1 00:00:10,800 --> 00:00:14,760 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,840 --> 00:00:19,120 Speaker 1: I'm Joe Wis and I'm Tracy Halloway. Tracy, I feel 3 00:00:19,160 --> 00:00:23,680 Speaker 1: like a lot of our best episodes are often based 4 00:00:23,720 --> 00:00:26,360 Speaker 1: on something in a previous episode and we're like, hello, 5 00:00:26,400 --> 00:00:29,240 Speaker 1: that sounds interesting, Like, you know, we did the dredging 6 00:00:29,280 --> 00:00:32,199 Speaker 1: episode because of something that we learned about when we 7 00:00:32,200 --> 00:00:33,960 Speaker 1: were talking about why your luggage was stuck or why 8 00:00:34,000 --> 00:00:37,000 Speaker 1: your goods were stuck. Yes, that's exactly right. And this 9 00:00:37,080 --> 00:00:40,960 Speaker 1: is a similar episode, isn't it. We heard something interesting, uh, 10 00:00:41,000 --> 00:00:43,640 Speaker 1: and it came from the commodity space, and we've decided 11 00:00:43,720 --> 00:00:46,240 Speaker 1: that we need to dig in a bit further. Right, So, 12 00:00:46,320 --> 00:00:48,640 Speaker 1: earlier in the year, a couple of months ago, I 13 00:00:48,680 --> 00:00:52,280 Speaker 1: recall we were having a chat with Jeff Curry, who 14 00:00:52,400 --> 00:00:57,080 Speaker 1: is the top commodity strategist at Goldman Sachs, and of course, 15 00:00:57,120 --> 00:00:59,959 Speaker 1: the the overall topic was just like this tremendous come 16 00:01:00,000 --> 00:01:02,600 Speaker 1: addity inflation that has been like the story of much 17 00:01:02,600 --> 00:01:07,119 Speaker 1: of one and and a lot of the focus has 18 00:01:07,120 --> 00:01:09,839 Speaker 1: been oil, and a lot of the focus have been food. 19 00:01:10,160 --> 00:01:13,480 Speaker 1: But then he also said that copper specifically might be 20 00:01:13,560 --> 00:01:16,360 Speaker 1: one of the tightest commodity markets that we've ever seen 21 00:01:16,360 --> 00:01:21,120 Speaker 1: in history. Yeah, which is kind of surprising because I mean, A, 22 00:01:21,360 --> 00:01:23,640 Speaker 1: you just don't hear copper talked about as much as 23 00:01:23,680 --> 00:01:26,119 Speaker 1: something like oil and gas. But b if you look 24 00:01:26,120 --> 00:01:29,160 Speaker 1: at the price chart of copper, it's been coming down 25 00:01:29,319 --> 00:01:32,560 Speaker 1: in recent months, mostly because of you know, concerns over 26 00:01:32,680 --> 00:01:35,720 Speaker 1: China's economic growth and the lockdown and things like that. 27 00:01:35,800 --> 00:01:39,800 Speaker 1: But it's not necessarily a market that is screaming uh 28 00:01:39,880 --> 00:01:44,839 Speaker 1: structural under investment and supply tightness, right, I think there's 29 00:01:44,880 --> 00:01:48,720 Speaker 1: sort of like this long term store because the increases 30 00:01:48,840 --> 00:01:53,080 Speaker 1: in demand for copper are expected to be very high. 31 00:01:53,320 --> 00:01:56,760 Speaker 1: Unlike oil, it takes a really long time to get 32 00:01:56,760 --> 00:01:58,640 Speaker 1: new production online. It's not like you just like put 33 00:01:58,640 --> 00:02:01,320 Speaker 1: a new rig out somewhere in Texas and the Dakotas 34 00:02:01,360 --> 00:02:04,560 Speaker 1: and start pumping. So it's a there's a lot of 35 00:02:04,600 --> 00:02:08,120 Speaker 1: demand for copper, and although the prices are done recently, 36 00:02:08,160 --> 00:02:11,480 Speaker 1: it's still up a lot since this crisis overall, so 37 00:02:11,520 --> 00:02:14,480 Speaker 1: it's still like a tight thing. But I think structurally, 38 00:02:14,680 --> 00:02:17,639 Speaker 1: long term, apparently it seems like it's going to be 39 00:02:17,639 --> 00:02:19,560 Speaker 1: a tough market. Well, this is what I'm trying to 40 00:02:19,600 --> 00:02:23,440 Speaker 1: get it, perhaps inelegantly, but it's it's it's. Copper is 41 00:02:23,480 --> 00:02:26,760 Speaker 1: something that we don't talk about that much, but if 42 00:02:26,760 --> 00:02:28,280 Speaker 1: you look at it, if you look at the long 43 00:02:28,360 --> 00:02:31,120 Speaker 1: term dynamics, it seems to have some resemblance to what 44 00:02:31,160 --> 00:02:34,280 Speaker 1: we've seen with oil and gas. So big booms and 45 00:02:34,360 --> 00:02:38,239 Speaker 1: bus that kind of lead to uh, structural under investment 46 00:02:38,360 --> 00:02:42,200 Speaker 1: or under exploration and unwillingness to expand minds also because 47 00:02:42,240 --> 00:02:47,560 Speaker 1: of environmental concerns. And then the reason that's so interesting 48 00:02:47,680 --> 00:02:50,400 Speaker 1: is because if you look at what's going on with 49 00:02:50,840 --> 00:02:54,640 Speaker 1: the attempts to electrify everything, attempts to bring down emissions 50 00:02:54,720 --> 00:02:57,280 Speaker 1: and things like that, well you're going to need electric 51 00:02:57,320 --> 00:02:59,679 Speaker 1: wires for that, and so copper becomes a really important 52 00:02:59,720 --> 00:03:03,639 Speaker 1: street teach, a commodity that is nevertheless kind of underlooked 53 00:03:03,680 --> 00:03:06,239 Speaker 1: at the moment. Yeah, totally. So the line that Jeff 54 00:03:06,360 --> 00:03:09,120 Speaker 1: used in our podcast, he said, I would argue copper 55 00:03:09,240 --> 00:03:12,600 Speaker 1: is likely to be the tightest commodity will have ever seen. 56 00:03:13,120 --> 00:03:16,040 Speaker 1: It's much tighter than what oil was during the two thousand. 57 00:03:16,120 --> 00:03:18,959 Speaker 1: Let me remind you oil went up seven x in 58 00:03:19,040 --> 00:03:22,679 Speaker 1: the two thousands. Our forecast of sifteen thousand of time 59 00:03:22,840 --> 00:03:27,440 Speaker 1: on copper. But no matter what technology you use, you're 60 00:03:27,440 --> 00:03:30,560 Speaker 1: gonna be using electric electricity. And the only thing that 61 00:03:30,639 --> 00:03:34,560 Speaker 1: can conduct electricity, given the rules around the periodic table 62 00:03:34,639 --> 00:03:37,480 Speaker 1: and the rules of chemistry, is copper at the rate 63 00:03:37,520 --> 00:03:38,920 Speaker 1: we need to conduct it. So it's all right, we 64 00:03:38,960 --> 00:03:41,280 Speaker 1: gotta follow up. And so we are going to follow 65 00:03:41,360 --> 00:03:44,920 Speaker 1: up on copper with a fellow, a colleague of Jeff's, 66 00:03:44,920 --> 00:03:48,440 Speaker 1: a Goldman Sacks. We're going to be talking to Nick Snowdon, 67 00:03:48,480 --> 00:03:51,680 Speaker 1: who runs metals research at Golden Goldman Sacks, and whill 68 00:03:51,680 --> 00:03:54,720 Speaker 1: explain that line and what we should be watching for 69 00:03:54,800 --> 00:03:57,880 Speaker 1: with copper. So, Nick, thank you so much for coming 70 00:03:57,920 --> 00:04:01,720 Speaker 1: on odd lots to be on with you both. What 71 00:04:01,800 --> 00:04:06,200 Speaker 1: does that mean what we talk about a tight commodity market? 72 00:04:06,280 --> 00:04:08,720 Speaker 1: How do how do you define that? Well? I mean, 73 00:04:08,760 --> 00:04:11,360 Speaker 1: I think when we look at the outlook for for 74 00:04:11,400 --> 00:04:14,520 Speaker 1: the copper market, um, you know, over the course of 75 00:04:14,560 --> 00:04:18,640 Speaker 1: the next three, five, ten years, what we see are 76 00:04:19,040 --> 00:04:24,720 Speaker 1: essentially impossibly large deficits developing over that that timeframe. But 77 00:04:24,960 --> 00:04:29,080 Speaker 1: by the middle of this decade we're forecasting the largest 78 00:04:29,240 --> 00:04:32,760 Speaker 1: ever deficit in the copper market. So just two years 79 00:04:32,800 --> 00:04:34,880 Speaker 1: away from now, um and by the end of the 80 00:04:34,920 --> 00:04:39,359 Speaker 1: decade that the largest ever long term deficits. So I 81 00:04:39,360 --> 00:04:42,919 Speaker 1: think you know what that's telling us relative to to 82 00:04:43,000 --> 00:04:46,719 Speaker 1: the starting point already of very low inventories, is that 83 00:04:47,240 --> 00:04:51,880 Speaker 1: this market has such severe imbalances that you know, they're 84 00:04:51,920 --> 00:04:56,000 Speaker 1: not resolvable at at current price levels. Um And. I 85 00:04:56,040 --> 00:04:58,040 Speaker 1: think that's the kind of