – in a 755 page document.
The financialization of commodities markets is a long-established trend. Daily copper trading on Comex averages more than a million tonnes per day (1 escondida) but far less than 1% is ever delivered.
And investing in the industrial economy has long been considered passé, but it’s still a bit surprising that the WSJ and its editors don’t know how to value hard assets anymore.
At best Big Bull’s argument may create a tradeable moment on Comex if you somehow shoehorn copper’s prospects into the intactness of the IRA and manage to convince enough of your readers.
Besides, if you’re glomming everything onto the debt ceiling perhaps it is gold that should be classified as a critical mineral. Or platinum – to mint that magic coin.
In the closing paragraph, Big Bull doubles down on the thesis that it’s the IRA or the highway for copper’s future:
“But assuming the law remains intact, the U.S., China and Europe will all move aggressively to green their economies over the next decade.
“The world will need much more copper to achieve that, especially if global supply chains keep Balkanizing.”
China has been moving aggressively for more than two decades – the country consumes more than half the world’s copper and is responsible for 42% of refined output.
US consumption? 7%. The IRA is a day late and a dollar short – for everyone except lobbyists.
As for balkanizing, Serbia opened a massive new copper mine less than two years ago. Built and owned by the world’s fastest growing copper company which is, unsurprisingly, Chinese.
Of course, that’s not how the term was used in WSJ’s nice but nonsensical summation of the future of copper, but mining supply chains need more balkanization not less. See tranq above for more on that.
Big Bull must’ve been a popular story, because three days later there was a follow-up article headlined The Green Revolution Is Here. Which Big Miners Are Prepared? rehashing the arguments (no emphasis added):
“New U.S. legislation points to the world being short of copper in a few years.”
“Over the last six months mining firms have begun jostling to acquire copper assets. One major reason: The U.S. Inflation Reduction Act…”.
To its credit Which Big Miners at least introduces concepts like “dense thickets of permits”, “big new greenfield projects”, “capricious regulatory regimes in far-flung places,” the ““herculean” task of building new copper mines, and “luck”.
But then spoils it all in the final paragraphs.
“Cyclical headwinds from the U.S. and China are also weighing on current copper prices, making big new investments harder to sell.”
So copper is not the next big bull market and no institutional investor believes the “probable surge in copper prices” mentioned in paragraph one?
“Nonetheless, the big miners will need to plunge in eventually anyway.”
Yes BHP and Rio, just build Resolution already. It’s been 20 years since you bought that property for goodness sake. Can’t put it off any longer. Did you not prepare?
“The huge write-downs of assets like Alcan bought near the top of the last commodity supercycle are still seared into mining bosses’ memories. That is understandable.”
They are seared into investors’ memories. You know, the ones who had their fingers burned, not those who accepted sinecures on mid-tier mining boards after being shown the door.
“But the copper demand wave is coming. Those who don’t invest soon will almost certainly be forced to do so later — probably at much higher prices.”
If “much higher prices” refers to copper prices, make it make sense.
It must refer to the prices/valuations of big miners’ takeover targets. So while big miners are busy suppressing seared memories they are missing out on the demand wave, but the takeover targets grow rich on said wave?
Whatever paradox is being laid out here it does not seem to include the building of mines.
As for exploration – the bedrock of the industry – it is completely absent from both articles.
It seems copper is having a moment in the WSJ.
A search for “copper” in the last seven days sorted by relevance found 10 articles including some useful ones like It’s Time to Ditch Your (Supposedly) Nonstick Pans.
I was going to write a stern letter to the editor after suffering through Big Bull and Which Big Miners but a search brought up Minnesota Rep Peter Stauber’s submission from a couple of weeks ago: Why Won’t Biden Pursue U.S. Mineral Independence?
The WSJ also covered the World Copper Conference in Santiago held last month. This is the first sentence:
“Metal markets seem to think copper is the new lithium.”
Okay that’s it. I give up. I’m outta here.
