The copper price started 2021 at around US$8,000/t, increasing steadily throughout the first five months of the year. Copper prices hit record highs in May, with the monthly average AME Europe and Asia copper prices increasing to US$10,193/t and US$10,252/t, respectively.

Copper prices retreated from June to September as China’s recovery lost steam, with headwinds from repeated Covid-19 outbreaks, energy shortages and debt crises at big corporates. Meanwhile, surging energy and raw materials prices, environmental curbs and power rationing weighed on global industrial production.

Prices soared again to near-record levels in mid-October as copper stockpiles plunged across global exchanges. The dramatic drop in LME copper stocks began in August and accelerated in October. The proportion of cancelled warrants gradually increased during this period, reaching 92.2% in mid-October, which pushed the LME available inventory to its lowest level since 1974.

In November and December, copper prices pulled back from their mid-October highs as tightness on exchanges eased and attention refocused on the increasingly strained global economy, with major concerns over continued high inflation levels, the global energy crisis and slowing China growth.

TC/RCs

Spot treatment and refining charges (TC/RCs) fell to a 10-year low of around US$25/t and ¢2.5/lb at April-end due to tight concentrate supplies resulting from pandemic-related disruptions in major copper-producing countries. They then rebounded to US$46/t at June-end and continued to increase to above US$60/t at August-end. The increase was driven by China's Copper Smelting Purchasing Team's decision to cut concentrate purchases, an increase in supply from new mines and expansion projects, and pandemic-related disruptions lessening. Spot TC/RCs stayed between US$60/t and ¢6.0/lb and US$65/t and ¢6.5/lb between September and December.

In December, Freeport-McMoRan and major Chinese copper smelters agreed on annual TC/RCs of US$65/t and ¢6.5/lb for copper concentrate supply in 2022. The settlement snapped a six-year run of declines in annual benchmarks since 2015, being 9.2% higher than the 2021 benchmark of US$59.5/t and ¢5.95/lb.

New Mines and Expansions

Several new mines and expansion projects ramped up production during 2021. Ivanhoe Mines and Zijin Mining’s Kamoa-Kakula mine started production from its phase one 3.8Mtpa concentrator in May. Phase one is forecast to reach full capacity in 2022, producing 200ktpa of copper in concentrate. The 7.6Mtpa Phase two is under construction and is expected to start production in 2022, adding 200ktpa of copper production. The Kamoa-Kakula project will continue to expand in phases and finally reach a processing rate of 19Mtpa. The 19Mtpa scenario would position Kamoa-Kakula as the world’s second-largest copper mine, with peak production of more than 800ktpa.

In Chile, the Spence Growth Option (SGO) achieved first copper sales, on schedule, in March, following first production in December last year. The SGO will extend the Spence mine life beyond 2070. The ramp-up to full production at SGO is expected to take approximately 12 months, following which Spence is forecast to average 300ktpa of production (including cathodes) over the first four years of operation.

In Peru, Minsur’s 60%-owned Mina Justa mine shipped the first batch of copper concentrate in July. At full capacity, Minsur aims to produce 51ktpa of copper in concentrate from a 6Mtpa concentrator and 42ktpa of copper cathode from a 12Mtpa oxide SX/EW plant.

In Indonesia, work to ramp up underground mining operations at Grasberg mine is advancing on schedule, and copper production from the mine is expected to reach 603kt in 2021, a rise of 64.4% from the 2020 level of 367kt. The Grasberg and DMLZ block caves are expected to fully ramp up by 2023, when Grasberg should produce approximately 770ktpa of copper and 1.8Mozpa of gold. The next development of block cave mining will be at the Kucing Liar deposit. Freeport anticipates that the development of Kucing Liar could start as early as 2022, with ramp-up commencing in 2028.

In Botswana, the Khoemacau copper mine produced first concentrate in late June. It is expected to ramp up to its full capacity of 60-65ktpa of payable copper and 1.9Mozpa of payable silver in 2022. Khoemacau is planning an expansion project which is expected to increase production of payable copper and silver in concentrate to 125ktpa and 4.5Mozpa, respectively.

