The copper story has had its ups and downs. Currently it’s trading at around US$3.80. Copper’s high point came in March 2022 at US$5.02 a pound. With optimism on higher prices at the start of the year, expectations have not been met as China, the world’s largest consumer of copper, has decreased consumption.
I spoke with World Copper Ltd. (TSXV:WCU) CEO Nolan Peterson, whose expertise lies in engineering and financing. He holds an MBA from UBC’s Sauder School of Business, as well as a degree in metallurgical engineering. Nolan is a CFA charter holder and a professional engineer in British Columbia and Ontario. He starts by explaining copper’s potential during inflationary periods.
Peterson: Any type of hard asset we’re starting to see starts to benefit from inflation, whether that be real estate, land, gold or copper. Now, copper is not something you buy and hold, like some of the other inflation-friendly or traditionally inflation associated commodities. It’s something that you buy and then use, but it’s being used at such a high rate now. The supplies are limited so anyone who holds it is going to benefit from upticks in prices over the long term.
So, you’re starting to see as prices go up on the supply side, which is driving a lot of the inflation pressures that funnel back into copper as a metal. So it’s a little bit of a different way it benefits from inflation from some of the traditional commodities, but it’s definitely starting to see its effects.
The Market Herald: And we talked about Chile, but where else are the copper rich areas in the world?
Peterson: So most of the copper comes from South America. So we have, Peru is one of the largest copper producers, and then … Russia is a large producer of refined copper metal, so that’s something as well that is obviously for the last year or so has been a challenge to the market. Africa is starting to become a big producer of copper, but then you have your traditional sources like Australia and the United States that are quite large as well. Arizona in the U.S., where we have one of our projects.
So it is fairly, you know, every country in the world uses copper for their industry (and) manufacturing. China, of course, is one of the biggest users of it but the producers are predominantly South America, Africa, the United States and Australia.
TMH: World Copper has mines that are strategically located. Tell me about how you’re positioned to meet this demand.
Peterson: Our projects are not mines yet, but we’re working towards it. So, we have projects in Chile, which of course, as we talked about is one of the best places to look for copper. And when investment money starts to flow in there, I think it’s going to flow very quickly and very aggressively. And then we have a project that’s Escalones in Chile. We also have Cristal, an exploration project there that we’re very optimistic about. And then in Arizona, in the United States, the No. 1 mining jurisdiction in the U.S. Arizona, in one of the best places to develop a mine, a so-called tier one jurisdiction; we’ve got our Zonia project.
So, we’ve got some national diversity, country diversity there, jurisdictional diversity; it’s very helpful for us. And our Zonia project is a little bit smaller than our Escalones project. So it can be developed very quickly in response to market conditions and is attracting a lot of interest from players who are willing to spend the money right now.
TMH: And finally, it’s such a basic question but I wanted to ask it. Why is the price of copper not higher?
Peterson: Well, I think it comes into that fact that copper is something that you are using on a daily basis. You can’t really accumulate it and warehouse and inventory it so aggressively because it’s almost all used. And it wouldn’t make sense for you, to you as an investor, to hold onto it.
So it is a very active and fluid market. But I think that it comes down to uncertainty. People aren’t sure where the economies are going, when things are going to settle down. There’s just so much uncertainty out there that people are not buying for the long term just yet. So they are more than happy to just keep buying at spot prices, which for the most part supply has kept up with demand, and ultimately prices come down to supply and demand.
TMH: As we get closer, as this EV transition becomes real. I know we’re there; I don’t know if we’re (in the) infancy, middle infancy … but when it becomes real, how do you suspect that’s going to change things?
Peterson: Well, I mean, look at historical adoption of new technology, right? So, and I’ve used this example before, smartphones or HDTVs or color TVs or whatever you want to call them, you know, at first it always starts with a trickle.
People say, you know, projections from analysts say, “OK, well, demand is going to go up steadily, and then a year later everyone’s got one.” Everyone has a smartphone, right? Suddenly, you know, what you were selling 1 or 2 million of the year before and now you’re selling 50 million the next year.
I think that that’s what’s going to happen with electric vehicles. When it clicks, it’s going to click very hard. What may slow that down is the supply of materials to fuel that, unfortunately. But when it does happen, it’s going to happen very aggressively, very quickly. Just like other technological adoptions historically.
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