Everlution Newsletter

Copper Could Be Like Gold (Part 2)

In the last Newsletter we looked at supply issues with copper. In this issue we look at the forecast increase in demand for copper.

Copper’s widespread use in construction wiring & piping, and electrical transmission lines, make it a key metal for civil infrastructure renewal.

The continued move towards electric vehicles is a huge copper driver. In EVs, copper is a major component used in the electric motor, batteries, inverters, wiring and in charging stations. An average electric vehicle contains about 4X as much copper as regular vehicles. Electrification includes not only cars, but trucks, trains, delivery vans, construction equipment and two-wheeled vehicles like e-bikes and scooters.

The latest use for copper is in renewable energy, particularly in photovoltaic cells used for solar power, and wind turbines. The base metal is also a key component of the global 5G buildout. Even though 5G is wireless, its deployment involves a lot more fibre and copper cable to connect equipment.

The big question is, will there be enough copper for future electrification needs, globally? And remember, in addition to electrification, copper will still be required for all the standard uses, including copper wiring used in construction and telecommunications, copper piping, and copper needed for the core components of airplanes, trains, cars, trucks and boats.

The short answer is no, not without a massive acceleration of copper production worldwide.

A recent research report from Jefferies Research LLC concluded: “The copper market is heading into a multiyear period of deficits and high demand from deployment of renewable energy and electric vehicles. Secular demand driver in copper is electric passenger vehicles as the average EV is about four times as copper intensive as the average ICE automobile. Renewable power systems are at least five times more copper intensive than conventional power.”

President-elect Joe Biden plans a major shift away from fossil fuels to wind and solar power, and from gas/ diesel vehicles to EVs. In what would be a significant scale-up of President Obama’s 2009 plan to electrify the US transportation system, a kind of “electrification 2.0”, Biden aims to spend up to $1.7 trillion over 10 years on boosting renewable power and speeding introduction of electric vehicles.

Dubbed “Clean Energy Revolution”, the plan calls for installation of 500,000 electric vehicle charging stations by 2030 and would provide $400 billion for R&D in clean technology.

One of the largest manufacturers of public charging stations, ChargePoint, is targeting a 50-fold increase in its global network of loading spots by the mid-2020s. The group in which German companies BMW, Daimler and Siemens hold stakes, aims to operate 2.5 million charging points by 2025, from 53,000 in 2018. A Level 2 charging station requires 7 kg of copper, a direct current fast charger (DCFC) or Level 3 station uses 25 kg.

BloombergNEF forecasts by 2040 there will be a need for 12 million charging points, each requiring about 10 kg of copper. The number of EV charging stations recently passed the one million mark. 

Biden has also promised a $1.3 trillion infrastructure improvement plan, including: a $50 billion investment in repairs to roads and bridges; $10 billion for transit construction in poor areas of the country; a doubling of BUILD and INFRA grants, and more funding for the US Army Corps of Engineers.

The plan includes investments in high-speed rail, public transit, bicycling, school construction, expansion of rural broadband, and replacement of pipes and other water infrastructure — all of which will require millions more tonnes of copper, along with other infrastructure metals such as nickel, zinc and aluminium.

Is this going to happen for the US? Well, if it is, it isn’t going to come cheap, as existing metal sources run dry. Across the Atlantic, the UK government has set a target of replacing all of its 31.5 million cars with electrics by 2050. A team of scientists led by the Natural History Museum’s head of earth sciences, Professor Richard Herrington, took the government to task and calculated how much raw materials that number of EVs would require.

The researchers found that to build 31.5 million EVs would take a jaw-dropping 207,900 tonnes of cobalt, 264,600 tonnes of lithium carbonate, at least 7,200 tonnes of neodymium and dysprosium, and 2,362,500 tonnes of copper — about 10% of global production. Just mining the amount of raw materials required to replace 2 billion cars globally would require four times the United Kingdom’s total annual electrical output.

