China’s Increasing Copper Demand Bodes Well For Mining And Exploration Companies

mining foreman 25059165 China's Increasing Copper Demand Bodes Well For Mining And Exploration Companies

According to recently released customs data, China imported 26% more copper in August compared to the same period last year, signaling the unrelenting demand for the commodity. Copper ore and copper product imports into China range from refined to semi-finished copper products and also peaked at 498,188.60 tonnes in August compared to 394,017.10 tonnes last year, which represented a two-year low. China’s increase in copper imports came on the backdrop of reduced prices in July and August, which sparked buying interest among producers.

He Tianyu, a copper analyst at CRU Group, noted, “Lower copper prices in July and August sparked buying activities. Also, the open arbitrage between Shanghai and London led to more cargo inflow.” 

Despite the weakening prices, China’s steadily increasing demand still bodes well for mining and exploration companies such as Barrick Gold (NYSE:GOLD) (TSX:ABX), BHP Group Ltd (NYSE:BHP), Rio Tinto (NYSE:RIO), Glencore (OTCMKTS:GLNCY) and Torq Resources Inc. (TSXV:TORQ) (OTCQX:TRBMF).

Vancouver-based Torq Resources Inc. (TSXV:TORQ) (OTCQX:TRBMF), a copper and gold exploration company with a portfolio of premium holdings in Chile, is well-positioned to reap big from the increasing copper demand. In May, the company announced a new copper and gold discovery at its Margarita Iron-Oxide-Copper-Gold project located in northern Chile, and just recently they announced an extension to that discovery. They drilled 98 metres of 0.94 g/t gold and 0.68% copper just north of their initial discovery drill hole, which intersected 90 m of 0.94% copper and 0.84 g/t.

In addition, the company says they have identified new high-priority targets at the project, so there may be additional positive results to come from Margarita.. Situated within the prolific Coastal Cordillera belt, which is host to world-class IOCG deposits.

Earlier this month, Torq announced a C$15 million non-brokered private placement with a wholly owned affiliate of NYSE-listed international gold mining company, Gold Fields Limited (NYSE: GFI), at a purchase price of C$1.00 per share. Undoubtedly, an investment of this size at this early stage of exploration represents tremendous confidence in the company’s projects, its approach and its team. Torq intends to use the net proceeds for drilling at its Santa Cecilia gold-copper project in Chile’s Maricunga belt, as well as for drilling at the company’s Margarita IOCG project.

For more information about Torq Resources Inc. (TSXV:TORQ) ( OTCQX:TRBMF), click here.

To further illustrate the growing demand for copper, Barrick Gold’s (NYSE:GOLD) (TSX:ABX) Q2 2022 results, published earlier this month, revealed that the company’s copper production increased 25% year-over-year to 120 million lbs. The company reiterated that it was set to meet its copper production guidance targets of 420 – 470 million lbs for the year. Barrick has been gradually scaling up its copper production in a major way, and investors are likely to keep a close watch on the developments considering that the metal is expected to experience higher demand as the global economy moves to renewable energy solutions and electric vehicles. Barrick is likely to have the edge over other miners in the copper space, considering that copper often occurs alongside gold in large-scale deposits.

On the other hand, miner and trader Glencore (OTCMKTS:GLNCY) recently cut its full-year copper guidance as a result of reduced output from its Katanga mine in the Democratic Republic of Congo (DRC). Although the company’s total copper production declined by 15% to 510,200 tonnes in the first half of this year, Glencore still managed to deliver a robust financial performance thanks to high oil and coal prices.

The Katanga open-pit mine experienced geotechnical problems resulting in the miner having to reduce production guidance from the initial 1.11 million tonnes to 1.06 million tonnes for the year. Furthermore, the company’s copper production declined with the sale of its Collahuasi mine in Chile and its Ernest Henry mine in Australia.

Resurgence Of Copper M&A Deals 

As BHP Group (NYSE:BHP), one of the world’s top miners, returns to major dealmaking in the search for copper and nickel assets critical to the transition to clean energy, its recently announced takeover of OZ Minerals Ltd. is facing headwinds. OZ Minerals not only operates copper mines in South Australia, where BHP has its massive Olympic Dam operation and Oak Dam prospect, but it also has nickel developments in Western Australia and projects in Brazil. Earlier this year, BHP sold off its oil and gas assets, seeking to add more growth in commodities tied to trends including low-emissions transport and clean energy, particularly copper needed for renewables and nickel required for lithium-ion batteries. BHP’s offer valued the target at roughly $5.8 billion, but a statement from the company said that the offer was too low considering its growth prospects in the coveted commodities space.

Last week Rio Tinto (NYSE:RIO) agreed to buy out the  remaining stake in Turquoise Hill which it didn’t already own in a deal valued at about $3.3 billion, in an attempt to gain more control of the Oyu Tolgoi mine it’s developing in Mongolia.

Pentwater, a top investor in Turquoise Hill Resources Ltd. said it was opposed to the takeover by Rio Tinto, citing that the purchase price undervalues the company that’s behind one of the world’s largest copper mines.

Pentwater believes there is a high probability that copper prices will be more than $4 a pound over the next couple of years as the world transitions to a green economy. The firm said at that price, it believes Turquoise Hill will generate almost C$14.2 billion in free cash through 2030.

Pentwater owns a nearly 12% stake in Turquoise Hill while Rio already owns 51% of Turquoise Hill. However, more than half of the remaining shareholders must back the acquisition for the deal to proceed.

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About the author: Stephanie Bedard-Chateauneuf has over four years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on consumer stocks, cannabis stocks, tech stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.