The global copper market has been experiencing significant turbulence in recent times, with a number of macroeconomic trends affecting copper stocks negatively. Despite holding good value and continually making progress on exploration projects, copper stocks have been sinking due to various geopolitical factors.
Turbulence in the Global Financial Markets
One of the main factors affecting the copper market is the recent bank failures of Signature Bank and Silicon Valley Bank in the United States. These failures have created a sense of uncertainty in the financial markets, leading investors to pull out of risky investments such as copper stocks. As a result, many copper companies have seen a sharp decline in their stock prices, despite their solid fundamentals.
Another factor affecting the copper market is the ongoing geopolitical whiplash from many regions. The global pandemic has created significant economic uncertainty, and many countries have responded by implementing protectionist policies that are hindering international trade. This has had a negative impact on the copper market, as copper is a vital component in many industries and is often used in international trade.
The ongoing war in Ukraine has also contributed to the negative sentiment in the copper market. The conflict has created a sense of political instability in the region, leading investors to pull out of investments in companies with significant exposure to the region. This has led to a decline in the stock prices of many copper companies, despite their solid fundamentals.
High-Grade, Open Pit Copper Resource within Low-Cost Intensity Generate Unprecedented Economics
Despite these negative trends, there is still upside potential for investors who understand the potential of massive copper projects and the current opportunities in the market. One of the projects that could potentially benefit from the upside potential in the copper market is Solaris Resources’ (TSX:SLS) (OTCQB:SLSSF) Warintza project, located in southeastern Ecuador. The company issued a substantial 1.5 billion tonne copper resource last year, making it a size that would interest even the largest mining companies.
In fact, the resource size puts it in the same league as some of the largest greenfield copper mines to have gone into production this cycle, such as Teck Resources’ 1.7 billion tonne QB2 Mine and Anglo American’s 1.4 billion tonne Quellaveco Mine.
But more importantly – the resource included a high-grade starter pit of 280 million tonnes at 0.8% CuEq to front-end load the cash flows. This, along with the low-cost intensity in Ecuador, really drives robust economics and is the major differentiator between a deposit that gets developed rapidly, like Warintza, and one that stays in the ground for multiple cycles.
Analysts published that this starter pit of 280 million tonnes at 0.8% CuEq would generate a $50/t margin, which, at 40 million tonnes per annum, would generate $2 Billion per year of EBITDA for nearly 7.5 years within a nearly 40-year mine life. This translates into a capital payback period of two years, which is unheard of for a project of this scale.
In addition, the 1.5 billion tonne inventory primarily from the Warintza Central deposit is just the starting point – the Central deposit is surrounded by three adjacent discoveries with footprints of equal or larger size representing multiple times resource growth potential.
Copper’s Breakout in the Coming Decade
Despite recent turbulence in the global copper market due to geopolitical factors and macroeconomic trends, the potential upside for copper projects remains significant. Solaris Resources’ Warintza project in southeastern Ecuador is one such project that has the potential to become a significant near-term copper producer. With a massive copper resource and unprecedented economics, Warintza is well-positioned to take advantage of the rising demand for copper. As the global demand for copper continues to rise, investors should keep a close eye on Solaris Resources and the Warintza Project as potential sources of significant returns in the future.
Founder Dinis Guarda
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