News

ASX copper players step into action as supply shortage looms

• Long-term demand growth and supply challenges point to looming global copper shortfall
• ASX developers moving projects towards production could benefit
• Companies like Hot Chili and Caravel Minerals well placed to capitalise

 

Copper prices surged to record highs in January, briefly topping US$14,500 per tonne.

This powerful rally was partially driven by short-term factors including supply disruptions at major mines and a build-up of US inventories due to tariff uncertainty.

Prices have since eased below US$13,000 per tonne as geopolitical tensions in the Middle East fuel concerns about a potential global economic slowdown.

Despite this pullback, they remain well above historical levels and the long-term outlook for copper appears strong.

The metal’s wide-ranging industrial applications and its role in the both AI and the global energy transition underpin projected demand growth.

In parallel, supply pressures are mounting, prompting major miners such as BHP (ASX:BHP) to lift their exposure to the red metal. Copper now outstrips iron ore as the biggest earner for the world’s top miner.

This backdrop is also driving renewed exploration and development momentum across the ASX.

Emerging companies are positioning for a significant role in the next wave of global copper supply by advancing their bulk-tonnage porphyry deposits towards production.

 

The red metal

Copper has been used for thousands of years and remains a strategically important metal thanks to its mass industrial applications and central role in electrification.

It is a key component in EVs, energy systems, AI data centres and the infrastructure that supports them.

These applications are expected to support long-term demand for the metal. However, the greater challenge appears to be future supply.

“New demand is obviously something that everyone’s watching, but it’s really around the supply side and that’s what is a little bit different to this copper cycle,” Hot Chili (ASX:HCH) managing director and CEO Christian Easterday told Stockhead.

His firm’s Costa Fuego project in Chile is one of a handful of signficant scale in the global project pipeline.

“This is more around a supply starvation story.”

 

Supply challenges

According to the International Energy Agency, copper could face a 30% shortfall by 2035 under the current project pipeline, with several structural factors contributing to this outlook.

Firstly, global copper ore grades have fallen by about 40% since 1991, raising capital costs and project complexity.

Graphic showing declining grades of copper reserves globally. Source: Caravel Minerals

Secondly, expanding existing mines has become more capital-intensive, approaching the levels needed for new developments.

The discovery rate of new resources is also declining sharply, with just 5% of finds in the past 35 years occurring in the last decade, despite exploration spend remaining high.

Graphic showing declining copper discoveries. Source: Caravel Minerals

Long development timelines, often about 17 years from discovery to production, along with frequent delays and cost overruns are adding to the pressure.

Such factors point to a structurally constrained market at a time when demand continues to strengthen, suggesting copper prices may need to remain elevated to incentivise new supply.

“You see demand stronger than it ever has been as a result of renewables which we never had in the past,” noted Caravel Minerals (ASX:CVV) managing director Don Hyma.

“The price has to climb to incentivise new developments to come online and now we’re finally seeing the breakthrough pricing.”

 

The Middle East conflict

The Middle East conflict has raised concerns about a potential slowdown in global growth, which may weigh on short-term copper demand and prices.

However, Easterday believes structural demand from electrification and the energy transition supports long-term fundamentals.

“In the short term, there are question marks around the impact of geopolitical instability associated with the Iran-US-Israel conflict, and the timing of whether that has resolved or not will certainly weigh on the short to medium term view on where price goes,” he said.

“But what I would say is that the medium to long term view is unchanged.”

Hyma seemed to agree, noting that the global macroeconomics tend to favour copper.

“I think copper is one of the metals that is a bit agnostic to what is happening geopolitically,” he said.

“The war is not going to change the need for data centres and AI, that’s been coming on stream with a vengeance lately. There’s a lot of copper that goes into that.”

In essence, longer term copper fundamentals could open the door for ASX developers advancing large-scale projects.

And copper porphyries may be instrumental in future supply.

 

Copper porphyries

Porphyry deposits are bulk-tonnage and low-grade orebodies. They are also the world’s main source of copper.

For instance, Chile is the largest copper-producing nation, accounting for about one quarter of total output. It derives about 90% of its copper from porphyries.

“This is the way of the future,” said Hyma.

“There’s plenty of little, tiny deposits out there that’ll go for a few years that are higher grade but they really are not going to address the issue about of supply and demand.”

“Copper is going to come from these big open pit porphyries that are low grade.”

 

The next wave of porphyries

Caravel is approaching the conclusion of a comprehensive DFS for its namesake project not far from Perth.

So far, it has defined ore reserves totalling 583Mt at 0.24% copper for 1.42Mt of contained metal.

Management noted that Caravel represents one of only a few large-scale copper projects undergoing feasibility studies, especially in lower risk mining jurisdictions.

Map showing large-scale copper projects undergoing feasibility studies. Source: Caravel Minerals

The company is targeting a long-life operation characterised by low-cost, open-pit bulk mining and significant logistical advantages.

Results from the DFS, along with an updated ore reserve, are due in September.

Meanwhile, Hot Chili’s Costa Fuego project combines three deposits for an indicated resource totalling 798Mt at 0.45% copper equivalent. A recent PFS outlined a 20-year mine life, positioning the project as a potential long-term supplier.

“We’re in a very, very small grouping of meaningful near-term copper developers that are really the next wave of new supply coming outside of the majors,” explained Easterday.

The nearby La Verde discovery could further strengthen the project’s economics and extend mine life. Recent intercepts at the prospect included 529m at 0.41% copper and 0.21g/t gold from 41m, and 495m at 0.38% copper and 0.10g/t gold from 3m.

Hot Chili is targeting first production at Costa Fuego – slated to produce 95,000tpa of copper along with precious metals credits – early next decade.

 

ASX copper deals

More broadly, copper has become a focal point for corporate activity on the ASX.

BHP expanded its global copper footprint with a series of deals, headlined by its A$10 billion acquisition of Oz Minerals in 2023.

Sandfire Resources (ASX:SFR) completed its acquisition of the MATSA operations in Spain in early 2022 and brought its Motheo mine in Botswana to production in 2023.

In recent years Africa has emerged as one of the world’s most important copper producing regions.

Kaoko Metals (ASX:KAO) is set to become the latest ASX copper player in Africa as it lists on our bourse this month. It will now look to unlock the exploration potential of its Chalkos and Karibib projects in Namibia.

Elsewhere, FireFly Metals (ASX:FFM) acquired its Green Bay project in Canada in 2023 and is advancing the past-producing mine toward a restart.

The Steve Parsons-led explorer has since become a poster-child for the mid-tier copper sector on the ASX.

Loyal Metals (ASX:LLM) is also working to restart and expand its recently acquired Highway Reward mine in Queensland, which historically produced 3.65Mt at 5.7% copper.

Recent drilling returned 145m at 1.5% copper equivalent and 86m at 2.34% copper equivalent.

Subsequent gravity imaging hinted at the prospect of a vertically extensive copper-gold system sitting beneath the Highway Reward mineralised trend.