Copper

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What major copper projects and expansions should investors keep an eye on in 2022? Here's a look at five to watch as the year progresses.

Copper demand came in strong during 2021, following a couple of years of strict lockdown measures put in place to battle the COVID-19 pandemic.

With economies reopening and copper prices reaching all-time highs, analysts are expecting supply to increase in 2022 as mine output recovers, and new projects and expansions come online.

How supply and demand dynamics play out this year is yet to be determined, but in the long term more copper will be needed to meet increasing demand for the green energy transition.


Major copper projects to watch this year

According to the International Copper Study Group, copper output is expected to increase by 3.9 percent in 2022 as it continues to recover to pre-pandemic levels in a number of countries — notably Peru, the world’s second overall top-producing country.

“It will also be supported by the ramp-up of recently commissioned mines and expansions as well as the planned start-up of some large projects,” the group said in a statement.

Commenting on which projects she will be watching in 2022, Karen Norton of Refinitiv told the Investing News Network (INN) that Quebrada Blanca Phase II in Chile and Quellaveco in Peru are on her radar.

“They are two of the more sizeable projects starting up this year, and as long as commissioning runs smoothly they will be important contributors to growth in 2023,” Norton said.

At the end of last year, Dan Smith of Commodity Market Analytics told INN that there are some big projects and expansions coming through at the moment, including Kamoa-Kakula in the Democratic Republic of Congo (DRC), Grasberg in Indonesia and Spence in Chile.

“This will be followed by a couple of medium-sized mines in Chile and Peru in 2022 and 2023,” he said. “China is also in the process of building some new copper mines, which are due onstream soon.”

Here INN looks at five major copper projects and expansions that experts think investors should keep an eye out for in 2022. Projects are listed in alphabetical order.

1. Grasberg

Freeport-McMoRan (NYSE:FCX) operates the Grasberg mine in Indonesia, one of the world’s largest copper and gold mines. So far, underground production ramp up continues to move forward on schedule. In 2021, combined average output from the company’s underground mines, Grasberg Block Cave and Deep Mill Level Zone, was about 160,800 metric tonnes (MT) of ore per day, with total milling rates averaging 181,000 MT of ore per day.

The target for 2022 is for milling rates to average approximately 180,000 MT of ore per day. The installation of additional milling facilities is in progress, to be completed in 2023; these additional facilities are expected to increase milling capacity to approximately 240,000 MT of ore per day.

Freeport is also expecting to complete the US$250 million expansion of capacity at PT Smelting's copper smelter by 2023, with rates increasing by 30 percent to 1.3 million MT of concentrate per year.

2. Kamoa-Kakula

Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF), in a joint venture with Zijin Mining Group (OTC Pink:ZIJMF,HKEX:2899), Crystal River Global and the government of the DRC, operates the Kamoa-Kakula copper project in the DRC. Phase 1 of the project is forecast to produce 200,000 MT of copper every year.

After reaching total copper concentrate production of 105,884 MT in 2021, which exceeded expectations, this year production guidance has been set at between 290,000 and 340,000 MT.

The construction of Kamoa-Kakula’s Phase 2, 3.8 million MT per year concentrator plant is almost complete, with early stage commissioning activities now underway. The plant is on track to begin operations in April of this year. An updated prefeasibility study, which will include a Phase 3 expansion, is expected in Q3 2022.

Ivanhoe has signed offtake agreements for copper concentrate from the project with CITIC Metal and Gold Mountains International, a subsidiary of Zijin Mining, for 50 percent each of the copper products from Kamoa-Kakula’s Phase 1 production.

3. Quebrada Blanca Phase 2

With an initial mine life of 28 years, Teck Resources (TSX:TECK.B,TSX:TECK.A,NYSE:TECK) is expecting its massive Quebrada Blanca Phase 2 project to start production in the second half of 2022.

The Vancouver-based company has invested more than US$5 billion in the project, which is forecast to produce 316,000 MT of copper per year during its first five years of operation. Quebrada Blanca Phase 2, located in Northern Chile, is also expected to double Teck’s copper production by 2023.

The TSX-listed company is already looking to evaluate a Phase 3 for the mine, which would need a further US$5 billion in investment and a new concentrator.

4. Quellaveco

Located in Peru, the Quellaveco project is expected to deliver an average of around 300,000 MT per year of copper in its first 10 years of operation. The copper asset has been under development since 2018, with investment in the project reaching over US$5 billion.

Anglo American (LSE:AAL,OTCQX:AAUKF) mined the first ore from Quellaveco in October 2021, and first production of copper concentrate is expected by mid-2022. The London-listed company forecasts the project will produce 120,000 to 160,000 MT of copper for the entire year.

Quellaveco has 1.7 billion MT of estimated ore reserves containing 7.5 million MT of copper with a 0.57 percent grade, as well as a mine life of 36 years. The project is 60 percent owned by Anglo American with the rest being held by Mitsubishi (TSE:8058).

5. Spence

Spence is one of the two mines that are part of BHP’s (NYSE:BHP,ASX:BHP,LSE:BHP) Pampa Norte operation. The other one is Cerro Colorado, located in the Northern Chile. In 2017, the company approved an almost US$2.5 billion expansion plan at Spence, named the Spence Growth Option (SGO), which would extend the life of mine by 50 years. At full capacity, Spence could be producing 300,000 MT per year up until at least 2026.

First production at SGO was achieved in December 2020. At the end of 2021, Pampa Norte’s copper production increased by 40 percent to 136,000 MT, reflecting the continued ramp up of the SGO. However, recoveries at Spence are trending lower than expected, and some plant modifications are being planned in order to achieve the full intended production levels.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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