By Mark Rachovides*
Copper prices have soared over the past few months due to a supply crunch, with analysts suggesting that global shortages of the red metal will continue to exist throughout the decade.
This is due to a combination of factors such as increased demand driven by the reopening of China, efforts to transition to a greener economy, and increasingly challenging supply streams in South America.
Although initially resilient, Peru’s copper mines were hit hard by protests last month, affecting exports to copper-intensive economies. The South American nation is the world’s no.2 copper producer, accounting for 10% of the world’s copper supply.
Beyond political instability however, there is also the issue of declining grades, whose effects are already evident in Chile, the world’s largest copper producer, accounting for 27% of global supply. The country recorded a drop in copper output due to lacklustre ore grades – reporting a year-on-year decline of 7% in November – with analysts at Goldman Sachs estimating that it will likely produce less copper within the next two years.
At the same time, the global economy cannot rely on new mines, since taking a new mine online in hard-to-reach but copper-abundant areas, would take a long time.
Against this backdrop, copper is expected to take on a bigger role over the next decade, putting a further strain on the current shortage. Analysts at Wood Mackenzie have gone so far as to say that the current shortage could last until 2030.
As put by the manager of the BNY Mellon Natural Resources fund, Al Chu, copper is set to undergo a “generational shift” in demand as decarbonization ramps up. “Copper typically is used as a construction metal for wiring for building, wiring for machinery and whatnot, but if we look at the decarbonization net zero energy transition trend, copper is the new oil”, he pointed out.
Chu went on to say that demand from renewables will result in a “multiyear tsunami of demand”, which means the metal’s price is bound to increase further.
In this framework, Cyprus can take on a role in the global copper supply chain by promoting and facilitating new projects in the raw materials sector. Boasting significant untapped copper resources, the island could benefit from the global surge in copper prices, leading to new jobs and services as well as additional state revenue.
Cyprus-based mining and exploration companies, which use modern mining and mineral processing methods that minimise the environmental impact, are prepared to recover important metals from mining waste created decades ago, which have accumulated in tailing ponds and dumps across the island.
Venus Minerals specifically, has made a very promising discovery in Kokkinoyia, which indicates an estimated combined resource inventory of 9.5 million tonnes at 0.65% of copper.
As such, amid the increasing global demand for copper, I believe that Cyprus is presented with a huge opportunity. Unlocking the island’s untapped copper reserves will not only add value to the Cyprus economy, due to the expected price surge and the diversification of our economy, but it will also help eradicate environmental hazards from mining waste and recultivate the land.
*Chairman of Venus Minerals