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Gold Miners Bet Big on Copper as the Energy Transition Heats Up

How the green energy transition is driving the demand for copper and why gold miners are expanding their portfolios to capitalize on this opportunity.

by Motoni Olodun

Gold miners are increasingly investing in copper, a metal that is essential for the global energy transition. Copper is used to make electric vehicles, wind turbines, solar panels, and other green technologies. As demand for these products grows, so does the need for more copper.

According to the World Bank, copper demand could rise by 50% by 2050, driven by the shift to low-carbon energy sources. However, supply is not keeping up with demand, as copper production faces challenges such as declining ore grades, social unrest, and environmental regulations.

To capitalize on this opportunity, gold miners are expanding their copper portfolios through acquisitions, exploration, and development. For example, Barrick Gold, the world’s second-largest gold producer, aims to become a “major-league copper producer” by building a massive mine in Pakistan and expanding its operations in Zambia. Barrick says the Pakistan project, known as Reko Diq, will be among the world’s 10 largest copper mines when it starts production in 2028.

Newmont, the world’s largest gold miner, also increased its exposure to copper by acquiring Australia’s Newcrest Mining for about $15 billion in November. Newmont expects copper to account for 20% or more of its revenue in the future, up from 10% currently.

Other gold miners, such as Evolution Mining, Agnico Eagle Mines, and Regis Resources, have also made significant deals or discoveries in the copper space recently.

For these companies, diversifying into copper is not only a strategic move to tap into a growing market but also a way to hedge against the volatility of gold prices and the criticism of the environmental impact of gold mining.

Gold mining is a major source of greenhouse gas emissions, mercury pollution, and water use. Some researchers have called for an end to gold mining, arguing that there is already enough gold in circulation for technological and financial purposes.

By contrast, copper mining is seen as a positive contributor to the energy transition and the fight against climate change. Copper is also more widely used in various industries, such as construction, electronics, and telecommunications, making it less dependent on consumer sentiment and investor demand.

However, copper mining is not without its challenges and risks. Copper prices have fallen by more than 20% since hitting a record high in March 2022, due to a slowdown in the global economy, high inflation, and lower electric vehicle sales. Copper mining also faces social and environmental issues, such as community opposition, labor disputes, and regulatory uncertainty.

Therefore, gold miners need to balance their copper ambitions with their core competencies and values. As Newmont’s CEO Tom Palmer said, “You can expect that the value of copper is going to increase, and the importance of copper in the portfolio is going to increase. But we’re not going to lose sight of the fact that we’re a gold company first and foremost.”

Source: The Wall Street Journal


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