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Rise of AI adds another spark to copper’s looming supply squeeze

• AI data centres adding to copper demand as supply challenges persist
• Major miners boosting production to prepare for potential supply gap
• ASX developers and advanced explorers could also benefit from positive outlook

 

The prospect of a copper supply shortfall has been a recurring theme over the past few years.

The red metal boasts long-standing industrial applications with consumption supported by global urbanisation, infrastructure development and economic growth.

More recently, the world’s energy transition has added more demand.

The shift to renewable energy, expansion of electricity networks and growing uptake of EVs are increasing the amount of copper needed to support a more electrified world.

And now, the rapid rise of AI is creating another demand source as data centres require significant amounts of copper for wiring, power distribution and cooling.

On the supply side, long development timelines and vast capital requirements are creating challenges for those working to bring new copper sources to market.

Declining ore grades at established mines place further pressure on output.

Major miners like BHP (ASX:BHP), Rio Tinto (ASX:RIO) and Glencore (ASX:GLC) have been expanding their copper operations to boost production.

ASX explorers including Caravel Minerals (ASX:CVV) and Hot Chili (ASX:HCH) are also looking to establish a foothold in the market by developing their large-scale porphyries.

But the supply challenge could also create openings for smaller and mid-tier producers.

True North Copper (ASX:TNC) aims to capitalise on that opportunity in Queensland’s Mt Isa region through a three-pronged strategy.

It seeks to advance its Cloncurry project towards development, grow its existing Mt Oxide resource and unlock further discoveries through regional exploration.

 

Copper demand and the supply challenge

International research organisation S&P Global recently projected global copper demand would grow by 50% between 2025 and 2040.

The bullish outlook is shaped by several structural trends, with the energy transition expected to deliver the largest increase in demand.

S&P estimated that copper consumption related to the energy transition – including renewable energy, EVs and electricity networks – could rise from 8.5Mt in 2025 to 15.6Mt by 2040.

However, the firm cautioned that supply may struggle to keep pace.

It found that copper could be facing a potential supply shortfall of 10Mt by 2040 without significant investment in new mines and project expansions.

S&P also concluded that the average copper mine takes about 17 years to move from discovery to production, shining a light on the difficulties in bringing substantial new supply online.

Declining ore grades, rising extraction costs and increasingly complex projects were also identified as key challenges for future supply.

True North Copper managing director Andrew Mooney believes these overlapping factors build a strong foundation for the red metal.

“Copper has some of the strongest long-term fundamentals of any industrial commodity,” he told Stockhead.

“What’s particularly interesting about copper is that we’re seeing several major demand drivers emerge at the same time.

“Electric vehicles, renewable energy, electricity networks and now AI infrastructure are all competing for a commodity that’s already essential to the global economy.

“These aren’t short-term trends.

“They represent major, multi-decade investments in the infrastructure required to support a more electrified and digitally connected world.

“I think the market increasingly recognises copper’s importance, but there’s now an established consensus that new supply can’t be developed quickly enough to meet the scale of demand we’re anticipating.”

 

The rise of AI

The rapid ascent of AI is an emerging driver for copper demand, with the technology’s uptake requiring mass investment in power-hungry data centres.

These facilities need extensive electrical infrastructure to keep computer servers running, with copper used in wiring, power distribution systems, circuit boards and cooling equipment.

The amount of copper employed is significant.

According to the International Energy Agency, large hyperscale data centres – which are becoming increasingly common – have power demands of 100MW or more.

Their annual electricity consumption is equivalent to between 350,000 and 400,000 EVs.

“AI might be a digital revolution, but the infrastructure required to support it is very physical,” explained Mooney.

“What’s particularly significant is that AI investment is creating demand well beyond the data centres themselves.

“New facilities require enormous amounts of electricity, driving investment in power generation, substations and transmission networks, all of which rely heavily on copper.

“The scale of investment we’re seeing in AI infrastructure could become a significant new source of copper demand over the next decade, at a time when the industry is already facing challenges bringing new supply online.”

Earlier this month at LME Week in London, Trafigura Group head of industrial metals analysis Henry Van reportedly said copper use in AI infrastructure may triple within two years.

He noted that consumption from data centres could rise from about 1Mt in 2026 to between 2.5Mt and 3Mt by 2028, if hyperscalers follow through on their announced investment plans.

CRU Group’s senior researcher Frank Nikolic also suggested that AI and data centres could account for 41% of copper demand growth in the next five years.

 

Mining giants ramp up investment

Some of the world’s biggest miners have been positioning for a copper supply squeeze.

BHP has lifted its exposure to the metal through a series of deals, headlined by its $10 billion acquisition of OZ Minerals in 2023, which expanded its South Australian copper operations.

Copper has since become the company’s largest earnings contributor, accounting for more than half of its EBITDA in FY26.

