Copper: China plants red flags on red metal ahead of green switch

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Chinese-backed miner MMG has snatched a coveted Botswanan copper mine from under the noses of global rivals. Its purchase of Canada-based Cuprous Capital, the company that owns the high-grade (2 per cent) Khoemacau mine, concludes a long search. Despite soaring copper prices, China is determined to secure long-term supplies of a metal crucial to the green energy transition. 

Global copper producers have long eyed the mine, which holds one of Africa’s largest deposits. Khoemacau’s flagship project aims to deliver 60,000 tons of copper a year. The deal values Cuprous Capital at an enterprise value of $1.9bn.

MMG is headquartered in Australia but listed in Hong Kong, and its largest shareholder is China Minmetals, which is state-owned.

China urgently needs more mines. Its copper smelting capacity has been growing rapidly and should increase by another 45 per cent by 2027. Global competition for copper concentrate has surged.

Supply is constrained. Political unrest at Panama’s Cobre mine has disrupted and reduced output. Strikes in Peru have added to uncertainties. The price for copper in Shanghai rose to $9,506 on Tuesday, a two-month high. LME prices have risen similarly this week.

Energy transition targets mean prices for the red metal are headed higher still. Renewable energy systems use as much as five times more copper than fossil fuel-based generation. China is on track to double its solar capacity five years ahead of its 2030 goals. Solar panel exports to Europe nearly doubled last year. 

Meanwhile, an electric car uses nearly three times as much copper as its petrol counterpart. EV charging stations use large amounts and should amp up demand further.

MMG shares have risen by a quarter in the past year and trade at 10 times forward earnings. That is double the level of a year ago, a premium to global peers.

For now, China is the world’s largest consumer of copper, using more than half of the total. Expect its state-backed miners to continue bidding up the price of the metal. China is willing to pay top dollar to bolster the competitiveness of key industries.