by Ross Louthean
A leading metals market observer believes copper will outperform in 2021 while gold will have new but still positive dynamics.
In his keynote speech to the RIU Explorers Conference in the Western Australian port city of Fremantle, Canaccord Genuity mining analyst Paul Howard said copper had “favourable medium supply-demand fundamentals”.
He said there were potential near-term supply shocks in the major copper producing nations of Peru and Chile through elections and labour force negotiations. Against this scenario, China was expected to be a larger importer of copper.
Canaccord Genuity sees the electric vehicle revolution could see copper being added to the ‘green economy’ stimulus.
Mr Howard believes gold will continue its decade-long bull run, though it will shift from 2020’s pandemic-driven, safe-haven to the metal being a greater hedge against inflation – “protected against a falling US dollar.”
US President Joe Biden’s $US1.9 trillion stimulus package could see a weaker $US meaning a stronger Australian dollar.
Mr Howard said gold equity valuations now better reflect the gold price, but are they cheap or more accurately priced?
Buoyant gold prices will encourage an increased exploration trend, though data released early this year showed global exploration was down as was gold production, though the metal price was up to 25 percent higher than the previous year.
The easy pickings for new gold finds in Australia are gone, and brownfields are seen as the best hunting grounds, while any greenfield discoveries are likely to be deep and in new terrains such as the Yamana belt, Paterson Range and the Pilbara of WA.
Lithium, which was being seen as one of the new age metals for electric vehicles (EV), hit a basement in 2020 but a price lift and other signs early this year have taken in a thematic shift to electrified transportation, incentivised by governments.
Demand for magnets using rare earths could increase by up to 60 per cent by 2030, based on EV’s and more wind turbine deployment.
Howard said that while future growth for rare earths and other metals is predicated on EV’s and renewables, the main source of demand in the near-term will remain conventional auto accessories markets (share 16 per cent) consumer products (26 per cent) and other industrial uses (43 per cent).
This compares to the current EV’s share of 7 per cent and turbines also 7 per cent.