Earlier this month the group outlined its plans to double South Australian copper output to 650,000t by 2040.

The proposed expansion includes an upgrade of the Olympic Dam smelter and refinery at a cost of nearly US$4bn.

Two further phases of investment are envisaged before 2032, comprising a US$6.9bn expansion of the Olympic Dam and Carrapateena mines and US$5.8bn to develop nearby deposits.

Mooney believes BHP’s plans send a clear signal about copper’s outlook.

“You only need to look at BHP’s recent announcement outlining plans to double Australian copper production by 2040, backed by a significant pipeline of investment,” he said.

“When one of the world’s largest miners is making commitments on that scale, it reinforces the industry’s confidence in copper’s long-term outlook.”

BHP chief financial officer Vandita Pant expects a persistent shortage of copper to occur from 2028 onwards.

Rio Tinto is also growing its copper output thanks to the ramp-up of its Oyu Tolgoi mine in Mongolia and a $1.8bn expansion of its Kennecott operations in Utah.

Oyu Tolgoi is expected to be one of the world’s largest copper mines when in full production.

Glencore is also pursuing an ambitious copper growth strategy, targeting annualised production of more than 1Mt by the end of 2028 and 1.6Mt by 2035.

Its pipeline includes the Alumbrera restart in Argentina, the Coroccohuayco expansion in Peru and further development at its African copper operations.

 

The next wave of suppliers

A group of ASX developers and advanced explorers are also looking to capitalise on the favourable outlook by moving their projects towards production.

Caravel is finalising a DFS for its namesake porphyry not far from Perth.

It believes the deposit to be Australia’s largest undeveloped copper project, with reserves totalling 1.42Mt of contained copper.

A previous economic study outlined more than 25 years of production, with steady-state output of 65,000t of copper in concentrate per year.

A final investment decision is targeted for next year.

Hot Chili has defined a resource totalling 798Mt at 0.45% copper equivalent across three deposits at its Costa Fuego porphyry in Chile.

Last year’s PFS outlined a potential 20 year mine life, but the nearby La Verde discovery could further enhance the economic profile.

Recent intercepts at La Verde included 529m at 0.56% CuEq and 725m at 0.42% CuEq.

First production at Costa Fuego is targeted for 2031.

Smaller and mid-tier producers could also play an important role in meeting future copper demand, especially those offering a clear path to production.

“The major copper deposits will remain critical to global supply, but many of these projects require billions of dollars in capital and can take decades to bring into production,” explained Mooney.

“BHP’s recent investment plans are a good example of the scale of capital required to develop new copper supply, even for established global producers.

“That creates an important opportunity for smaller and mid-tier developers, particularly those with established resources, existing infrastructure and more manageable capital requirements.”

“Projects that can demonstrate a credible pathway to production could become increasingly attractive as the market looks for new sources of copper, particularly within established mining districts where regional processing infrastructure and consolidation opportunities already exist.”

 

True North opportunity

True North operates within the renowned North West Minerals Province in Queensland, which first came to prominence in the 1930s with the start of large-scale copper mining at Mt Isa.

Today, Evolution Mining’s (ASX:EVN) Ernest Henry copper-gold mine is one of the region’s leading operations after the closure of Glencore’s Mount Isa mines last year.

True North Copper landholdings. Pic: True North Copper

 

True North’s tenure in this infrastructure-rich district is also well endowed with copper.

Its Cloncurry project holds a 20.6Mt resource grading 0.74% Cu and 0.26g/t Au across several deposits.

It is being positioned as a development opportunity to generate near-term cash flow and support regional growth.

A PFS and potential ore reserve for Cloncurry are expected in the coming weeks.

The Mt Oxide project hosts the Vero copper-silver resource totalling 15.03Mt at 1.46% Cu and 10.59g/t Ag, alongside a 9.15Mt cobalt resource grading 0.23% Co, which remains open along strike and at depth.

True North is now looking to grow the resource with the drill bit.

The Aquila discovery about 4km away has opened a second front, with standout drill hits including 59m at 1.77% Cu.

Drilling north of Aquila confirmed the new Chidna zone earlier this year, with subsequent rock chip sampling growing the combined strike beyond 4km.

The nearby Apollo and Acanthis prospects also show geochemical characteristics similar to Aquila.

More broadly, True North is targeting a series of priority targets within a prospective trend stretching for more than 10km.

It is conducting systematic exploration along this corridor, with the Aquila discovery providing the blueprint.

Key prospects along a 10km trend at Mt Oxide. Pic: True North Copper

 

A drill blitz at Mt Oxide is ongoing, with up to 6000m of drilling planned across Aquila and Vero before the year’s end.

First assays from the campaign are expected in December, with a maiden MRE for Aquila targeted for mid-2027.