crux of the issue in 86 00:04:58,080 --> 00:05:02,159 Speaker 1: the copper market. Um it's just an impossibly tight future 87 00:05:02,839 --> 00:05:07,000 Speaker 1: at today's price that there's no fundamental adjustment underway that 88 00:05:07,000 --> 00:05:11,280 Speaker 1: that can meaningfully solve what what lies ahead. So can 89 00:05:11,360 --> 00:05:14,680 Speaker 1: you dig into that a little bit further, because you know, 90 00:05:14,720 --> 00:05:17,440 Speaker 1: I mentioned the price action in copper recently. It is 91 00:05:17,600 --> 00:05:19,919 Speaker 1: up a lot over the past year or two, but 92 00:05:20,000 --> 00:05:22,440 Speaker 1: it has been coming down, and so I guess my 93 00:05:22,520 --> 00:05:25,240 Speaker 1: question is what is it that you guys are seeing 94 00:05:25,320 --> 00:05:30,720 Speaker 1: that the market isn't currently seeing and what is responsible 95 00:05:30,800 --> 00:05:35,760 Speaker 1: for the looming supply imbalance that you just mentioned. Yeah, sure, 96 00:05:35,760 --> 00:05:37,440 Speaker 1: I mean I think there's there's a kind of a 97 00:05:37,520 --> 00:05:41,279 Speaker 1: horizon difference there. Um. I think in in the near term, 98 00:05:42,160 --> 00:05:47,200 Speaker 1: commodity markets are ultimately driven by by spot fundamentals, um And. 99 00:05:47,200 --> 00:05:49,480 Speaker 1: And you know, in the in the current kind of environment, 100 00:05:50,279 --> 00:05:54,080 Speaker 1: we are seeing a weakness in in Chinese demand due 101 00:05:54,160 --> 00:05:58,960 Speaker 1: to the due to the COVID lockdowns. That has generated 102 00:05:59,080 --> 00:06:01,880 Speaker 1: some softening a act on on the market. On top 103 00:06:01,960 --> 00:06:06,040 Speaker 1: of that, we are seeing slightly stronger exports of copper 104 00:06:06,120 --> 00:06:10,320 Speaker 1: out of Russia than was expected um when you went 105 00:06:10,600 --> 00:06:13,560 Speaker 1: back to to to the beginning of the invasion. So 106 00:06:13,600 --> 00:06:15,800 Speaker 1: that's creating a bit of softness in the market and 107 00:06:15,960 --> 00:06:18,560 Speaker 1: that has certainly weighed on price. But you know, those 108 00:06:18,600 --> 00:06:22,720 Speaker 1: are short term transitory issues in the copper market. When 109 00:06:22,760 --> 00:06:27,320 Speaker 1: we talk about the structural ball market copper, that's underpinned 110 00:06:27,400 --> 00:06:31,160 Speaker 1: ultimately by by two key factors. One, UM, you know, 111 00:06:31,200 --> 00:06:35,080 Speaker 1: there's essentially no decoganization without copper. It's a you know, 112 00:06:35,120 --> 00:06:39,600 Speaker 1: absolutely integral raw material for for for for the key 113 00:06:39,640 --> 00:06:45,200 Speaker 1: green technologies e VS. EV charging, infrastructure renewables UM. And 114 00:06:45,240 --> 00:06:49,880 Speaker 1: I think you know, we see the demand impact from 115 00:06:49,960 --> 00:06:55,040 Speaker 1: decorganization efforts over the course of this decade generating as 116 00:06:55,160 --> 00:06:58,000 Speaker 1: much of an uplift of copper demand as China did 117 00:06:58,320 --> 00:07:02,280 Speaker 1: in the two thousand UM. So it absolutely meant UM. 118 00:07:02,279 --> 00:07:04,960 Speaker 1: But at the same time, that's coming up against an 119 00:07:05,080 --> 00:07:09,159 Speaker 1: environment where we hit peak copper supply within the next 120 00:07:09,200 --> 00:07:13,520 Speaker 1: two years and there's a complete absence of fresh investment 121 00:07:13,560 --> 00:07:16,640 Speaker 1: coming into the sector. And so after that peak supply 122 00:07:17,440 --> 00:07:21,000 Speaker 1: is and is trending into an open ended contraction. So 123 00:07:21,080 --> 00:07:24,960 Speaker 1: you have this clear tightening tension between this boom in 124 00:07:25,440 --> 00:07:29,400 Speaker 1: demand tied to the green transition and really a complete 125 00:07:29,480 --> 00:07:48,080 Speaker 1: lack of growth coming from from the supply side. Let's 126 00:07:48,080 --> 00:07:53,320 Speaker 1: talk more about the demand side. So in right now, 127 00:07:53,960 --> 00:07:57,080 Speaker 1: how many tons of copper does the world use I 128 00:07:57,120 --> 00:07:58,880 Speaker 1: don't know in a day or a year or whatever 129 00:07:58,960 --> 00:08:01,160 Speaker 1: however you like to make it. And what is the 130 00:08:01,200 --> 00:08:05,560 Speaker 1: sort of industry or usage breakdown? And then what do 131 00:08:05,640 --> 00:08:09,560 Speaker 1: you see as a that number the total volume demanded 132 00:08:09,640 --> 00:08:12,280 Speaker 1: in the year twenty thirty and what will be the 133 00:08:12,320 --> 00:08:15,560 Speaker 1: segmentation of where that demand is coming from? Yeah? Sure, 134 00:08:15,600 --> 00:08:17,520 Speaker 1: so I mean if you look at the global copp 135 00:08:17,600 --> 00:08:22,520 Speaker 1: market today, demand in two will will come in at 136 00:08:22,680 --> 00:08:27,600 Speaker 1: around twenty four million tons. So yeah, the way we 137 00:08:27,640 --> 00:08:30,560 Speaker 1: look at that that demand breakdown, I think this is 138 00:08:30,600 --> 00:08:33,480 Speaker 1: the you know, in the context of the placing the 139 00:08:33,480 --> 00:08:39,280 Speaker 1: green transition is green versus non green demand. UM. Today 140 00:08:39,400 --> 00:08:42,480 Speaker 1: the world is dominated by non green demand. UM. That's 141 00:08:42,520 --> 00:08:47,800 Speaker 1: copper going into construction, wiring in your house, UM, wiring 142 00:08:47,840 --> 00:08:52,920 Speaker 1: in in UM electronics, in cars, UM, in the grid. 143 00:08:53,440 --> 00:08:57,040 Speaker 1: UM that out of that twenty four million tons this 144 00:08:57,160 --> 00:09:00,920 Speaker 1: year will will make up about twenty two and a 145 00:09:00,920 --> 00:09:06,240 Speaker 1: half a million tons, so absolutely dominant driver of global 146 00:09:06,240 --> 00:09:10,920 Speaker 1: copper demand today. And green demand, which we categorize as 147 00:09:11,080 --> 00:09:16,040 Speaker 1: electric vehicles, electric vehicle charging infrastructure, and then the kind 148 00:09:16,040 --> 00:09:19,800 Speaker 1: of green power sector so wind and solar. That that 149 00:09:19,880 --> 00:09:22,079 Speaker 1: only amounts to about one and a half million tons 150 00:09:22,080 --> 00:09:25,800 Speaker 1: of copper demand today. But if you look at what's 151 00:09:25,800 --> 00:09:29,080 Speaker 1: going to play out over the next five ten years, 152 00:09:29,840 --> 00:09:33,240 Speaker 1: that balance between green and non green demand is going 153 00:09:33,280 --> 00:09:39,679 Speaker 1: to switch quite quite sharply. By five green demand will 154 00:09:39,760 --> 00:09:43,520 Speaker 1: have doubled, gone to closer to three million tons, and 155 00:09:43,600 --> 00:09:46,360 Speaker 1: by the end of the decade UM that that number 156 00:09:46,360 --> 00:09:49,920 Speaker 1: will have risen to between six to seven million tons. 157 00:09:49,920 --> 00:09:53,080 Speaker 1: So green demand will go from from today being only 158 00:09:53,120 --> 00:09:56,800 Speaker 1: about five per cent of the global demand too too 159 00:09:56,800 --> 00:10:01,559 Speaker 1: closer to so an immense uplift UM, and I mean 160 00:10:01,600 --> 00:10:03,839 Speaker 1: I think he is. It's already starting to play out. 161 00:10:03,920 --> 00:10:07,760 Speaker 1: You know, we're already seeing um incredible growth in the 162 00:10:07,760 --> 00:10:12,040 Speaker 1: EB sector, particularly in China. UM. You know, the growth 163 00:10:12,160 --> 00:10:18,640 Speaker 1: rates there are spectacular, you near doubling UM in market size, UM, 164 00:10:19,000 --> 00:10:23,160 Speaker 1: well beyond any any expectation. UM. If you went back 165 00:10:23,160 --> 00:10:25,240 Speaker 1: to the beginning of this year or next year, but 166 00:10:25,240 --> 00:10:27,800 Speaker 1: but also in Europe as well, um and we're also 167 00:10:27,840 --> 00:10:32,839 Speaker 1: starting to see really aggressive growth in green infrastructure um 168 00:10:32,880 --> 00:10:35,280 Speaker 1: and and that's not just China that that's Europe as well. 169 00:10:35,440 --> 00:10:38,880 Speaker 1: So you