Copper
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US Copper Demand Rises, Mines Get Riskier
March 2021
US refined copper demand is set to grow by 3% this year to 1.768Mt and rise a further 4.5% in 2022 to 1.847Mt as President Biden's US$1.9tn stimulus bill comes to fruition, powering further economic recovery in the world's biggest economy, coupled with the new administration's enthusiasm for the green revolution.

The US Senate approved President Biden's stimulus legislation on Mar. 7, providing a large-scale dose of federal funding to the US economy, even as the recovery showed signs of a solid revival in February after the winter slump. Biden’s package, on top of a nearly US$900bn stimulus bill passed in December, is expected to encourage American consumers, who account for nearly 70% of US economic growth, to unleash a torrent of spending as vaccines are deployed and restrictions lifted.

As a result, several major financial firms have upped their forecasts for US economic growth this year. HSBC Holdings, Europe’s largest bank, raised its estimated 2021 GDP growth forecast by 1.5% to 5%, while Deutsche Bank raised it by 1.2% to 7.5%. Meanwhile, Fed Chair Jay Powell said in testimony before the Senate Banking Committee in early March that 2021 economic growth could be in the range of 6% this year.

Copper demand will be further buoyed by Biden administration plans to electrify the nation’s automobiles and combat climate change. Indeed, Mr Biden met with lawmakers last month to discuss how to secure supplies of electric vehicles and the minerals used to make them. He has promised to convert the entire US government fleet of around 645k vehicles to electric.

A recovery in global copper demand this year is forecast to keep the market in deficit and result in a further rise in copper prices. Expectations of consumption growth over the medium-and-long-term has several miners trying to address, and indeed, capitalise on that demand.

Freeport-McMoRan Inc is set to approve expansions at three of its US copper mines, which would add more than 250Mlbs of the red metal to annual output. The Phoenix-based company already produces more than 1Blbs of copper every year in the US, little of which is exported. Freeport also brought its Lone Star project in Arizona online last year. "President Biden clearly has a commitment to addressing climate change, and any climate change initiative creates demand for copper," said Freeport CEO Richard Adkerson. "We're very well-situated to address that with the assets we have."

The option to expand existing mines, rather than building new ones, gives Freeport an edge over its rivals, which face increasing regulatory hurdles as environmental and cultural issues increasingly come to the forefront. Rio Tinto, for example, has been dealt a blow in its goal to build its proposed Resolution copper mine in Arizona, with the US Forest Service blocking a land swap granted in the final days of former President Trump's administration. The decision was a major win for Native American tribes, who have long opposed the project as the land is considered sacred. Rio said it was evaluating the decision and would continue to engage in ongoing consultation with Native American tribes and local communities. If developed, Resolution would supply a quarter of US copper demand and generate more than US$280m in annual taxes.

There are also two copper mine projects in Minnesota’s environmentally sensitive Boundary Waters region from PolyMet Mining Corp and Antofagasta Plc’s Twin Metals subsidiary, which Mr Biden could weigh in on.

PolyMet Mining secured a legal win last month for its US$1bn NorthMet project, after the Minnesota Supreme Court ruled in favour of the Clean Air Act permit issued to the company. The court ruling overturned an order by the state Court of Appeals that handed the permit back to the Minnesota Pollution Control Agency (MPCA). “This decision is another big win and a major step forward in the defense of our air permit,” said Chairman, President and CEO Jon Cherry. Even though the most significant legal issue has now been cleared, PolyMet still has several other legal hurdles to clear in the court of appeals before it can begin mining. The company, whose majority shareholder is Swiss commodities giant Glencore, expressed confidence that it would prevail.

NorthMet marks the first large-scale project to be permitted within the Duluth Complex in northeastern Minnesota, one of the world’s major, undeveloped mining regions. The deposit will be mined by open pit methods to a depth of approximately 700ft below surface and will reuse existing infrastructure of the former LTV Steel taconite processing site. It is expected to produce up to 57.7Mlbs of copper—along with 8.7Mlbs of nickel, 311,000 lbs of cobalt, 14koz of platinum, 59koz of palladium, 4koz of gold and 48koz of silver annually—over an estimated mine life of 20 years. Environmentalists have fought the project because of the potential for acid mine drainage upstream from Lake Superior.

The Twin Metals project, also within the Duluth Complex, faces a much lengthier battle, and like Resolution, has faced considerable opposition from environmental groups. The project, which is targeting the Maturi deposit, made considerable traction under former President Trump. The Bureau of Land Management (BLM) issued a Notice of Intent to scope and prepare an Environmental Impact Statement (EIS) for the project in June last year. Twin Metals said at the time this was a "standard but significant step in the process,” and would take several years to complete.

A challenge to the project could come in the form of the new US Agriculture Secretary Tom Vilsack, who is in charge of giving clearances to the mine. Mr Vilsack cancelled the renewal of the Maturi leases when he was the official overseeing the US Forest Service under President Obama due to water pollution concerns. The project borders the Boundary Waters Canoe Wilderness Area within the Superior National Forest.

The final outcomes of Twin Metals and Resolution are currently anyone's guess. Producers are hopeful that the appeal of copper for electric vehicles and renewable energy may help the mines ultimately get approved. The same reason has conservationists concerned. “If these were coal mines, I’d feel much more comfortable knowing they wouldn’t be approved,” said Pete Marshall of Friends of the Boundary Waters.