In the DRC, China Molybdenum started trial production from the 10ktpd expansion project at the Tenke Fungurume mine (TFM) in July. The project is expected to produce an additional 88.5ktpa of copper and 7.28ktpa of cobalt. China Molybdenum also approved US$2.51bn this year to double copper and cobalt production at the TFM. The project is expected to be completed by 2023.

SICOMINES in the DRC is also ramping up phase two at its namesake mine. The first batch of copper cathode from phase two was produced in early July. After the second phase reaches full capacity, SICOMINES is expected to produce 253.5ktpa of copper cathode and 5,180tpa of cobalt hydroxide.

In Kazakhstan, KAZ Minerals officially opened the US$1.2bn Aktogay expansion project in October. The second concentrator will double the sulphide ore processing capacity at Aktogay to 50Mtpa, with total copper production forecast to increase by 80ktpa to 170ktpa.

In Serbia, Zijin Mining opened the Upper Zone of the Timok mine in October. The Upper Zone is designed to process 3.3Mtpa of ore and produce 91ktpa of copper and 47koz of gold in concentrate at full capacity. Meanwhile, Zijin is expanding Bor Group’s four copper mines and a smelter in Serbia. Copper in concentrate production from the Bor mines is planned to increase from 45ktpa to 120ktpa, while refined copper production from the smelter and refinery is planned to increase from 45ktpa to 180ktpa.

New Smelters and Expansions

Greenfield and brownfield copper smelting projects advanced quickly in 2021. Freeport-McMoran in October began constructing its new US$3bn smelter in Gresik, in the province of East Java, Indonesia, which will have a processing capacity of 1.7Mtpa of copper concentrate. Freeport is also expanding its existing smelter in Gresik, lifting the smelter’s concentrate treatment capacity by 300ktpa, or 30%. These two projects are expected to start operation in late 2023 or early 2024.

In the DRC, Zijin Mining in November made a US$769m investment decision for the construction of a greenfield 500ktpa copper smelter at its 39.6%-owned KamoaKakula mine. Construction of the plant is expected to take three years. The plant will process most of the copper concentrate forecast to be produced by Kamoa-Kakula’s Phase 1, 2 and 3 concentrators.

Aurubis in November approved the construction of a secondary smelting plant in the US state of Georgia with an investment of about EUR300m (US$344m). The new site, located in Augusta, will have the capacity to process up to 90kt of complex recycling materials. It will be the first secondary smelter for multimetal recycling in the US. Construction will start in the summer of 2022, with commissioning planned for the first half of 2024.

China, the world’s largest refined copper producer and consumer, has largely completed its recent round of new copper plant development and will step into a ramping-up stage in the next five years. Only one smelting project was scheduled to start up this year—Daye Nonferrous’s 400ktpa Hongsheng smelter. However, the project has been pushed back from late 2021 to mid2022 because its imported equipment or major parts have been delayed due to the impacts of the Covid-19 pandemic.

Fangyuan Nonferrous recommenced its 300ktpa production line in October. Fangyuan has a 1Mt nameplate copper concentrate treatment capacity, but it has operated at a very low level for the past six months after the 300ktpa production line was suspended due to liquidity problems.

Mergers & Acquisitions

With price averages considerably higher in 2021, it was a relatively quiet year for copper asset transactions, with most owners electing to hold onto assets in order to take maximum advantage of high positive cash margins. The largest M&A action in 2021 was Sandfire Resources’ acquisition of Minas De Aguas Teñidas (MATSA) for a total consideration of US$1.865bn. Sandfire Resources entered into a binding sale and purchase agreement with Trafigura and Mubadala Investment Company in September to acquire MATSA. The MATSA mining complex in Spain comprises three underground mines feeding a 4.7Mtpa central processing facility producing 100-120ktpa copper equivalent. The transaction is expected to be completed in the March quarter of 2022. Once complete, Sandfire said it would be one of Australia's largest copper producers, producing up to 194kt of copper equivalent in the 2022 financial year.

South32 in October reached agreements with Sumitomo Metal Mining and Sumitomo Corporation to acquire a 45% interest in the Sierra Gorda mine in Chile for an upfront cash consideration of US$1.55bn. South32 also agreed to provide Sumitomo with a contingent price-linked consideration of up to US$500m, payable at threshold copper production rates and prices in the years 2022-2025. Completion of the transaction is expected in early 2022, subject to the satisfaction of the remaining conditions.