Copper: The Essential Metal (Part II) - Supply and Demand

VISUAL CAPITALIST COPPER THE ESSENTIAL METAL PART 2: SUPPLYAND DEMAND FOR MORE THAN 10,000 YEARS, COPPER HAS BEEN ONE OF THE MOST USEFUL METALS KNOWN TO MAN. EVEN NOW, IT IS THE MEDIUM OF ELECTRICAL TRANSMISSION AND DIGITAL COMMUNICATION. Quarterly Copper Prices US$/t 1991 - 2011 10000 However, in the last 10nears Copper prices have risen by more than 5000 1991 2001 2011 WHAT HAS LEAD TO THESE EXTRAORDINARY PRICE INCREASES? SUPPLY To answer that question, we must first see where copper comes from. PRIMARY SECONDARY All new copper can be split into two categories: COPPER COPPER NEW COPPER MINED FROM ORES SMELTING SX/EW 65% 17% 18 Figures from 2011 COPPER THAT HAS BEEN RECYCLED FROM A PREVIOUS USE Requires copper sulfide ores and large amount of heat and power. Copper is 100% recyclable and recycled copper is indistinguishable from primary copper. Primary Recycled 100% 80% of all copper ever mined is still in use SOLVENT EXTRACTION AND ELECTROWINNING ( SX/EW ) Can be used on low in fact, there are Requires copper oxide ores. Environmentally friendly grade resources, and operated on a small scale... 40-50 'mom and pop’ copper SX/EW operations in China. WORLD MINE PRODUCTION 2011 (TONNES) RUSSIA CANADA POLAND KAZAKHSTAN U.S. CHINA MEXICO CONGO INDONESIA Increase since 2008 PERU ZAMBIA Decrease since 2008 AUSTRALIA OTHER CHILE WORLD TOTAL: 16,100,000 Trends are emerging on the supply side which have pushed up price... As the world's richest deposits are exhausted first, the average grades of mined copper are falling. 1990 2012 A tonne of mined copper ore now yields 30% less copper than in 1990. 1бкg 11kg 1 tonne of earth... In fact, only 6% of copper resources discovered in the last decade have been upgraded to reserves. 6% Lack of new large discoveries has pushed exploration into higher risk areas. 12% ATTRACTIVE RISKY / EXPENSIVE 4% USA Australia Peru Congo Zambia Relative share of world copper mine production As a result, more than a fifth of all copper produced in 2016 will come from the above 3 countries DEMAND TRENDS FOR GLOBAL REFINED COPPER CONSUMPTION 30 000 CHINA 25 000 REST OF WORLD 20 000 15 000 All of the growth in copper consumption in the last decade occurred in China. Rapid development and urbanization have grown copper demand tremendously. 10 000 5 000 2002 2004 2006 2008 2010 2012 2014 2016 This will continue. Between 2010 and 2017, an additional 70 million Chinese will migrate from rural areas into cities. That's almost 9X the population of New York! To accommodate this, China is adding to their existing infrastructure: Social Housing (36 M units) Power Plants Transportation Infrastructure Hospitals Communication Networks All of which require massive amounts of copper. 150k tonnes 680k In fact, in 2013 China's demand growth for copper will be 4.3x larger than these 34 countries. tonnes One of the best indicators of copper consumption per capita is income per capita. PER CAPITA REFINED COPPER CONSUMPTION GERMANY • USA • CHINA • JAPAN 18 CHINA 2025 COPPER CONSUMPTION (EST.) 16 14 COPPER CONSUMPTION CHINA 2008 COPPER 12 CONSUMPTION 10 08 06 04 02 10000 20000 30000 40000 50000 60000 GDP PER CAPITA PO Copper consumption increases dramatically as individuals can afford electricity in their homes, modern infrastructure, cars, refrigerators and other appliances As purchasing power in China catches up with the developed world, China's copper consumption per capita will more than double from 2008 levels by 2025. THE OPPORTUNITY Constrained supply and growing Chinese demand have significantly changed the market for copper. ANNUAL COPPER PRICES AND STOCKPILES PRICE STOCKPILES (RIGHT AXIS) High prices have lead to surges in exploration, and as new projects come online an over supply of copper is expected in the medium term, which will soften prices and raise copper stockpiles. The low prices during the economic crisis were still double the price in 2003. 10 000 8500 7000 5500 4000 2500 500 2001 2003 2005 2007 2009 2011 2013 2015 2017 CONCLUSION While the short and medium term outlooks for copper are more volatile, the market fundamentals are strong for the long term. As China and other BRIC countries continue to build a middle class, copper will be essential for building infrastructure, houses, vehicles, power plants, and communication networks. FEATURED PROJECT: BORNITE AMEX-NYSE: NCQ Nova VISUAL CAPITALIST IS COMMITTED TO PROVIDING FEATURING NEW SOUTH REEF ZONE DISCOVERY HOLE #187 CONTAINING 178 METERS @ 4% CU INCLUDING 35 METERS @ 12% CU INDEPENDENTLY RESEARCHED CONTENT FOR COPPER EDUCATIONAL PURPOSES. TSX: NCQ THANKS TO NOVA COPPER AND TINTINA RESOURCES FOR TINTINARESOURCES COVERING THE PRODUCTION COSTS OF THIS PROJECT. OTCQX: TINTE LEARN MORE AT WWW.NOVACOPPER.COM AND FEATURED PROJECT: BLACK BUTTE COPPER wwW.TINTINARESOURCES.COM TSX.V: TAU ONE OF THE HIGHEST GRADE COPPER PROJECTS IN DEVELOPMENT IN NORTH AMERICA. PEA ON BLACK BUTTE COPPER OUT IN Q3 2012 VISUAL CAPITALIST EDUCATING A NEW GENERATION OF INVESTORS ON RESOURCE INVESTING VISUAL CAPITALIST AND MANAGMENT www.VISUALCAPITALIST.COM TOP 5 SOURCES: HTTP://WWW.RIOTINTO.COM/DOCUMENTS/CESCO_PRESENTATION_A_HARDING_170412.PDF HTTP://WWW.RIOTINTO.COM/DOCUMENTS/MEDIA-SPEECHES/MF_GLOBAL_SEMINAR_15_OCTOBER_2009.PDF HTTP://WwW.FRASERINSTITUTE.ORG/UPLOADEDFILES/FRASER-CA/CONTENT/RESEARCH-NEWS/RESEARCH/PUBLICATIONS/MINING-SURVEY-2011-2012.PDF HTTP://BREE.GOV.AU/DOCUMENTS/PUBLICATIONS/RESOURCES/REQ-MAR-2012.PDF HTTP://WwW.COPPER.ORG/ FOR A COMPLETE LIST OF SOURCES, PLEASE VISIT: VISUALCAPITALIST.COM/SOURCES KG PER CAPITA THOUSAND TONNES OF COPPER П П п %3D п %3D WEEKS OF CONSUMPTION