BHP and copper fetish22 Sep 2018 17:30
SOLG ticks all the BHP boxes -
https://www.bhp.com/media-and-insights/prospects/2017/11/ten-reasons-why-we-like-copper
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1. Systematic grade decline and resource depletion. Primary output from currently operating mines is reportedly likely to decline over the coming decade. This is due to the long-anticipated decline in grade that is endemic to the porphyry resource base that currently dominates global supply. That is a geological fact. The implication is that new mines will have to be developed to offset this decline and to meet rising demand.1 Our view is that this will be no easy or inexpensive matter.'
2. Lack of big bang exploration success. Global copper mine output is currently built on a foundation of giant deposits with low operating costs that were discovered and developed decades ago. By major region, the discovery of metals deposits peaked in the following decades:
Europe and central Asia 1960s
High income OECD 1980s
East Asia and Pacific 1980s
Latin America 1990s
Sub-Saharan Africa 2000s
Source: Minex Consulting & the International Monetary Fund.
To confidently predict that the industry wide cost curve will not steepen as today’s giants age, one would need to have observed a portfolio of like-for-like deposits being discovered and developed on the required timeframe. The reality is that this has not been the case. Analysis2 shows that Tier-I discoveries across the minerals sphere have become scarce in the new millennium, with an additional slowdown post GFC. Copper is no exception. Our view is that it is extremely likely that the copper cost curve will steepen in the 2020s, as the absence of a significant new generation of Tier-I assets will leave lower quality and/or higher cost deposits to fill the looming gap. The expansion of Olympic Dam is a likely exception to this rule.
3. Above ground risk.
4. Water constraints. - can make projects uneconomic due to massive capex outlay
BHP will have to pay top dollar for the prize they so desperately seek
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