Reko Diq: Value of Pakistan's Copper Deposits Soars Amid Surging Demand

[Riaz Haq]

The value of copper assets has surged 31.7% in the last six months, significantly surpassing the rise in tech stocks (20.2%) and gold (20%) in the same period. Growing demand for copper is mainly driven by increasing adoption of green technologies such as electric vehicles and growth in AI (artificial intelligence) data centers using the latest Nvidia chips. At current prices, the value of copper and gold deposits at Reko Diq in Balochistan province is nearly $200 billion.

Comparing Asset Price Appreciation Over Last Six Months. Source: Wa...

Interest in developing Pakistan's Reko Diq copper and gold mines has also grown with widening gap between demand and supply of the metals. Dennis Mark Bristow, CEO of the Canadian mining giant Barrick Gold Corporation, has said the Reko Diq mining project in Balochistan province is “absolutely on track” and would be able to begin production by 2028, according to news reports. Bristow said Reko Diq is an “enormous project” in which the company would be investing $10 billion.

Growing Copper Supply-Demand Gap

Clean Energy Driving Global Copper Demand. Source: IEA Via Nikkei

New infrastructure development is underway to connect Reko Diq with the national highway network. Barrick is building a link road to connect the mining project site with N-40 Quetta-Taftan national highway. Barrick chief says the company looks at the project as a “multi-generational investment,” adding that it wants all children under the age of 10 in the Reko Diq region to be in school by the end of 2024.  Similar infrastructure projects to support coal mining in Thar desert have brought socioeconomic improvements and human development for the local villagers. 

Reko Diq project is expected to employ thousands of workers during and after completion. Barrick has interviewed over 3,000 applicants from universities across Pakistan and selected 9 Baloch citizens, four women and five men, according to Bristow. “And they are now working on our mines in Argentina and they will go through a program of development and gaining experience from all our different operations around the world,” Bristow said, saying 30 such graduates would be employed in training programs with the company by the end of the year.  By Jan-Feb next year (2025), he said, 1,200 people would be employed, which would increase to 6,000 by 2026. “By the time we peak production, we will have employed 10,000 people,” Bristow told Arab News. 

Canadian mining giant Barrick Gold Corporation and the governments of Pakistan and Balochistan reached a deal to restart the Reko Diq mining project back in March 2022 on former Prime Minister Imran Khan's watch. Reko Diq is the world's 4th largest undeveloped copper-gold porphyry deposit with over 14 million tons of copper (worth $142 billion at $9,464 per ton) and 21 million ounces  (worth $50 billion at $2,367 per ounce) of gold. 

The project was abandoned in 2011 after a Pakistan Supreme Court bench headed by former Chief Justice Iftikhar Chaudhry canceled the mining license granted to Tethyan Copper Company (TCC), a joint venture between Canada's Barrick Gold and Antofagasta Minerals of Chile. TCC challenged the cancellation in the International Centre for Settlement of Investment Dispute (ICSID). On July 12, 2019, the ICSID Tribunal awarded TCC $5.894 billion plus interest of  $700,000 per day in damages against Pakistan. As of 1 March 2022, the award stood at $6.5 billion. The new agreement between Barrick Gold Corporation  and the governments of Pakistan and Balochistan does away with this award. It also increases the share of the project owned by Pakistan from 25% to 50%, brings in $10 billion investment, the largest single investment in the country, and creates 8,000 jobs. Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.

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[Riaz Haq]

Copper prices stay firm after hitting all-time high on AI demand, China recovery - Nikkei Asia



https://asia.nikkei.com/Spotlight/Market-Spotlight/Copper-prices-st...


Copper prices are expected to remain elevated for some time as traders and investors assess whether strong demand from data centers to power artificial intelligence, and from clean energy projects, materializes.

"Doctor Copper," as it is sometimes called, is seen an indicator of the health of the global economy. Consumption of the nonferrous metal often rises along with demand for infrastructure, which in turn increases as economies grow.



The benchmark three-month forward contract for copper rose to $11,104.5 per tonne on the London Metal Exchange (LME) on May 20, the highest level ever. It traded above $10,000 on Friday.

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Prices are also being buoyed by predictions of a global push for renewable energy and electric vehicles, as well as more data centers to support the development of artificial intelligence, all of which will require copper.

Industry sources and analysts say the market has been tight in North America and Europe, partly due to demand from the renewable energy industry and electric vehicle manufacturers. In terms of supply, the LME barred the trading of newly smelted Russian copper in April. Miners have struggled to meet production targets and bring on new projects onstream, such as with the Cobre Panama mine, which halted operations due to protests in the Central American country over environmental damage and land sales to foreign companies.

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With China's economy slow to take off, the Asian market is not as tight as in the West. "We are seeing current demand from China softer than anticipated," said Joannides. End-use buyers are "taking a wait-and-see attitude by delaying placing orders with the currently elevated copper prices," she said.

Copper prices are widely expected to stay elevated. Wood Mackenzie expects a supply shortfall in the market this year. Australia's Macquarie Group forecasts an average price of $10,500 per tonne in the October to December quarter, after easing to $9,800 in July to September. Goldman Sachs forecasts a surge to $12,000 per tonne by the end of the year.

Demand arising from the "green transformation" and electrification, especially in emerging markets, is "offsetting the negative impact of China's economic slowdown," said Norinobu Ozawa, general manager of the nonferrous metal and ores trading department at Japanese trading house Marubeni. In 2024, "There are limited factors that can ease the supply-demand tightness in the short-term," in the face of a potential increase in Chinese demand, he said.

Over the longer term, Japanese trading houses expect demand growth to outpace supply. While copper demand from China is not as strong as in the past, "it is likely to continue growth at annual rates of about 2.5% to 3% over the medium and long-term," said a trader at Mitsui & Co., a Japanese trading house.

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Macquarie predicts global demand for refined copper will rise 19% between 2023 and 2030, with China's own demand rising at 16% and the country remaining the world's largest copper market. India's demand will rise the fastest, at 61%, while demand from the rest of Asia is expected to grow by 25%. This takes into account demand related to data centers, the financial services company said.

Copper demand for data centers is estimated as about 200,000 tonnes, out of a total demand of about 25 million tonnes, according to Marubeni's Ozawa. "While this sounds like a small volume, it could be equivalent to one refinery" by 2030 onward, impacting the market, he said.

According to the International Energy Agency, clean energy will be a key driver of copper demand if the global energy sector is to reach carbon neutrality by 2050. The agency predicts copper demand for other uses will stay more or less flat until 2040.