“The world’s top copper producer Chile saw output of the red metal fall for the tenth consecutive month in March, government statistics agency INE said on Friday.
Copper output fell 1.3% in March, to 491,720 tonnes, the agency said.”
Chile also introducing new restrictions on movement and commerce following the Southern Hemisphere’s summer holidays. I expect their already bad Covid situation to get worse as they move into their Winter / European Summer.
As I understand it most mines have had essential workers only on site - very few contractors allowed in. This means essential specialist work and maintenance has not been kept up to date with operating and mining plans.
There are inevitable consequences: mines eat capital and if you do not feed them money production issues always occur. Usually with a 6 to 12 month lag.
We are one major supply disruption away from an exponential move higher. This is now very likely in H2 In my view.
I remain bullish of copper in the short, medium and long term.

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More from @METhompson72

26 Apr
The global zinc market is, give or take, 13 million tonnes. China is far and away the largest producer with over a third of mine production and smelter capacity. Supply growth in China is static though with new mines barely replacing old mine capacity.
Zinc’s main use is as a anti-corrosion coating on steel in the construction and automotive industries. This is called galvanization. Other uses include alloy (brass mainly) die-casting precision components and as a fertiliser additive.
Consumption growth is highly correlated to Global economic growth - 2.5x geared to growth above/below 2.5%. (i.e. zero consumption growth at 2.5%, but 5% consumption GDP growth of 4.5%.)
Read 15 tweets
26 Apr
Tin is the 49th most abundant element within the Earth and has the chemical symbol Sn, which is derived from the Latin word “Stannum”. Crustal abundance is only 2 parts per million (“ppm”) compared with 75 ppm for zinc, 50 ppm for copper, and 14 ppm for lead.
#tin Tin mining dates back at least 4000 years to the Bronze Age, when tin was alloyed with copper to make bronze. Tin does not occur as the native element but must be extracted from oxide ores. Cassiterite (SnO2) is the only commercially important source of tin.
#tin Cassiterite is insoluble in water and erosional processes of deposits often results in placer deposits. Maybe 70% of all historic tin production has come from hydraulic mining or dredging of these alluvial type deposits, where grades as low as 0.015% tin can be economic.
Read 19 tweets
26 Apr
The secret to tin investment is easy if you focus on 3 things: mineralogy, mineralogy and mineralogy.
#tin Cassiterite is THE ONLY commercially valuable tin mineral. Most hard rock tin deposits contain some stannite (tin sulphide) and tin silicates. Look at the cassiterite grade, NOT tin grade.
#tin Alluvial deposits are more attractive generally than hard rock as they are 100% cassiterite. Cassiterite is dense with a specific gravity of 7 so water action concentrates it in placer type deposits.
Read 6 tweets
26 Apr
Why you should only ever buy gold mining stocks and not gold.
This is going to make me unpopular with some of you, but I am going to explain why you should never buy gold. Do not confuse this with owning gold mining stocks though.
Gold is a store of value. This is true. In Roman times one ounce of gold would clothe a men nicely and the same is true today.
Read 9 tweets
26 Apr
A smelter buys a 30% copper concentrate at a TC of $40 + 40c / lb RC. This basis the LME copper price of $9,000 per tonne. The copper content of one tonne of concentrate is 300kg. (30% of 1t). It is worth $2,700 (0.3t x 9,000 per t)
So if a smelter buys at a TC of $10, they are buying copper at a discount of $55 only. Their costs are still $200. So if they hedge forward sell when they buy the concentrate they are locking in a loss of $145.
So bringing this thread all together and explaining what it means.
1. TC's are trading at a level where smelters cannot make money.
2. This can only happen when smelters have consumed all available profitable stocks
Read 5 tweets
26 Apr
I keep seeing this Wood-Mackenzie chart in every copper presentation. I started my career in 1994 when the market was about 10Mt and Sumitomo embarked on a massive attempted copper market squeeze.
There are copper projects out there, of course, and they are all raising capital and advancing feasibility studies. But I strongly contend that there are not enough and they cannot be built in time to meet expected demand.
10 years of below trend copper exploration has consequences.
My very strong view is the only way out of this situation is for the copper price to go to a level where demand is substituted or destroyed.
Read 26 tweets

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