know, it's no longer theoretical demand. Even though 170 00:10:38,880 --> 00:10:40,840 Speaker 1: it's a small part of the market, it's growing at 171 00:10:40,840 --> 00:10:43,599 Speaker 1: a very rapid rate um and that that rate is 172 00:10:43,600 --> 00:10:46,320 Speaker 1: going to accelerate over over the course of the next 173 00:10:46,320 --> 00:10:48,640 Speaker 1: few years. So I think I'm going to ask the 174 00:10:48,679 --> 00:10:52,560 Speaker 1: same question, but just from the supply perspective, So where 175 00:10:52,600 --> 00:10:54,920 Speaker 1: does copper come from? Or maybe a better question is 176 00:10:54,960 --> 00:10:57,320 Speaker 1: how hard is it to get copper? Because I think 177 00:10:57,320 --> 00:11:00,000 Speaker 1: copper I think, you know, big minds that are bringing 178 00:11:00,080 --> 00:11:03,200 Speaker 1: out new supply. But I also remember back in two thousand, 179 00:11:03,480 --> 00:11:06,760 Speaker 1: two thousand nine, when we also had very high copper prices, 180 00:11:06,800 --> 00:11:10,200 Speaker 1: there are all these stories about people stealing scrap metal 181 00:11:10,440 --> 00:11:13,000 Speaker 1: in order to get bits of copper and sell them 182 00:11:13,000 --> 00:11:15,520 Speaker 1: for loads of money. So how difficult is it to 183 00:11:15,600 --> 00:11:18,719 Speaker 1: actually source and what is the supply path actually look 184 00:11:18,760 --> 00:11:21,559 Speaker 1: like for the next few years. Yes, So, I mean 185 00:11:21,559 --> 00:11:23,280 Speaker 1: I think the first point to make is that there 186 00:11:23,320 --> 00:11:26,520 Speaker 1: isn't a shortage of copper and the Earth's crust that 187 00:11:26,600 --> 00:11:31,679 Speaker 1: you know, there are a lot of potential mindable options 188 00:11:31,720 --> 00:11:36,680 Speaker 1: out there, but we're just not seeing capital flowing into 189 00:11:36,840 --> 00:11:41,240 Speaker 1: into those projects. Um yeah. And I think it's very 190 00:11:41,280 --> 00:11:43,480 Speaker 1: different to what we saw in the two thousand's because 191 00:11:43,520 --> 00:11:46,440 Speaker 1: in two thousand and two, when that that kind of 192 00:11:46,480 --> 00:11:50,520 Speaker 1: respective ball market began, almost immediately you saw the supply 193 00:11:50,600 --> 00:11:54,640 Speaker 1: side respond. You saw projects being approved and investment flowing rapidly, 194 00:11:54,720 --> 00:11:57,599 Speaker 1: and the supply side really, you know, almost moved in 195 00:11:57,679 --> 00:12:01,360 Speaker 1: lockstep with the increase in price. This time around, that 196 00:12:01,480 --> 00:12:04,080 Speaker 1: isn't occurring at all. You know, over the last two years, 197 00:12:04,480 --> 00:12:07,400 Speaker 1: even though copper, the cop price has doubled, there hasn't 198 00:12:07,400 --> 00:12:10,839 Speaker 1: been a single new copper mine fruit. Um. So it's 199 00:12:10,880 --> 00:12:15,440 Speaker 1: just startling difference. And I think the reasons for that 200 00:12:15,760 --> 00:12:19,480 Speaker 1: are similar to some of the issues facing broader commodity 201 00:12:19,640 --> 00:12:23,680 Speaker 1: extraction industries. But I think the number one constraint on 202 00:12:23,679 --> 00:12:27,800 Speaker 1: on the copper mining industry is the experience of the 203 00:12:27,880 --> 00:12:32,280 Speaker 1: last cycle, Because the mining industry faced a near death 204 00:12:32,320 --> 00:12:38,480 Speaker 1: experience in as a result of the over build in 205 00:12:38,559 --> 00:12:42,080 Speaker 1: response to to to high prices in in in the 206 00:12:42,120 --> 00:12:46,920 Speaker 1: mid late two thousands, and I think now you have, um, 207 00:12:46,960 --> 00:12:51,520 Speaker 1: you know, a a much more conservative mentality amongst management 208 00:12:51,559 --> 00:12:55,600 Speaker 1: teams in the mining sector, reflecting that at that experience. UM. 209 00:12:55,600 --> 00:13:00,160 Speaker 1: And so that conservatism is very difficult to to to 210 00:13:00,240 --> 00:13:04,040 Speaker 1: a road, and it's certainly still firmly in place. UM. Look, 211 00:13:04,240 --> 00:13:07,000 Speaker 1: I think it's not just that though. Also I think 212 00:13:07,400 --> 00:13:11,200 Speaker 1: you know what's different now to twenty years ago is 213 00:13:11,240 --> 00:13:14,400 Speaker 1: also you know, we have the E s G influence 214 00:13:14,720 --> 00:13:20,040 Speaker 1: on investor allocation, but also at a micro level, so 215 00:13:20,160 --> 00:13:24,160 Speaker 1: less capital has flown into into commodity sectors because they 216 00:13:24,160 --> 00:13:28,040 Speaker 1: haven't screened well through through the s G filter. But 217 00:13:28,040 --> 00:13:30,520 Speaker 1: but also you know, at a micro level, at a 218 00:13:30,640 --> 00:13:34,560 Speaker 1: mining level, if you want to build a copper mine today, 219 00:13:35,720 --> 00:13:39,600 Speaker 1: even before you break ground, um, you will will spend 220 00:13:39,640 --> 00:13:43,280 Speaker 1: two to three years waiting to get the right permits 221 00:13:43,440 --> 00:13:47,320 Speaker 1: to actually move forward with construction. Twenty years ago, that 222 00:13:47,480 --> 00:13:52,360 Speaker 1: same process to six maybe twelve months maximum, So much 223 00:13:52,440 --> 00:13:55,640 Speaker 1: much higher hurdles from an environmental and social perspective. Is 224 00:13:55,679 --> 00:13:59,720 Speaker 1: this a global phenomenon that everywhere around the world, because look, 225 00:13:59,760 --> 00:14:04,719 Speaker 1: I've are particularly surprised that, say, in certain developed markets 226 00:14:04,960 --> 00:14:08,320 Speaker 1: that people that there's been a big change in terms 227 00:14:08,320 --> 00:14:11,959 Speaker 1: of the environmental expectations and the permitting process. But is 228 00:14:12,000 --> 00:14:14,280 Speaker 1: this like a global phenomenon because I didn't I don't know, 229 00:14:14,480 --> 00:14:17,360 Speaker 1: you know, I think about the US in particular, maybe Europe, 230 00:14:17,360 --> 00:14:21,280 Speaker 1: But has everywhere in the world essentially gotten more stringent 231 00:14:21,320 --> 00:14:24,040 Speaker 1: about these things. Yeah, I mean, look at one of 232 00:14:24,040 --> 00:14:27,400 Speaker 1: the hardest places in the world to get a copper 233 00:14:27,440 --> 00:14:31,120 Speaker 1: project going today is Chili, and Chili is the Saudi 234 00:14:31,160 --> 00:14:33,920 Speaker 1: Arabia of the copper market, and that is one of 235 00:14:33,960 --> 00:14:39,200 Speaker 1: the places where the permitting process has more than tripled 236 00:14:39,240 --> 00:14:42,560 Speaker 1: in length. So it is, it is incredibly difficult. But 237 00:14:42,600 --> 00:14:45,400 Speaker 1: I think the other problem is that, you know, young 238 00:14:45,480 --> 00:14:48,400 Speaker 1: people have not been going into the mining sector for 239 00:14:48,440 --> 00:14:51,440 Speaker 1: the last decade. They've been going into you know, tech 240 00:14:51,600 --> 00:14:54,600 Speaker 1: or you know kind of and so what that means 241 00:14:54,680 --> 00:14:58,360 Speaker 1: is you've got a real bottleneck now on skilled labor 242 00:14:58,400 --> 00:15:03,080 Speaker 1: in the industry. There aren't enough engineers to support a 243 00:15:03,120 --> 00:15:04,920 Speaker 1: project if you if you want to want to get 244 00:15:04,920 --> 00:15:07,680 Speaker 1: it off the ground. So that's practical bottlenecks. There's E 245 00:15:07,840 --> 00:15:12,040 Speaker 1: s G bottlenecks, and there's just conservatism around spending money. 246 00:15:12,240 --> 00:15:16,120 Speaker 1: And on top of that, investors getting a great cash 247 00:15:16,160 --> 00:15:20,080 Speaker 1: return story from from the lining sector, very very high 248 00:15:20,480 --> 00:15:24,120 Speaker 1: free cash show yields, and they're not demanding growth from 249 00:15:24,120 --> 00:15:27,520 Speaker 1: from the sector either, So you know, we're not we're 250 00:15:27,600 --> 00:15:32,240 Speaker 1: first innings in terms of the supply response for for copper. Suddenly, Tracy, 251 00:15:32,280 --> 00:15:34,200 Speaker 1: it's just so fair saying how so many of these 252 00:15:34,240 --> 00:15:38,040 Speaker 1: stories keep a lining of totally having to unlearn the 253 00:15:38,120 --> 00:15:41,040 Speaker 1: lessons essentially of the last decade in order to make anything. Yeah, 254 00:15:41,040 --> 00:15:44,240 Speaker 1: it's we internalize trauma from the last cycle, and now 255 00:15:44,280 --> 00:15:48,200 Speaker 1: we're very careful about fueling the next boom bust cycle. 