Prof. Herrington told AutoExpress that, while there is urgency in cutting carbon dioxide emissions, “society needs to understand that there is a raw material cost of going green”.

US and UK copper needs, of course, have to be put in context with global demand for the essential base metal.

According to BloombergNEF, there are currently about 7 million electric vehicles in the world today. By 2040, they estimate around 30% of the world’s passenger cars will be electric. To me that’s a conservative and reasonable number. It means 500 million EVs will be on the road in 20 years, out of a total vehicle fleet of 1.6 billion. If each EV contains 85 kg of copper, that is 42,500,000,000 kg, or 42,500,000 tonnes of copper, roughly twice the current volume of copper produced by all of the world’s copper mines.

Just so we’re clear — in 20 years, BloombergNEF says copper miners need to double the amount of global copper production (20Mt), just to meet the demand for a 30% penetration rate of electric vehicles. That means an extra million tonnes a year, over and above what we mine now, every year for the next 20 years!  The world’s copper miners need to discover the equivalent of two Kamoas, at 500,000t, each and every year, while keeping current production at 20Mt.

Remember we still need to cover all the copper demanded by electrical, construction, power generation, charging stations, renewable energy, 5G, high-speed rail, etc., plus infrastructure maintenance/ buildout of new infrastructure.

That might be another 5-7Mt. So not only is there a 20Mt increase in copper usage required for a 30% EV penetration, but another (we estimate) 5-7Mt increase to meet demand for all of copper’s other applications. To keep up, the industry will need to find an additional two to three Kamoas a year, each producing 500,000t, for the next 20 years! Remember – Over 200 copper mines are expected to run out of ore before 2035, with not enough new mines in the pipeline to take their place. It’s going to be hard enough to keep up the current 20mt per year let alone add so much more production.

Where is this new, and replacement, supply going to come from? When copper becomes so rare it hits $10,000 a tonne, what’s going to happen to 30% EV penetration? High-speed rail? 5G? We suggest that without new copper deposits, these well-intentioned plans are in jeopardy.

Did we mention China’s Belt and Road Initiative (BRI), consisting of a vast network of railways, pipelines, highways and ports that would extend west through the mountainous former Soviet republics and south to Pakistan, India and southeast Asia?

Research by the International Copper Association found BRI is likely to increase demand for copper in over 60 Eurasian countries to 6.5 million tonnes by 2027, a 22% increase from 2017 levels.

Another report by Roskill forecasts total copper consumption will exceed 43 million tonnes by 2035, driven by population and GDP growth, urbanization and electricity demand. Remember total world mine production in 2019 was only 20Mt. In many countries it takes 20 years to go from discovery through permitting to mining.

But there’s a weird thing happening. The message of a looming copper shortage that could bring the global electrification shift to a screeching halt, and/or make copper so dear that only the rich can afford to buy finished products made from it, like EVs, isn’t getting through to the mining audience, because copper is not considered a critical mineral. 

That term is reserved for minerals like lithium, cobalt, graphite, rare earths etc., which despite their presumed rarity, are actually fairly common. What makes them critical, is the fact that North America (and Europe) have virtually no domestic supply; without mines and a pipeline of deposits under development, and the smelters and know-how to process them, we are hopelessly reliant on foreign countries. Our supply chains are vulnerable and can be exploited at will by the countries that dominate production, through policies like domestic ore beneficiation, export restrictions, tariffs and quotas.

For years North America didn’t bother to explore for these minerals and build mines. Globalization brought with it the mentality that all countries are free traders, and friends. Dirty mining and processing? NIMBY. Let China do it, let the DRC do it, let whoever do it. This has to change, if the US and Canada are to regain control of their critical minerals stockpiles.

