Cobre Secures $25M BHP Investment for Botswana Copper Exploration

Gold and copper’s shared influences

Over the past several years, global uncertainty has been fueling an unprecedented run in the gold price.

Among the factors have been high inflation in the fallout of the COVID-19 pandemic, a three-year war between Russia and Ukraine, conflict between Israel and Gaza that has threatened to spread throughout the Middle East and economic instability sparked by the US under President Donald Trump.

Many of these same issues are impacting the copper market. COVID-19 caused spikes in inflation that have impacted a downturn in real estate development worldwide, while shipping routes have had to be altered to avoid conflict zones. Most recently, US tariffs could upend a variety of industries around the world, including the US housing market.

While these influences largely affect the demand side of commodities, the supply side is also being affected similarly. Most notably, declining grades for both copper and gold are driving up overall mining costs and ultimately eating into corporate balance sheets.

The case for copper

The biggest strength for investors in the copper sector is the supply-and-demand situation.

While copper demand growth has only slightly increased in the past few years, it has been largely held back by weakness in the Chinese real estate sector, which is traditionally one of the largest demand drivers for copper.

Despite this, demand is increasingly coming from rapid urbanization as the global population grows and younger people move to cities from rural areas at higher rates than previous generations. Additionally, demand from the tech sector is also up in several areas, including energy transition, artificial intelligence, and data centers.

Frank Nikolic, vice president of battery and base metals at CRU North America, explained that this demand was critical to copper’s value over the next few years.

“Prior to 1990 we had relatively flat or slow growing intensity of copper use per person on the planet. Then after 1990 when the world opened up with the departure of communism from the global stage, in a big way, we’ve seen the massive exposure from computers, the internet boom, the China miracle, I call it the great urbanization, and then finally the last five years or more decarbonization,” he said.

Nikolic suggested that recent growth in copper markets is owed to growth in China, but over the next five years that will begin to shift as there is increased demand from decarbonization technologies.

He also pointed to increasing wealth in the global south, specifically Indonesia, India and South America that will provide additional demand for copper.

Nikolic also acknowledged that while copper will remain in a supply-and-demand surplus over the next year,…