256 00:15:48,280 --> 00:15:51,520 Speaker 1: But in the meantime you get this under investment um 257 00:15:51,560 --> 00:15:54,120 Speaker 1: and higher prices, but they don't seem to do very much. 258 00:15:54,440 --> 00:15:57,880 Speaker 1: One thing I'm wondering is, let's assume that everything stays 259 00:15:57,920 --> 00:16:01,040 Speaker 1: pretty much as it is. Environmental regular ations stay put 260 00:16:01,120 --> 00:16:03,520 Speaker 1: because people do care about the climate, and there are 261 00:16:03,560 --> 00:16:07,480 Speaker 1: concerns about digging stuff out of the earth. There's continued 262 00:16:07,640 --> 00:16:12,680 Speaker 1: under investment for various reasons. How fungible is copper, Like, 263 00:16:12,840 --> 00:16:15,840 Speaker 1: what are the alternatives that could be used when it 264 00:16:15,840 --> 00:16:21,480 Speaker 1: comes to something like electrifying a car or something like that. Well, 265 00:16:21,480 --> 00:16:24,200 Speaker 1: I think one thing we've got to recognize about copper 266 00:16:24,440 --> 00:16:28,680 Speaker 1: is that it is not a raw material where it 267 00:16:28,840 --> 00:16:32,080 Speaker 1: has close competitors in its key role as a as 268 00:16:32,120 --> 00:16:36,520 Speaker 1: a conductor, because it's such a good conductor UM that 269 00:16:36,640 --> 00:16:40,280 Speaker 1: you know, it really has a primacy over its key 270 00:16:40,360 --> 00:16:44,800 Speaker 1: roles in the grid in cars UM. Now that's not 271 00:16:44,840 --> 00:16:48,040 Speaker 1: to say there aren't other potential conductors, but things like 272 00:16:48,080 --> 00:16:52,440 Speaker 1: aluminium UM you know, require a lot more aluminium to 273 00:16:52,520 --> 00:16:55,920 Speaker 1: achieve the same level of conductivity as copper, and so 274 00:16:56,040 --> 00:16:59,640 Speaker 1: it's just not practical for uses where you have a 275 00:16:59,680 --> 00:17:03,760 Speaker 1: small amount of space UM. And so really there isn't 276 00:17:03,760 --> 00:17:06,560 Speaker 1: a competitor for copper for you know, for for for 277 00:17:06,600 --> 00:17:10,439 Speaker 1: the majority of of its key roles UM. That's not 278 00:17:10,560 --> 00:17:13,400 Speaker 1: to say that there couldn't be some substitution towards other 279 00:17:13,520 --> 00:17:19,320 Speaker 1: raw materials in UM kind of less space confined UM. Use. 280 00:17:19,440 --> 00:17:23,880 Speaker 1: I think aluminium is is top of that list. But look, 281 00:17:23,880 --> 00:17:26,320 Speaker 1: if you look at the aluminium market right now, that's 282 00:17:26,359 --> 00:17:31,200 Speaker 1: facing its own UM story of of of under investment 283 00:17:31,200 --> 00:17:34,199 Speaker 1: on the supply side and also is levered to to 284 00:17:34,280 --> 00:17:37,640 Speaker 1: the green transition UM and that's reflected in the very 285 00:17:37,720 --> 00:17:40,720 Speaker 1: rapid run up in aluminium price that we've seen over 286 00:17:41,760 --> 00:17:45,879 Speaker 1: the last eighteen months. So the most obvious potential substitute 287 00:17:46,680 --> 00:17:50,760 Speaker 1: is also facing near record pricing, and so it's not 288 00:17:51,240 --> 00:17:55,800 Speaker 1: an attractive UM kind of substitution choice. So I mean, 289 00:17:55,840 --> 00:17:58,520 Speaker 1: I think the answer to you would be, there isn't 290 00:17:58,560 --> 00:18:02,720 Speaker 1: really an obvious UM sort of raw material that can 291 00:18:02,720 --> 00:18:07,040 Speaker 1: step in UM. Now, look, necessity is the mother invention UM. 292 00:18:07,119 --> 00:18:10,240 Speaker 1: And you know, if copper prices go to the levels 293 00:18:10,280 --> 00:18:14,600 Speaker 1: that the weird expect, if not higher, then you will 294 00:18:14,680 --> 00:18:18,520 Speaker 1: that incentivize much greater efforts in in terms of trying 295 00:18:18,520 --> 00:18:23,680 Speaker 1: to find alternatives or perhaps more reasonably kind of dilution 296 00:18:24,040 --> 00:18:26,320 Speaker 1: of the level of copper used in some of these 297 00:18:26,920 --> 00:18:29,959 Speaker 1: UM areas, and that could well play out not just 298 00:18:30,040 --> 00:18:32,679 Speaker 1: in non green uses, but also new new areas. So 299 00:18:32,760 --> 00:18:35,119 Speaker 1: you may well see slightly less copper used in an 300 00:18:35,119 --> 00:18:37,879 Speaker 1: eavy in five ten years time, partly because of the 301 00:18:37,920 --> 00:18:41,120 Speaker 1: high prices and just partly because it's technology that's new, 302 00:18:41,160 --> 00:18:44,360 Speaker 1: that's developing, and over time they'll find efficiencies. I think 303 00:18:44,400 --> 00:18:48,760 Speaker 1: that's probably more of the demand effect you'll see than 304 00:18:49,000 --> 00:18:51,440 Speaker 1: you know, a kind of a material step away from 305 00:18:51,480 --> 00:18:54,359 Speaker 1: copper to another raw material. You said something that I 306 00:18:54,359 --> 00:18:57,240 Speaker 1: want to go back to because it seems extremely important 307 00:18:57,280 --> 00:18:58,720 Speaker 1: and it's not something I don't know if any other 308 00:18:58,720 --> 00:19:01,720 Speaker 1: guests have really talked about it, which is the talent crunch. 309 00:19:01,840 --> 00:19:06,440 Speaker 1: So it's like, Okay, we understand there's the cash shortfall, 310 00:19:06,520 --> 00:19:10,400 Speaker 1: the reluctants to invest and the under investment and so forth, 311 00:19:10,840 --> 00:19:14,119 Speaker 1: and the sort of E. S G. Environmental considerations, but 312 00:19:14,200 --> 00:19:16,440 Speaker 1: of course we just hit this decade right where if 313 00:19:16,480 --> 00:19:20,040 Speaker 1: you're a talented person, there's and you want to make 314 00:19:20,080 --> 00:19:22,560 Speaker 1: money and have a booming career. Probably went into software 315 00:19:22,640 --> 00:19:24,920 Speaker 1: or there was a really good uh thing like that, 316 00:19:25,119 --> 00:19:27,280 Speaker 1: can you or something like that? Can you talk more 317 00:19:27,400 --> 00:19:31,040 Speaker 1: about this idea, the talent shortage of like what happens 318 00:19:31,080 --> 00:19:33,560 Speaker 1: when sort of like the best and the brightest don't 319 00:19:33,600 --> 00:19:37,760 Speaker 1: want to work in extractive industries. Well, I mean, I 320 00:19:37,760 --> 00:19:40,800 Speaker 1: think I think the most obvious impact is that you 321 00:19:40,880 --> 00:19:47,480 Speaker 1: just have a shortage of labor to drive supply adjustments. 322 00:19:47,920 --> 00:19:51,560 Speaker 1: They literally are handful of teams recognized around the world 323 00:19:51,680 --> 00:19:55,760 Speaker 1: who are good at UM, building UM and growing production 324 00:19:55,840 --> 00:19:59,320 Speaker 1: at comple minds. Now that reflects that the lack of 325 00:19:59,359 --> 00:20:02,679 Speaker 1: new entrants into the mining market, but I think that 326 00:20:02,680 --> 00:20:06,800 Speaker 1: that really just limits the pace at which you can 327 00:20:07,359 --> 00:20:11,240 Speaker 1: undertake new new projects. So even if you decide today, 328 00:20:11,800 --> 00:20:13,879 Speaker 1: you know, we are going to spend several billions on 329 00:20:13,880 --> 00:20:16,480 Speaker 1: a new copper mine, You're still going to struggle to 330 00:20:16,560 --> 00:20:20,680 Speaker 1: find that the engineering engineering team to to support that. 331 00:20:20,760 --> 00:20:23,679 Speaker 1: So I think that's a bottleneck and and and a 332 00:20:23,760 --> 00:20:27,719 Speaker 1: further delay on response. But of course the other aspect 333 00:20:28,280 --> 00:20:32,399 Speaker 1: is that you know, you probably can find the right team, 334 00:20:32,440 --> 00:20:35,200 Speaker 1: but you're gonna have to pay top dollar together. And 335 00:20:35,520 --> 00:20:41,200 Speaker 1: so that then feeds into this risk of capital cost escalation, 336 00:20:41,359 --> 00:20:44,600 Speaker 1: which is exactly what we saw back in the two thousands. 