For example, according to the US Geological Survey, of the 7 million tonnes of cobalt reserves available globally, nearly half — 3.6Mt — are in the Democratic Republic of the Congo (DRC). The DRC is the world’s leading cobalt supplier by far, in 2019 producing 100,000 tonnes of the EV battery ingredient. China locked up supply from the DRC with infrastructure for off-take, brings it home and refines it to sell to the world. But there is a lot of cobalt found elsewhere. Australia has 310,000 JORC-compliant tons of cobalt but only mined 5,100t last year. Canada has a reserve of 300,000t but only produced 3,000t. Of the 55,000 tonnes of cobalt reserves identified in the US, only 0.01% was mined in 2019, or 550t.

North America is well endowed with huge, quality rare earth deposits, enough to supply us with decades and decades of production. Examples include Commerce Resources’ (TSXV:CCE) Ashram rare earths deposit in Quebec, and Ucore Rare Metals’ (TSXV:UCU) Bokan Mountain REE project in Alaska. Graphite One (TSX.V:GPH) has an excellent graphite project in Alaska.

What we lack is processing and larger-scale manufacturing, i.e. nearly all of the world’s mined rare earth oxides are processed in China; only very recently has REE processing started happening outside that country:

  • Mountain Pass in California expects to start processing REEs by the end of 2020.
  • Lynas signed a joint venture agreement with Blue Line Corp. to build a rare earths processing plant in Texas.
  • Saskatchewan is setting up a processing facility.

(Europe is also starting to get smart and deal with its lack of critical minerals mined and processed on the continent. The EU recently launched the European Raw Materials Alliance, a partnership of over 300 companies, business associations and governments, that will focus on breaking Europe’s dependence on imports from China and other resource-rich countries. Analysts estimate the group of 29 nations will need about 60 times more lithium and 15 times more cobalt for EV batteries and energy storage by 2050.)

Graphite is another mineral that is mined and processed under a near monopoly by China but exists in large quantities elsewhere. According to the USGS, China in 2019 produced nearly three-quarters of the world’s graphite — 700,000 tonnes of the 1.1Mt total. The country indeed has a large proportion of global graphite reserves, 73Mt out of 300Mt. But China doesn’t host the majority of the world’s graphite. In fact Turkey has more, 90Mt, yet last year only mined 2,000t. 25 million tonnes are held by Mozambique but the African country only produced 100,000t. Brazil has nearly as much graphite as China, 72Mt, but in 2019, produced just 96,000 tonnes, about 13% of China’s mine production. Other countries with significant graphite reserves, are India (8Mt), Madagascar (1.6Mt), Mexico (3.Mt), Tanzania (18Mt) and Vietnam (7.6Mt).

Certainly the above-mentioned metals, and the rest of the 23 mineral commodities identified by the US Department of the Interior, are critical, in that they are all important to the country’s economic and military security. You cannot, for example, make a lithium-ion battery without lithium, graphite and cobalt. But most of these metals are labelled critical because so much quantity comes from China, Russia or the DRC. Too much supply is coming from one country and China is where most of the refining is done. When we start mining and processing here in the West, or work with our mining country allies, some degree of ‘criticality’ will be removed. Why can’t we start mining all these minerals here? We have these materials in North America, South America, Australia and to a lesser extent, Europe. The next step is unfettered access and the creation of strong supply chains to get these metals from mine to market.

 Copper, however, is different. Arguably, the red metal is the most critical of all critical metals, because of its necessity in electrification, and the fact that there is an actual shortage of copper coming. 

Eco-tip for the day – Composting (Part 1)

Taking extracts from https://happydiyhome.com/diy-compost-bin/, we begin the composting series as Part 1:

“Making your own compost is one of those projects that keeps on giving. Aside from the obvious supply of soil for your garden, making your compost at home also means your garden won’t need to be fertilized as frequently. Frequent use of commercial fertilizers can end up doing more harm than good in your garden, so using your own compost adds beneficial microbes and nutrients without the harsh chemicals.

Making your own compost means saving money in the long run. Initially, you might spend to get your compost up and running, but as you add to it, you won’t be buying bagged soils as often.

