Bank of America (BofA) Global Research analysts have reported that beginning in 2025, the copper market will again suffer a deficit due to the lower number of projects currently underway.

Although global copper production by 2023 will increase by 7.7% after an expected shortfall in 2022, output will fall, due to the underperformance of new copper mine construction in recent years.

“While visibility over the near-term project pipeline is good, activity increases come with a wrinkle,” say the bank’s analysts. “Indeed, many of the projects currently developed have been in the making for almost three decades, and with exploration activity relatively limited in recent years, supply increases may fade from 2025.”

BofA predicts several drawbacks preventing copper production from growing. Edgar Blanco Rand, vice-minister of mining in Chile’s previous government, represented this data in a presentation during LME Week. His presentation showed a pipeline of projects planned for 2029 in Chile at a cost of $74 billion with the goal of achieving production of 7 million tons. Edgar Blanco pointed out a stagnation in production since 2000 with 5.7 million tons after 1990, a decade of rapid growth.

“This implies a capex intensity of around $50,000 per tonne, well above the $10,000 to 20,000 per tonne range seen in recent years. As an aggravating factor, the investment will need to be large enough to offset about 1.5 million tonnes of production losses,” says the bank.

The shortfall in copper production is beneficial to exploration companies because they have valuable projects that other companies are interested in acquiring in order to increase production. 

Solaris Resources (TSX:SLS) is responsibly and sustainably pursuing a number of copper projects in the Americas. Its Warintza project, based in Ecuador, is a high-grade open-pit resource within a 7 km x 5 km porphyry copper cluster. The company is also working on discovery drilling at Tamarugo and Ricardo in Chile and Capricho and Paco Orco in Peru.

Warintza’s mining model is a participatory model that promotes state-company-community dialogue based on transparency, collaboration and trust, which contributes to the sustainable socio-economic development of the communities and the project. 

For the copper market to continue to sustain steady production and high-quality projects, exploration companies like Solaris with projects like Warintza will become a priority and highly valuable to the major producers looking to grow output. As a result, this is a company that could be a significant part of the solution for this complex market problem.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.