337 00:20:44,720 --> 00:20:50,439 Speaker 1: Prices of of inputs into projects, labor, machinery, fuel, you know, 338 00:20:50,480 --> 00:20:54,520 Speaker 1: we're all rising rapidly, and so initial capital costs for 339 00:20:54,600 --> 00:20:57,919 Speaker 1: projects ended up being far too low versus where they 340 00:20:57,960 --> 00:21:00,200 Speaker 1: ended up. And I think that's that's a very old 341 00:21:00,280 --> 00:21:03,920 Speaker 1: risk that that we're facing in the mining sector today. 342 00:21:04,000 --> 00:21:06,760 Speaker 1: And on top of that, it means costs are just rising. 343 00:21:06,840 --> 00:21:09,560 Speaker 1: So the cost curve in in the copper mining industry 344 00:21:09,680 --> 00:21:14,040 Speaker 1: and in many other metals is inflating. And and the 345 00:21:14,080 --> 00:21:16,720 Speaker 1: top end of the cost curve, the most expensive minds 346 00:21:16,720 --> 00:21:20,680 Speaker 1: in the world to operate, is now within touching distance 347 00:21:20,800 --> 00:21:24,080 Speaker 1: of today's copper price. Um. So I mean that's actually 348 00:21:24,119 --> 00:21:28,760 Speaker 1: important for supporting where prices are but it doesn't solve 349 00:21:28,800 --> 00:21:33,760 Speaker 1: anything in terms of the structural imbalances in this this market. 350 00:21:33,800 --> 00:21:38,760 Speaker 1: It just makes that more expensive to solve and ultimately 351 00:21:38,800 --> 00:21:42,320 Speaker 1: supports the idea that we need much much higher prices 352 00:21:42,359 --> 00:21:46,359 Speaker 1: than we have today. So just on the existing I 353 00:21:46,359 --> 00:21:48,600 Speaker 1: guess sort of wanting to have questions, but what is 354 00:21:48,680 --> 00:21:52,159 Speaker 1: the supply outlook look like for the existing set of 355 00:21:52,200 --> 00:21:54,680 Speaker 1: copper minds that they're in production, Like how much are 356 00:21:54,680 --> 00:21:56,920 Speaker 1: they going to fade in terms of how much more 357 00:21:56,960 --> 00:21:58,840 Speaker 1: it can be pulled out of them? You at what 358 00:21:59,000 --> 00:22:01,720 Speaker 1: point will we see the down break so to speak, 359 00:22:01,760 --> 00:22:05,080 Speaker 1: where these high prices in this high demand actually does 360 00:22:05,760 --> 00:22:10,640 Speaker 1: induce someone somewhere to get break ground on a new mine, 361 00:22:10,680 --> 00:22:13,879 Speaker 1: Like when is that going to happen? Yeah? So I 362 00:22:13,880 --> 00:22:17,240 Speaker 1: think if you look at current production, what we have 363 00:22:17,400 --> 00:22:20,240 Speaker 1: over the next twelve months is a kind of final 364 00:22:20,720 --> 00:22:25,520 Speaker 1: spurt of growth UM set to come through UM and 365 00:22:25,560 --> 00:22:29,960 Speaker 1: then we hit peak production at the end of twenty three. 366 00:22:30,000 --> 00:22:34,760 Speaker 1: In the in the beginning UM quarter, so there is 367 00:22:34,800 --> 00:22:37,160 Speaker 1: a little bit of growth that's from a small number 368 00:22:37,200 --> 00:22:40,800 Speaker 1: of projects in Chile, Peru and UM and in the 369 00:22:40,800 --> 00:22:44,960 Speaker 1: copper belt in Africa. But then after that we essentially 370 00:22:45,000 --> 00:22:49,120 Speaker 1: flatline and then on the kind of current guidance from 371 00:22:49,160 --> 00:22:53,280 Speaker 1: from producers, we'll start to enter a phase of open 372 00:22:53,359 --> 00:22:59,520 Speaker 1: ended contraction of around one percent a year from um So, 373 00:23:00,080 --> 00:23:03,960 Speaker 1: I mean that's pretty pretty set in stone. Um. Look, 374 00:23:04,080 --> 00:23:07,240 Speaker 1: I think you know in terms of you know, what's 375 00:23:07,280 --> 00:23:10,960 Speaker 1: the that the kind of point that that kind of 376 00:23:11,080 --> 00:23:16,359 Speaker 1: changes that. Um, I think it really has to be price, 377 00:23:16,680 --> 00:23:19,560 Speaker 1: But I think it also has to be a realization 378 00:23:20,160 --> 00:23:24,320 Speaker 1: that you know, copper is it absolutely key raw material 379 00:23:24,359 --> 00:23:29,400 Speaker 1: for the green transition and is going to be a hurdle, 380 00:23:29,480 --> 00:23:34,520 Speaker 1: a bottleneck on the planned pace of of decorganization. Um, 381 00:23:34,720 --> 00:23:36,440 Speaker 1: We're just not going to have enough copper around to 382 00:23:36,520 --> 00:23:41,639 Speaker 1: support the necessary growth in in green technologies on the 383 00:23:41,680 --> 00:23:44,480 Speaker 1: kind of current road map. So I think you know 384 00:23:44,600 --> 00:23:47,720 Speaker 1: that means price has to be absolutely key, But I 385 00:23:47,720 --> 00:23:50,080 Speaker 1: think it also has to be a function of policy 386 00:23:50,119 --> 00:23:54,919 Speaker 1: makers governments kind of grasping that fact and and perhaps 387 00:23:55,240 --> 00:23:59,520 Speaker 1: kind of easing the ability to to to to grow 388 00:23:59,600 --> 00:24:03,240 Speaker 1: product and um So, I think it's a confluence of factors. 389 00:24:03,720 --> 00:24:08,199 Speaker 1: Um But absolutely number one, it has to be much 390 00:24:08,280 --> 00:24:11,760 Speaker 1: much high prices because the day's price is not moving 391 00:24:11,800 --> 00:24:17,639 Speaker 1: the need at all. In terms of producers interest in investment. 392 00:24:18,280 --> 00:24:22,760 Speaker 1: So one thing we've seen recently with certain commodities that 393 00:24:23,200 --> 00:24:29,240 Speaker 1: might be in immediately tighter markets are the actual customer 394 00:24:29,359 --> 00:24:32,760 Speaker 1: of these commodities trying to secure their own supplies. So, 395 00:24:32,840 --> 00:24:36,280 Speaker 1: for instance, Tesla signing deals in order to get stuff 396 00:24:36,480 --> 00:24:40,280 Speaker 1: like nickel from specific suppliers. Is that something that you 397 00:24:40,320 --> 00:24:43,440 Speaker 1: would expect to happen with copper, that sort of vertical 398 00:24:43,480 --> 00:24:48,840 Speaker 1: integration or you end users actually trying to strike deals 399 00:24:49,119 --> 00:24:52,280 Speaker 1: to source their own supply. I think it's I think 400 00:24:52,280 --> 00:24:56,439 Speaker 1: it's perfectly possible because I think the the the issues 401 00:24:56,520 --> 00:25:00,159 Speaker 1: that the copper face faces right now is farmer or 402 00:25:00,200 --> 00:25:04,160 Speaker 1: extreme than than some of the battery raw materials where 403 00:25:04,240 --> 00:25:08,359 Speaker 1: where you've seen that proposed um. You know, I think 404 00:25:08,760 --> 00:25:13,240 Speaker 1: we're not in as acute a stage of shortage today 405 00:25:13,480 --> 00:25:15,920 Speaker 1: as some of those other metals, and so it's not 406 00:25:16,800 --> 00:25:20,800 Speaker 1: as front and center in terms of potential strategy. But 407 00:25:21,280 --> 00:25:24,320 Speaker 1: I think in two three years time, given how tight 408 00:25:25,040 --> 00:25:27,520 Speaker 1: you know things are going to get, we will be 409 00:25:27,560 --> 00:25:30,720 Speaker 1: hearing very very similar conversations around cop But now that's 410 00:25:30,760 --> 00:25:34,480 Speaker 1: absolutely too late. Those conversations need to be happening today, 411 00:25:34,640 --> 00:25:37,640 Speaker 1: and you know, if the miners are not willing to 412 00:25:37,400 --> 00:25:41,160 Speaker 1: to start to invest, then it should be these key 413 00:25:41,200 --> 00:25:44,119 Speaker 1: downstream consumers who are who are pushing pushing that. So 414 00:25:44,280 --> 00:25:49,120 Speaker 1: I think, yes, absolutely, I think that will have to happen, um, 415 00:25:49,160 --> 00:25:52,479 Speaker 1: But it will probably happen too late. Um. And you know, 416 00:25:52,520 --> 00:25:56,520 Speaker 1: as a result, prices are going to go absolutely ballistic 417 00:25:56,600 --> 00:25:59,240 Speaker 1: to the upside and and you know the downstream will 418 00:25:59,280 --> 00:26:03,920 Speaker 1: suffer because of the current sort of transigence in terms 419 00:26:03,960 --> 00:26:08,000 Speaker 1: of supply investment. What are the environmental costs of mining? 