Copper Supercycle: Protectionist Moves and High Demand Create Perfect Storm

USA News Group Commentary

Issued on behalf of Yukon Metals Corp.

VANCOUVER, BC, June 14, 2024 /CNW/ -- With prices soaring for copper amid supply cuts and higher demand from energy transition and artificial intelligence (AI) projects, many industry experts are asking whether or not the red metal is entering a new supercycle of prolonged high demand and rising prices. According to analysts at Sprott, copper's new supercycle is already emerging, as protectionist moves by countries looking to secure vital materials are only stoking the flame. Long viewed as a barometer for economic activity, the market witnessed record highs in copper prices last month, signalling the urgency of developing new supplies. With experts stating the current copper supply forecast is insufficient for the global EV transition by 2035, the rise of AI infrastructure needs only serves to amplify the shortage. When opening a single copper mine can take 23 years, moves made by miners today are incredibly important, with recent developments coming from Yukon Metals Corp. (CSE: YMC), Freeport-McMoRan Inc. (NYSE: FCX), Taseko Mines Limited (NYSE-American: TGB) (TSX: TKO), Teck Resources Limited (NYSE: TECK) (TSX: TECK-B), and Ero Copper Corp. (NYSE: ERO).

According to analysts at Trafigura, AI development will increase copper demand by 1 million tons per annum by the end of 2030, with the demand-supply deficit set to increase to 4-5 million tons in that same time. With the supply crunch only set to get worse, a new entrant in the race has emerged with Yukon Metals Corp. (CSE: YMC), a newly branded miner that recently acquired an impressive premium-quality portfolio in the Yukon built upon over 30 years of prospecting by the Berdahl family, the same team that built up Snowline Gold which currently trades with a market cap of over US$655M.

Wasting no time after the initial acquisition, Yukon Metals swiftly announced that it has already doubled its land holdings from an initial 18,000 hectares to 36,000 hectares. This expansion includes significant staking at the priority AZ property, areas surrounding the Talbot property, and new claims near the Alaska Highway, known as "Fairway."

"During these past months, prior to Closing of the acquisition, the Company has been busy staking ground around two key properties, AZ and Talbot, as well as staking new claims at Fairway," said Rory Quinn, President and CEO of Yukon Metals. "AZ is a high-priority potential copper-gold porphyry asset, while Talbot hosts a substantial gold and silver anomaly. Both AZ and Fairway are within 20km of the Alaska Highway. I look forward to sharing ongoing details of what is going to be a busy exploration season."

In the early 1990s, while working for Noranda, Ron Berdahl explored the AZ and Fairway claim area and found copper mineralization on the AZ property. In 1993, rock sample tests indicated an average of 10% copper, 126 grams per tonne of silver, and 7.08 grams per tonne of gold. A report mentioned in a previous YMC press release on June 3, 2024, suggested that these mineralized rocks likely originated from a local source on the property. Additionally, small gold mining operations were present in the 1930s on Sanpete, Pan, and Gold Creeks in this region.

Ron Berdahl staked an additional 7,625 hectares on behalf of Yukon Metals to the north of the southern AZ claims, adding 372 new claims. This area includes significant mineral findings, such as gold, silver, copper, lead, and zinc. Despite encouraging initial sample results, there has been no further exploration or development in this area since 1989.

"Completing the acquisition of these high-quality exploration assets in the Yukon marks an exciting beginning for Yukon Metals," said Rory Quinn, President and CEO of Yukon Metals. "We have tremendously exciting properties that we'll work to responsibly and systematically advance, from copper-gold and silver-lead-zinc, to precious metals focused assets. With a healthy treasury after raising in excess of C$15 million, a comprehensive exploration database and key permits already in place, we are ready to hit the ground running!"

While finding new deposits is integral, other miners are looking for innovative ways to expand their copper assets that they already have.

According to its new CEO Kathleen Quirk, Freeport-McMoRan Inc. (NYSE: FCX) believes it can unlock the equivalent of a large new copper mine, just by applying new processing technology at its existing assets. Freeport is targeting an annual production of up to 800 million pounds of copper, which is approximately 20% of its current total output. This increase will come from new technology that enables the company to extract metal it already owns but couldn't previously access.

"I'm really focused on this issue, because when we look around, we know how hard it is to develop new supply," said Quirk when referring to the company's copper leaching program in an interview in New York. "You think about 800-million pounds of copper a year — that's the size of a big mine. That's meaningful. Our team is working very aggressively to get that done."

Freeport is already currently extracting an additional 200 million pounds of copper through the recovery process and aims to add another 200 million pounds over the next two years. Within the next three to five years, the company plans to develop the technology to extract 800 million pounds annually.

As supply issues are arising around the world, it doesn't help that Taseko Mines Limited (NYSE-American: TGB) (TSX: TKO) recently had to suspend operations at its Gibraltar Mine, due to a strike by its unionized workforce. The timing of the stoppage was unfortunate for Taseko, which had only recently acquired the remaining 12.5% interest in the mine from Dowa Metals & Mining, and Furakawa at the end of March, making it the 100% owner.

"We are happy to once again own 100% of the Gibraltar mine, our foundational asset, which will continue to generate strong returns for the Company for many years to come," said Stuart McDonald, President & CEO of Taseko at the time of the 100% equity stake achievement. "This acquisition provides 14% growth in our attributable copper production, and is immediately cashflow accretive as we advance construction at our Florence Copper Project."

In the first three months of this year, Teck Resources Limited (NYSE: TECK) (TSX: TECK-B) saw its copper production rise by 74%, bolstered by the ramp up of the extension at its Quebrada Blanca (QB) mine in Chile. As QB's production continued its ramp up, Teck saw its copper production hit 99,000 tonnes in Q1 2024, with 43,300 tonnes coming from QB alone.

Late last year, The Globe & Mail reported that Teck's divesting of its coal mines in British Columbia to Glencore would leave Canada's largest mining company with plenty of cash to potentially slowly triple its copper production. The expansion of QB has been seen as a success, with Teck receiving the Copper Mark award in recognition of environmentally and socially responsible production practices at both QB and its Carmen de Andacollo (CdA) operations.

"Copper is an essential metal for the transition to a low-carbon economy and our new Quebrada Blanca operation, as well as our Carmen de Andacollo operation, are contributing to helping sustainably meet growing demand," said Jonathan Price, President and CEO of Teck. "Being awarded the Copper Mark demonstrates our operations' commitment to responsible copper production, both for our customers and for the environment and people where we operate."

In Brazil, Ero Copper Corp. (NYSE: ERO) (TSX: ERO) recently received the last remaining permitting milestone for commercial operation on its Tucumã Project. With physical completion nearing 99%, commissioning well underway, and over 90% of the operational staff hired and trained, Ero still anticipates first concentrate early in the third quarter of 2024. The total direct capital cost estimate for the project's completion remains steady at around $310 million.

"I am thrilled to announce that we have received our operational license from SEMAS - the last regulatory approval required for commercial operations to commence at Tucumã," said David Strang, CEO of Ero Copper. "The Company is rapidly approaching a major inflection point, which we believe will benefit all of our stakeholders for years to come."

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