And speaking of saving, you can keep so many biodegradables out of landfills. More than just food scraps can be thrown into your compost. Plain paper towels and napkins, nail clippings, your hair — things like this are what you’re saving from your trash bin, which ends up in a landfill. No more unnecessary waste.

Plus, with composting, you can ensure you’re giving your garden nutrient-dense and healthy soil.

There are quite a few composting options when it comes to making your own compost. From worm bins to homemade compost tea, there’s no one way to enrich your compost.

One of the easiest and most affordable methods of homemade compost is creating a compost pile. This is just what it sounds like: a large pile of compost. Use this type of compost method in a spot out of the way in your yard, and that’s basically it. Mix up your pile a few times a week, make sure it’s moist (so keep in a shady place), and you have one of the most simple homemade compost methods.

A worm farm is a great composting option. Worms will give you nutrient-rich castings, which plants absolutely love. Make your own worm bin very easily with a couple of plastic storage totes, and a cup of worms. Your worms will eat your kitchen scraps too, so it’s another great way to reduce waste.

If you have friends or family with horses, cows, chickens, or other livestock, or you live in an area where you’re near some, collect the manure to add to your homemade compost. Most farms and ranches are more than happy to donate their animals’ poop. It’s a win-win.

You can also make compost tea. This is a nutrient-rich liquid that can be used much like a fertilizer in your garden. Simply fill a gallon jug with water, molasses, sprinkle in some soil, sawdust, or plain mulch, and then add some food scraps and shake. Let that sit and ferment for a few days and add it to your compost.

You can also do this with canned fish like sardines, or remnant fish parts and make a fish emulsion: just add fish to your water mix rather than the food scraps. Plants love dead fish juice. If you ever need an organic fertilizer or want to give your compost a nutrient boost, fish emulsion is a life saver.

Share watch – Stavely Minerals Ltd (SVY:ASX)

Copper’s strength is already rubbing off on junior explorers in a big way.

Stavely is a case in point. It popped 8c or 11.7% higher last week to 76c on no news other than copper’s strong overnight gain. However, after a quiet period, there is a strong news flow coming from Stavely’s namesake copper-gold project in western Victoria where it has been following up last September’s exciting Cayley Lode discovery.

Results from the drilling program have been delayed by Australia’s exploration boom (for gold at any rate) choking the flow of lab assay results. Stavely executive chairman Chris Cairns told a webinar on big-time copper porphyry exploration put on by Arlington Group last week that it was like watching a python swallow a chicken.

“We know the assays are coming through, but they haven’t got through to the other end yet,’’ Cairns said. “(But) I expect we will have a very good news flow once they start to come through.’’

Stavely’s drilling has been focussed on defining a near-surface resource for part of the Cayley Lode which would be an addition to the long known-about shallow chalcocite-enriched blanket of 28 million tonnes at 0.4% copper at the Thursday’s Gossan prospect. The idea is to get going on a shallow development.

That is exciting enough, but excitement levels will go up another notch next month when the company gets going with two deep (1500m) holes to test the big porphyry targets at depth presumed to be the source of the metal in shallower positions.

Stavely’s share price graph for the last 12 months is displayed on the chart above.

Financial indicators

The VIX fear gauge up slightly by 0.29 of a point since last Friday EST to 21.93.

The Dow Jones Industrial Average up since last Friday EST by 253.30 points or 0.84% to     30,303.37, the STOXX 600 up 5.09 points or 1.45% to 397.28 and the Shanghai Composite index up 1.92 points or 0.01% to 3,403.72.

Gold on 1,885.20. US 10-year Treasury Bonds on 0.925 and oil on 48.25. Cryptos Bitcoin up 3,811 points since last Friday or 19.88% to 22,977.

ASX 200 up 60.60 points or 0.85% since last Friday to 6,700.30. The Aussie dollar on 76.04US cents.

Eco Market Spot Prices

LGC $38.75

STC $38.00

ESC $27.30

VEEC $42.30

ACCU $16.50

Sources: RenewEconomy, demandmanager,  Reuters, SMH, Market Watch, Crikey