420 00:26:08,040 --> 00:26:11,600 Speaker 1: I mean, obviously I assume the people who the countries 421 00:26:11,600 --> 00:26:16,359 Speaker 1: and governments that are reluctant to rapidly approved new minds 422 00:26:16,400 --> 00:26:20,320 Speaker 1: have legitimate concerns about the environmental risk? What are they? 423 00:26:20,400 --> 00:26:23,119 Speaker 1: And then specifically like how much do we all have 424 00:26:23,200 --> 00:26:27,359 Speaker 1: to become Chilean political experts now to understand what's going 425 00:26:27,400 --> 00:26:29,760 Speaker 1: to be happening in the comment in the coming years. No, 426 00:26:30,040 --> 00:26:32,919 Speaker 1: I think the from a mining perspective, you know, I 427 00:26:32,960 --> 00:26:36,960 Speaker 1: think the mining sector has actually been very good at 428 00:26:37,280 --> 00:26:40,639 Speaker 1: reacting to the new kind of e s G. Standards 429 00:26:40,640 --> 00:26:44,040 Speaker 1: on on on operations. So you know, I think you 430 00:26:44,080 --> 00:26:46,439 Speaker 1: know that that there's no kind of challenge for the 431 00:26:46,560 --> 00:26:50,000 Speaker 1: for the mining sector in terms of respecting new rules. 432 00:26:50,440 --> 00:26:54,840 Speaker 1: You know, respecting nature um kind of water supply, Like 433 00:26:54,880 --> 00:26:57,080 Speaker 1: what is like mining due to the water supply or 434 00:26:57,200 --> 00:26:59,480 Speaker 1: what how what have we seen in terms of the 435 00:26:59,520 --> 00:27:02,199 Speaker 1: environmental it's not a it's not so much that it 436 00:27:02,240 --> 00:27:05,200 Speaker 1: doesn't even supply. Just the mining sector is a relatively 437 00:27:05,520 --> 00:27:08,720 Speaker 1: intensive use of water, um. And so if you have 438 00:27:08,760 --> 00:27:11,240 Speaker 1: a mine up in high in the in the mountains 439 00:27:11,240 --> 00:27:15,440 Speaker 1: in the Andes and local communities around there, then um, 440 00:27:15,840 --> 00:27:19,800 Speaker 1: governments want water to to you know, to to flow 441 00:27:19,880 --> 00:27:24,040 Speaker 1: to to local communities and so yeah, no, there's no 442 00:27:24,160 --> 00:27:26,520 Speaker 1: question of that at all. But I think what it 443 00:27:26,560 --> 00:27:29,560 Speaker 1: means is that the miners have then had to invest 444 00:27:29,680 --> 00:27:34,159 Speaker 1: in essentially pumping seawater up from up to the to 445 00:27:34,240 --> 00:27:38,200 Speaker 1: the operations and detailization plants. So what does that mean, Well, 446 00:27:38,200 --> 00:27:41,480 Speaker 1: it just means additional costs and time in terms of 447 00:27:41,480 --> 00:27:45,520 Speaker 1: getting that the mind's up to um that the kind 448 00:27:45,560 --> 00:27:47,719 Speaker 1: of level of operation they need. Now on top of that, 449 00:27:48,000 --> 00:27:52,560 Speaker 1: in some regions, you've you've had pretty bad drought and 450 00:27:52,680 --> 00:27:55,560 Speaker 1: certainly that's been an issue in Chile, an ongoing issue 451 00:27:55,640 --> 00:27:58,879 Speaker 1: in Chile for the last few years. And you know, 452 00:27:59,080 --> 00:28:02,439 Speaker 1: depend mining is a very water dependent process. The more 453 00:28:02,560 --> 00:28:05,639 Speaker 1: water you have, the higher the throughput of of the 454 00:28:05,720 --> 00:28:09,160 Speaker 1: kind of are through the system and the yields get 455 00:28:09,200 --> 00:28:11,040 Speaker 1: on that. So what is the water I don't know 456 00:28:11,119 --> 00:28:13,280 Speaker 1: much about mining engineering. What is the main use? Well, 457 00:28:13,320 --> 00:28:16,639 Speaker 1: you're well, you essentially have to kind of wash the 458 00:28:17,720 --> 00:28:19,920 Speaker 1: material that's coming out of the ground. So it's a 459 00:28:19,960 --> 00:28:23,640 Speaker 1: kind of a cleansing process. And so you know, the 460 00:28:23,680 --> 00:28:27,240 Speaker 1: lower the flow of water through that, the kind of 461 00:28:27,600 --> 00:28:30,840 Speaker 1: lower the kind of essentially the the yield. So it 462 00:28:31,000 --> 00:28:34,320 Speaker 1: is key, um. But mining companies are resolving that, but 463 00:28:35,080 --> 00:28:37,520 Speaker 1: you know it adds cost to to to the systems. 464 00:28:37,520 --> 00:28:39,280 Speaker 1: So I look, I think it's there's no doubt the 465 00:28:39,320 --> 00:28:43,320 Speaker 1: mining sector, particularly copper mining sector, has been successful at 466 00:28:43,360 --> 00:28:48,280 Speaker 1: that adapting to E S g M hurdles and I 467 00:28:48,320 --> 00:28:52,960 Speaker 1: think if anything held itself to very high standards before 468 00:28:53,320 --> 00:28:56,120 Speaker 1: you know, that became a can of official mantra. But 469 00:28:56,720 --> 00:29:00,440 Speaker 1: you know that comes with um with additional cost and 470 00:29:01,120 --> 00:29:20,920 Speaker 1: time in terms of getting projects up to speed. So 471 00:29:21,640 --> 00:29:25,160 Speaker 1: what's the bear case for copper here? And the reason 472 00:29:25,200 --> 00:29:28,200 Speaker 1: I ask is because um, I saw an article on 473 00:29:28,360 --> 00:29:33,120 Speaker 1: the Institute of Electrical and Electronics Engineers, which obviously I 474 00:29:33,160 --> 00:29:37,000 Speaker 1: read very religiously, and the article was called Practical Power 475 00:29:37,080 --> 00:29:41,560 Speaker 1: beaming gets real. And this was like Nicola Tesla's dream, 476 00:29:41,680 --> 00:29:44,680 Speaker 1: right that instead of using wires or some type of 477 00:29:44,680 --> 00:29:47,600 Speaker 1: physical conductor to transmit energy, you could actually do it 478 00:29:47,600 --> 00:29:50,480 Speaker 1: in a different way, like a bolt of lightning that 479 00:29:50,520 --> 00:29:53,080 Speaker 1: goes from one thing to another, that sort of thing. 480 00:29:53,560 --> 00:29:56,760 Speaker 1: And I mean, I wonder, is that the ultimate bearer 481 00:29:56,800 --> 00:29:59,480 Speaker 1: case for copper, that we developed some sort of new 482 00:29:59,520 --> 00:30:02,400 Speaker 1: technology g that means you actually don't have to conduct 483 00:30:02,480 --> 00:30:07,920 Speaker 1: through wires. Well, yeah, I mean I think that. I 484 00:30:07,960 --> 00:30:10,560 Speaker 1: think there are there are two two things that could 485 00:30:10,720 --> 00:30:15,000 Speaker 1: transform the story. The first would be if we get 486 00:30:15,600 --> 00:30:18,720 Speaker 1: a production technology shift. So we've we've seen that play 487 00:30:18,760 --> 00:30:22,400 Speaker 1: out in other commodity markets over over the last twenty years. 488 00:30:22,400 --> 00:30:27,520 Speaker 1: The most obvious is oil and shale um in the US. 489 00:30:28,840 --> 00:30:33,800 Speaker 1: Is there any evidence of that type of production technology 490 00:30:34,320 --> 00:30:37,680 Speaker 1: shift occurring in copper? The answer would be no. You know, 491 00:30:37,720 --> 00:30:42,800 Speaker 1: there's some developments at the margin around achieving higher return 492 00:30:42,920 --> 00:30:45,760 Speaker 1: from from tailings deposits, which which is the waste that 493 00:30:46,360 --> 00:30:52,360 Speaker 1: minds generate during the production process. Typically those tailing deposits 494 00:30:52,400 --> 00:30:55,520 Speaker 1: are kind of left on the side, But but there 495 00:30:55,560 --> 00:30:58,440 Speaker 1: is some technology being developed that that can actually achieve 496 00:30:58,520 --> 00:31:02,200 Speaker 1: a quite a high return on on the copper within 497 00:31:02,240 --> 00:31:07,320 Speaker 1: those but that's really a marginal production game that there's 498 00:31:07,320 --> 00:31:10,640 Speaker 1: certainly nothing along the lines of shale, and I think 499 00:31:11,160 --> 00:31:14,240 Speaker 1: even if there was, if you look at the history 500 00:31:14,280 --> 00:31:19,719 Speaker 1: of production technology in the mining sector, it's incredibly slow 501 00:31:19,920 --> 00:31:24,560 Speaker 1: to adapt. So in copper back in the there was 502 00:31:24,600 --> 00:31:28,680 Speaker 1: a new production process called s x CW that that 503 00:31:28,760 --> 00:31:33,040 Speaker 1: