Copper mine replacement by acquisition – Richard Mills

2026-09-01

Because building greenfield mines from scratch take can take 20 years and cost many billions of dollars, replacement by acquisition has become the primary growth engine for producers. But first let’s take a hard look at copper pricing and where the price might be heading.

“Copper positioning has moved beyond every prior reading in the available combined futures-and-options COT history. The normal interpretation is bearish, but a rare commercial-capitulation scenario could produce the opposite outcome, while the wider metals complex is also flashing caution.

Copper positioning has moved into territory I have never seen before in the available combined futures-and-options COT history.

Both Commercials and Large Speculators are now at their most extreme net positions since the dataset begins in 1995. The conventional signal is bearish, but one historical copper episode makes the current setup more complicated than a simple top call.” Copper reaches an all-time COT extreme – and the 2003 capitulation precedent matters

I believe despite the high risk signaled by extreme speculative long positions on the Commitments of Traders (COT) report, major structural drivers continue to support a bullish outlook for copper pricing:

Developing a new major copper deposit takes over a decade, meaning new supply cannot rapidly respond to current price spikes.

Spot treatment and refining charges have collapsed, proving that physical concentrate is scarce for smelters. Organizations like the International Copper Study Group (ICSG) and major financial institutions project a shift into structural refined deficits.

Hyperscale artificial intelligence infrastructure and expanded power grid requirements are adding a dense, non-cyclical layer of new electricity and wiring demand.

Electric vehicles, renewable energy buildouts, and ongoing global grid modernizations continue to consume high volumes of the metal independently of traditional economic cycles.

Anticipated U.S. Section 232 trade policies and potential import tariffs on refined copper create strong incentives to pull physical material into North American warehouses. This regional hoarding aggressively drains visible inventories on the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE), supporting high spot prices outside of China even when headline global balances appear mixed.

https://en.macromicro.me/series/3613/copper-lme-warehouse-stock

https://metalcharts.org/shfe/copper

The world consumes roughly 77,000 to 82,000 metric tonnes of refined copper every single day.

This figure is calculated from total global consumption, which recently surpassed 30 million metric tonnes annually for the first time.

BMI’s 2026 copper pricing number of $12,700 per tonne sits below the Bloomberg analyst consensus of $13,007 and trails calls from the likes of Macquarie, which last week raised its own 2026 average to $13,165 a tonne and Goldman Sachs is holding its 2026 forecast at $12,650.

CRU initially projected a major “639,000-tonne global surplus for 2026,” but their analysts now concede that the rush to move metal into the U.S. has turned it into “at best a balanced market”

The ICSG flipped its forecast mid-year, calling for a 96,000-metric-ton surplus for 2026. They attribute this shift to “lower than previously anticipated copper usage and higher secondary refined production.”

J.P. Morgan holds one of the most aggressive deficit forecasts on Wall Street, projecting a 330,000-metric-ton shortfall for 2026. This is largely driven by a massive, immediate demand spike from power-dense AI data centers.

BMI  (Fitch Solutions) notes that ongoing mining disruptions at top operations like Grasberg and Kamoa, alongside delayed projects, are pushing the market into a structural shortage. They view the current tight market as the start of a multi-year structural deficit

Goldman Sachs maintains a conservative, near-term modest surplus estimate based on recovering supply baselines.

S&P Global points to severe bottlenecks in copper smelting and a cumulative 3 million-tonne concentrate deficit building through the decade, forcing physical buyers to move away from “just-in-time” procurement to strategic stockpiling.

The potential confirmation of U.S. tariffs on refined copper is one of the most explosive catalysts for further supply tightening and a continued rally in global prices.

While the U.S. already implemented a 50% tariff on semi-finished copper products (like pipes and sheets), refined copper—the core raw metal—is currently under Section 232 review. The original proposal outline targets a phased 15% tariff beginning January 1, 2027, escalating to 30% in 2028.

The reporting on the copper market balance is a confusing “mixed bag” because statistical models are currently clashing with physical trade flows.

On paper, major data aggregators see an improving supply buffer. However, in reality, logistical hoarding driven by political risks has left the immediate physical market feeling incredibly tight.

But even if the conservative agencies are right that a technical global surplus exists on paper, the physical market is behaving as if there is a severe shortage due to two critical distortions.

The threat of tariffs has turned what should ⁠have been a surplus this year into ‘at best a balanced market’, assuming copper stockpiled in the U.S. is no longer available,” said Robert Edwards, principal copper analyst at CRU. Because traders are aggressively rushing metal into U.S. COMEX warehouses to get ahead of the potential 2027 Section 232 tariffs, that copper is effectively “locked away” and unavailable to the rest of the global market.

Smelters are starving for raw mined copper (concentrate), causing spot treatment charges to collapse. “Concentrate availability is tight enough to cap primary electrolytic output despite new refining capacity coming online.” Even if there is enough refined copper sitting in certain warehouses globally, the pipeline to make new refined copper is severely choked.

Ultimately, the market is facing a structural shortage of available, uncommitted copper outside of the United States, keeping spot prices near historic highs despite what top-line statistics claim.

While the technical consensus for standard projects sits in that $11,000 to $13,000 range, a growing number of industry heavyweights and Tier-1 operators argue that $15,000 per metric ton (~$6.80/lb) is the true structural incentive price required to solve the long-term supply crisis.

Legendary mining magnate Robert Friedland famously noted that while a $9,000 or $11,000 price generates incredible cash flows for existing operations, it is completely inadequate for greenlighting the massive, multi-billion dollar “mega-mines” the world desperately needs. “We probably need about $15,000 a ton, stable for a long period of time, before the industry can really gear up and build those giant mines,” he stated, referencing the extreme capital risk of building in complex jurisdictions like Latin America or parts of Africa.

Major investment banks like Goldman Sachs differentiate between a “cyclical incentive price” and a “scarcity resolution price.” While $12,000–$13,000 may technically incentivize a standard brownfield expansion, Goldman models show that the average price must reach $15,000 to aggressively force demand substitution, promote scrap recovery, and prevent absolute inventory exhaustion in the face of structural deficits.

Conclusion

If the market genuinely requires $15,000/t to build massive greenfield mines, it completely changes the game for junior explorers on CEO.ca:

Majors miners will almost certainly choose to buy existing projects in safe jurisdictions rather than trying to build them from scratch.

Major and mid-tier mining companies are increasingly targeting British Columbia’s junior copper explorers and developers to replenish dwindling global reserves and secure future supply for the clean-energy transition.

Exploration expenditures in British Columbia reached a record-shattering $751 million in 2025, driven heavily by an insatiable corporate appetite for quality copper assets in a stable, Tier-1 jurisdiction. As noted by the Northern Miner, “Exploration spending in British Columbia set a new record last year as junior miners turned on the tap amid sustained appetite for copper projects.”

These BC juniors will get a “Premium Jurisdiction” re-rating because a junior company with a well-defined copper resource in Southern BC (with roads, power, and deep-rooted mining infrastructure already in place) becomes exponentially more valuable to a major producer as buying the junior avoids the multi-billion dollar infrastructure hurdles of remote mega-mines.

Richard (Rick) Mills
aheadoftheherd.com

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