Copper is a good bet to outperform other major metals over the next year, based on strong market fundamentals, senior Canadian bankers told delegates this week at the world’s largest mining industry gathering.
“The fundamentals for copper in the near and long term are fantastic,” Ilan Bahar, managing director and co-head of Global Metals & Mining at BMO Capital Markets, said on Monday at the Prospectors and Developers Association of Canada (PDAC) convention in Toronto. “I think we’ve seen extraordinary demand for copper equities. It’s a good time to buy copper equities and see them rise (though) there are some supply constraints with some mines.”
Bahar was one of four finance gurus on an investment banker panel that kicked off the “Mineral financing and the banking ecosystem” talk at PDAC with an online audience poll on which metal will outperform over the next year.
Steven Reid, left; Michael Faralla; Ryan Latinovich; Ilan Bahar, and Northern Miner Group president Anthony Vaccaro, who moderated the panels. Credit: Urvish More
Copper, which on Wednesday sat at US$3.89 per lb., also topped the audience’s picks, followed by gold, uranium, lithium and nickel.
Ryan Latinovich, global head of mining & metals at RBC Capital Markets, said the copper thematic has a broad and deep following, with a history of underinvestment.
“We’ve got a structural deficit that will require investment of about $2 billion over the next few years, and there’s (copper’s importance to) the energy transition,” he said.
Uranium key to energy transition
Asked by moderator and Northern Miner Group president Anthony Vaccaro to choose a commodity other than copper, Michael Faralla, head of global mining with TD Securities, settled on uranium.
“I think we’re in a situation where the supply and demand fundamentals are as good as they’ve been back to the last bull market in the 2005 to 2008 range,” he said. “As the energy transition comes back into focus and is exacerbated by energy transition concerns, nuclear has come back as a source for stable and strong base load power.”
Spot uranium traded at US$95 per lb. on Wednesday — down from US$100 per lb. earlier in the year, but still at high prices not seen since 2007.
Steven Reid, managing director at CIBC, said that while he agreed with other panellists’ comments, he’s most excited about gold’s prospects over the next 12 months.
“This is probably the fastest interest rate increase we’ve seen, and the gold price is holding very well. I think it’ll be a big catalyst to see gold moving higher,” he said.
Gold traded at US$2,137.40 per oz. on Wednesday, its highest level in a year.
Divided markets loom?
Noting that lithium and nickel weren’t among the panellists’ picks, Vaccaro asked them what could help drive prices of those metals up, as well as about the importance of having a cleaner supply of nickel in North America.
Faralla said that one of the biggest challenges for those commodities is their supply chains are dominated by China. And in the case of nickel sourced from Indonesia, which accounts for much of the world’s nickel supply, its production is mainly powered by coal-fired energy.
“It’s energy-intensive to mine and refine (lithium and nickel),” he said. “We need more battery supply coming from the West. Perhaps the market will split into a low-carbon market primarily out of the West, and maybe a higher carbon market with lower prices and profile (out of Asia)?”
Faralla added that geopolitical risk could spur a similar realignment as Western investors seek out lower-risk projects, with Chinese companies investing more in African and Asian jurisdictions and Western companies shying away from them.
ESG wins and bumps
Turning to the issue of environmental, governance and social (ESG) priorities, Vaccaro asked the equity research panel how much of a factor ESG is for investors.
Andrew Thompson, director of global mining equity sales with RBC Capital Markets, said ESG is now “the price of admission” and investors will assume that miners have strong ESG credentials.
Jackie Przybylowski, managing director at BMO Capital Markets, said companies’ approach to ESG is less performative and more genuine than it used to be.
“What comes across this year is more care about employees, about communities and about government relations,” she said. “People aren’t as concerned about scores and rewards as in the past.”
However, Przybylowski noted that while she’s seen progress in the representation of women in mining, there are many women in junior roles but they don’t stay in the industry.
“I never get invited to all the social things, the networking things,” she said. “Generally, when people see (others ) in the hallways, they talk to the guy with the suit and tie on because he’s obviously important. It’s the sad truth.”
Asked what can be done to keep more women in the industry, Przybylowski said women need to be included in the dialogue about career trajectories. “I think that would be the most helpful thing, is to see where you could go in your career. There’s maybe not enough role models for younger women yet.”
Fantasy Land, but not near as pretty as the one in Anaheim. No wonder the mining industry has gone off the track.