actually became quite a meaningful influence on production, but not 504 00:31:33,160 --> 00:31:35,719 Speaker 1: until the end of the nineteen nineties and into the 505 00:31:35,760 --> 00:31:38,680 Speaker 1: twenty ten so it took it took over a decade 506 00:31:38,720 --> 00:31:43,040 Speaker 1: for that technology to to scale up and have a 507 00:31:43,160 --> 00:31:47,040 Speaker 1: mass adoption. So there's nothing on that line, you know, 508 00:31:47,520 --> 00:31:49,640 Speaker 1: in our line of side um and even then I 509 00:31:49,680 --> 00:31:53,680 Speaker 1: think it would be very slow. So that's not a 510 00:31:53,760 --> 00:31:56,719 Speaker 1: solver at least in the in the twenties. And and 511 00:31:56,760 --> 00:32:00,680 Speaker 1: then you know on the demand side that that there 512 00:32:00,760 --> 00:32:05,680 Speaker 1: isn't an obvious raw material competitive substitute. You can't rule 513 00:32:05,720 --> 00:32:08,080 Speaker 1: that out. There's clearly a lot of work being done 514 00:32:08,120 --> 00:32:12,800 Speaker 1: on these kind of alternatives, but we just don't see 515 00:32:12,800 --> 00:32:15,600 Speaker 1: that that happening. And I think that's why when we 516 00:32:15,640 --> 00:32:18,240 Speaker 1: look at the story, that just isn't the mind supply 517 00:32:18,320 --> 00:32:23,080 Speaker 1: response coming through in time to to to meaningfully kind 518 00:32:23,080 --> 00:32:25,680 Speaker 1: of lower the deficits in this market. So mind supply 519 00:32:25,720 --> 00:32:28,760 Speaker 1: and argue is not going to be the solver um 520 00:32:28,800 --> 00:32:31,200 Speaker 1: and then so what are we left with? Well, you know, 521 00:32:31,320 --> 00:32:35,520 Speaker 1: really what you're left is is demand destruction. And I 522 00:32:35,520 --> 00:32:39,880 Speaker 1: think this is why we have such a bullish target 523 00:32:39,920 --> 00:32:43,680 Speaker 1: on copper because to achieve demand destruction end demand destruction 524 00:32:44,000 --> 00:32:49,120 Speaker 1: in copper it is much much harder than in agricultural 525 00:32:49,240 --> 00:32:51,360 Speaker 1: or energy products. And the reason for that is that 526 00:32:51,720 --> 00:32:54,240 Speaker 1: the end consumer in the in the goods that they 527 00:32:54,240 --> 00:32:57,520 Speaker 1: consume that that have copper, copper is really a very 528 00:32:57,560 --> 00:33:00,560 Speaker 1: small part of the cost of that good, the price 529 00:33:00,600 --> 00:33:02,880 Speaker 1: of the good that they face. So for the for 530 00:33:02,920 --> 00:33:06,840 Speaker 1: the copper price to drive demand destruction in in cars, 531 00:33:07,400 --> 00:33:10,040 Speaker 1: in in in electronics, you're gonna have to see a 532 00:33:10,080 --> 00:33:13,920 Speaker 1: massive outsized move in the copper price to achieve that 533 00:33:14,000 --> 00:33:16,640 Speaker 1: the necessary increase in in in the cost of the 534 00:33:16,680 --> 00:33:20,640 Speaker 1: total good to drive that destruction. At demand destruction, it's 535 00:33:20,760 --> 00:33:24,520 Speaker 1: very different to energy and agricultural um commodities, where you're 536 00:33:24,640 --> 00:33:28,440 Speaker 1: really go nearly majority exposed to the oil price or 537 00:33:29,000 --> 00:33:31,560 Speaker 1: or you know, the wheats price with the food on 538 00:33:31,600 --> 00:33:34,280 Speaker 1: your your table. It just doesn't work their way in metals. 539 00:33:34,280 --> 00:33:36,600 Speaker 1: This is really fascinating. I haven't thought about that. So 540 00:33:36,720 --> 00:33:40,960 Speaker 1: copper is absolutely crucial to e vs, but it's not 541 00:33:41,160 --> 00:33:43,200 Speaker 1: so big of a factor in the price of an 542 00:33:43,200 --> 00:33:46,240 Speaker 1: evy that it's actually gonna like change anyone's planned to 543 00:33:46,440 --> 00:33:48,959 Speaker 1: build or buy one until you just get run up. 544 00:33:49,000 --> 00:33:50,720 Speaker 1: But you know, we just have like a couple of 545 00:33:50,760 --> 00:33:53,720 Speaker 1: minutes left here, So we're at you know, in London, 546 00:33:53,880 --> 00:33:58,440 Speaker 1: I think the element price is right around n a ton. 547 00:33:58,720 --> 00:34:02,640 Speaker 1: For the price of copper, what are the scenarios where 548 00:34:02,640 --> 00:34:05,200 Speaker 1: it could go? I think I've seen fifteen thousand, But 549 00:34:05,280 --> 00:34:07,440 Speaker 1: what are the scenarios? And then if we were to 550 00:34:07,440 --> 00:34:10,439 Speaker 1: gain some sort of demand destruction, like are there any 551 00:34:10,800 --> 00:34:14,840 Speaker 1: use cases at that price, it becomes economical and they'd 552 00:34:14,840 --> 00:34:19,719 Speaker 1: have to drop off. I think yeah. I mean, the 553 00:34:20,000 --> 00:34:23,400 Speaker 1: reason we see prices going to fifteen thousand are you 554 00:34:23,440 --> 00:34:27,880 Speaker 1: know one. We're already in a very time market. The 555 00:34:27,960 --> 00:34:31,279 Speaker 1: COVID fiscal stimulus effects of the last two years have 556 00:34:31,400 --> 00:34:36,279 Speaker 1: generated incredibly large deficits in many metals, copper included, and 557 00:34:36,320 --> 00:34:39,520 Speaker 1: so we start really this this kind of green supply 558 00:34:39,600 --> 00:34:44,400 Speaker 1: crunch story already with very very low inventories in the system, 559 00:34:45,040 --> 00:34:47,800 Speaker 1: but then the next leg higher is ultimately going to 560 00:34:47,880 --> 00:34:52,640 Speaker 1: be a reflection of that progressive green supply crunch, essentially 561 00:34:52,760 --> 00:34:56,120 Speaker 1: removing the remaining inventory from the system over the next 562 00:34:56,200 --> 00:35:00,040 Speaker 1: three years, and then the market having to go to 563 00:35:00,600 --> 00:35:04,800 Speaker 1: incredibly high price levels to generate that end demand destruction. 564 00:35:06,000 --> 00:35:08,520 Speaker 1: That the thing about the copper market is that we've 565 00:35:08,600 --> 00:35:12,320 Speaker 1: never been in such an extreme set of fundamental circumstances. 566 00:35:12,360 --> 00:35:17,080 Speaker 1: We've never had to go to end demand destruction pricing 567 00:35:17,480 --> 00:35:20,640 Speaker 1: to achieve a rebalancing. That the ballmarket of the two 568 00:35:20,680 --> 00:35:25,440 Speaker 1: thousands was nearly entirely solved by supply responses and and 569 00:35:25,640 --> 00:35:29,160 Speaker 1: that very rapid increase in mine investment, that that's clearly 570 00:35:29,160 --> 00:35:32,799 Speaker 1: not going to be the majority solver this time. So 571 00:35:32,880 --> 00:35:35,880 Speaker 1: when we say fifteen thousands, what we're saying there is 572 00:35:36,520 --> 00:35:38,120 Speaker 1: copper is going to have to go to a price 573 00:35:38,200 --> 00:35:42,799 Speaker 1: level well beyond any level we've seen before historically to 574 00:35:42,800 --> 00:35:48,200 Speaker 1: to to achieve that demons structure could fifteen thousand prove conservative, absolutely, 575 00:35:48,320 --> 00:35:51,440 Speaker 1: And the reason why I say that, look at oil 576 00:35:51,680 --> 00:35:56,200 Speaker 1: in the two thousand's. Oil started that decade um trading 577 00:35:56,560 --> 00:35:59,880 Speaker 1: ten twenty dollars a barrel and ended the decade trading 578 00:36:00,280 --> 00:36:04,680 Speaker 1: you know, hundred fifty dollars a barrel, so sevenfold increased 579 00:36:04,680 --> 00:36:10,080 Speaker 1: in price to adjust the market enough to solve imbalances 580 00:36:10,239 --> 00:36:13,640 Speaker 1: that all faced in two thousands that were very similar 581 00:36:13,760 --> 00:36:17,040 Speaker 1: to what the copper market faces today. So we don't 582 00:36:17,120 --> 00:36:19,640 Speaker 1: rule out the copper. Could could be a fifty thousand, 583 00:36:19,640 --> 00:36:22,440 Speaker 1: could be a hundred thousands other commodities, and that there 584 00:36:22,440 --> 00:36:24,840 Speaker 1: are plenty of commodities that have achieved that. Look at lithium. 585 00:36:24,960 --> 00:36:28,040 Speaker 1: You know, lithium is trading five times above six times 586 00:36:28,040 --> 00:36:31,560 Speaker 1: above the cost curve today. This does happen in commodity 587 00:36:31,600 --> 00:36:35,960 Speaker 1: markets when you face such extreme fundamental imbalances and price 588 00:36:36,440 --> 00:36:39,840 Speaker 1: has to go to such extremes to to solve that. 589 00:36:39,840 --> 00:36:44,280 Speaker 1: That set up, well, Nick, this was absolutely fascinating. We're 590 00:36:44,480 --> 00:36:46,640 Speaker 1: we could talk to you for a long time. We could. 591 00:36:46,760 --> 00:36:49,200 Speaker 1: We've got to have you back on again at some point, 592 00:36:49,239 --> 00:36:52,359 Speaker 1: but I learned a lot, really appreciate you coming on 593 00:36:52,360 --> 00:36:55,080 Speaker 1: our lights, and I will be paying close attention to 594 00:36:55,160 --> 00:36:57,759 Speaker 1: copper over the next decade for sure, because that was 595 00:36:57,760 --> 00:37:02,640 Speaker 1: a very high But if it's having me, thanks so much, like, Yeah, 596 00:37:02,880 --> 00:37:19,480 Speaker 1: that was fantastic, Wow, Tracy, A hundred dollar copper do 597 00:37:19,520 --> 00:37:23,759 Speaker 1: you hear that yeah, and I'm I mean, I'm looking 598 00:37:23,760 --> 00:37:26,879 Speaker 1: at the price chart of lithium to his point and 599 00:37:27,160 --> 00:37:32,400 Speaker 1: like five, yeah, uh, it is not unheard of. The 600 00:37:32,480 --> 00:37:34,600 Speaker 1: one thing that that struck me in that conversation and 601 00:37:34,640 --> 00:37:36,760 Speaker 1: you picked up on it already. But just this idea 602 00:37:37,080 --> 00:37:40,040 Speaker 1: of how difficult it is to get away from these 603 00:37:40,080 --> 00:37:43,680 Speaker 1: boom bust cycles because everyone comes out of the last 604 00:37:43,719 --> 00:37:47,239 Speaker 1: experience thinking that's the way the market is, that's the 605 00:37:47,239 --> 00:37:49,120 Speaker 1: way the world works, that's the way it's always going 606 00:37:49,160 --> 00:37:52,960 Speaker 1: to be. Uh, and then they proceed to become very 607 00:37:53,000 --> 00:37:56,719 Speaker 1: fiscally conservative. It's all about cash flow versus funding new 608 00:37:56,760 --> 00:37:59,320 Speaker 1: exploration and digging, and then we end up with a 609 00:37:59,400 --> 00:38:01,960 Speaker 1: tight market and then it seems like it's hard to 610 00:38:02,040 --> 00:38:05,319 Speaker 1: get out of that. I guess this is the question, right, 611 00:38:05,360 --> 00:38:08,480 Speaker 1: like whether or not higher prices do incentivize more production, 612 00:38:08,760 --> 00:38:11,640 Speaker 1: or whether or not something has fundamentally changed. It really 613 00:38:11,719 --> 00:38:13,880 Speaker 1: is striking. I mean, I'm I was always sort of 614 00:38:13,920 --> 00:38:16,520 Speaker 1: a lawyer. They're like, Okay, you have short cycle, short 615 00:38:16,680 --> 00:38:19,040 Speaker 1: cycle commodities and long ones. So it's like, you can 616 00:38:19,120 --> 00:38:21,560 Speaker 1: start to ramp up oil production pretty fast right now. 617 00:38:21,600 --> 00:38:24,520 Speaker 1: If you added some more rigs, you could theoretically add 618 00:38:24,600 --> 00:38:28,680 Speaker 1: acres to agriculture and get more weak corn and soy, 619 00:38:29,160 --> 00:38:32,280 Speaker 1: you know, in a sort of somewhat seasonal, timely manner 620 00:38:32,360 --> 00:38:34,759 Speaker 1: in a few months. But I was always sort you know, 621 00:38:35,080 --> 00:38:37,880 Speaker 1: I understand that it's not an overnight or even one 622 00:38:37,960 --> 00:38:40,360 Speaker 1: year process to get a new mind online. But the 623 00:38:40,400 --> 00:38:42,600 Speaker 1: fact that like we're now in this two year commodity 624 00:38:42,640 --> 00:38:47,320 Speaker 1: of bowl market and we're still haven't seen any groundbreaking 625 00:38:47,360 --> 00:38:50,880 Speaker 1: on anything we might need even higher prices yet. And 626 00:38:51,080 --> 00:38:53,400 Speaker 1: than given that that was pretty straight is like it 627 00:38:53,480 --> 00:38:54,920 Speaker 1: used to be nine months and now it might be 628 00:38:55,000 --> 00:38:58,640 Speaker 1: three years. That like you can start to see why 629 00:38:58,680 --> 00:39:01,319 Speaker 1: this could be. As you know, Jeff said the last 630 00:39:01,320 --> 00:39:03,239 Speaker 1: time we talked to him, the tightest commodity market we've 631 00:39:03,280 --> 00:39:05,799 Speaker 1: ever seen. It also kind of begs the question of 632 00:39:05,800 --> 00:39:09,760 Speaker 1: whether or not you need some sort of stability mechanism there. So, 633 00:39:10,080 --> 00:39:12,320 Speaker 1: you know, the oil and gas market has Opeque, which 634 00:39:12,400 --> 00:39:14,960 Speaker 1: has at various times been described as the central bank 635 00:39:15,080 --> 00:39:19,240 Speaker 1: for for crude oil. And I wonder if you had 636 00:39:19,360 --> 00:39:24,680 Speaker 1: something to sort of soften some of those troughs and 637 00:39:24,960 --> 00:39:29,000 Speaker 1: peaks or just try to offset human nature, right, and 638 00:39:29,000 --> 00:39:32,120 Speaker 1: then the fear greed cycles, I don't, Yeah, that's probably 639 00:39:32,239 --> 00:39:36,160 Speaker 1: it's Yeah, the lithium chart, by the way, that it's insane. 640 00:39:35,400 --> 00:39:39,399 Speaker 1: I hadn't realized. I didn't realize either that lithium chart 641 00:39:39,480 --> 00:39:43,279 Speaker 1: is completely nuts and yeah, and so like also I 642 00:39:43,320 --> 00:39:45,799 Speaker 1: thought his point was really interesting about like how the 643 00:39:45,960 --> 00:39:49,000 Speaker 1: end users of copper, for as important as it is, 644 00:39:49,880 --> 00:39:52,040 Speaker 1: it's not the key. And so it's like you could 645 00:39:52,040 --> 00:39:54,600 Speaker 1: have like one, I don't know, triple of the copper price. 646 00:39:54,719 --> 00:39:56,320 Speaker 1: It's not going to affect the price of a tesla 647 00:39:56,400 --> 00:39:58,560 Speaker 1: that much, right, Right, And so you get in this 648 00:39:58,680 --> 00:40:01,840 Speaker 1: situation which like, well, it's not going to discourage any buyers, 649 00:40:01,840 --> 00:40:04,480 Speaker 1: and so the demand just keeps going straight up. Anyway, 650 00:40:04,640 --> 00:40:06,759 Speaker 1: so much in there, and I've we got to do more, 651 00:40:06,840 --> 00:40:09,440 Speaker 1: like on the whole talent thing, like all these people 652 00:40:09,440 --> 00:40:12,400 Speaker 1: who are like I think, yeah, I think this is 653 00:40:12,440 --> 00:40:14,400 Speaker 1: exactly what it is, right is you think of it 654 00:40:14,440 --> 00:40:17,760 Speaker 1: as a market, but ultimately the decisions that are impacting 655 00:40:17,800 --> 00:40:20,920 Speaker 1: the market are being done by actual people. And so 656 00:40:21,120 --> 00:40:23,640 Speaker 1: we need to talk to like the head of a 657 00:40:23,680 --> 00:40:27,080 Speaker 1: mining company and ask them why don't you drill more? 658 00:40:27,400 --> 00:40:29,200 Speaker 1: Why don't you dig more? And we need to talk 659 00:40:29,239 --> 00:40:31,880 Speaker 1: to our minor, and we need to talk to the 660 00:40:31,960 --> 00:40:35,040 Speaker 1: Dean at the Colorado School of Mine, Texas A and 661 00:40:35,239 --> 00:40:39,640 Speaker 1: M about like our students excited about going into mining again. Yeah, 662 00:40:39,719 --> 00:40:41,960 Speaker 1: I think we should do that, all right? All right? 663 00:40:41,960 --> 00:40:43,719 Speaker 1: Should we leave it there? Let's leave it there. This 664 00:40:43,760 --> 00:40:46,600 Speaker 1: has been another episode of the All Thoughts podcast. I'm 665 00:40:46,640 --> 00:40:49,120 Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy 666 00:40:49,160 --> 00:40:51,719 Speaker 1: Alloway and I'm Joe Isn't All. You can follow me 667 00:40:51,920 --> 00:40:55,880 Speaker 1: on Twitter at the Stalwart, follow our producer Carmen Rodriguez 668 00:40:56,040 --> 00:40:58,800 Speaker 1: at Carmen armand follow the Bloomberg head of podcast for 669 00:40:59,000 --> 00:41:02,480 Speaker 1: Shsica leaving at Francesca Today, and check out all of 670 00:41:02,480 --> 00:41:06,320 Speaker 1: our podcasts at Bloomberg under the handle at podcasts. Thanks 671 00:41:06,320 --> 00:41:06,800 Speaker 1: for listening.