Focus on gold and lithium as China sets sights on copper

It was gold price, lithium demand and China’s appetite for copper that dominated much of the discussion at Mines and Money Online Connect at IMARC this week.

Mines and Money Online Connect saw 90 mining companies, more than 600 investors and more than 2000 participants log on to hear mining executives and analysts discuss the next big thing for savvy investors in 2022.

Time to strike gold?

‘Frustrating’ sums up the 2021 gold price according to commodity discovery fund founder and chief investment officer Willem Middelkoop.

Middelkoop spruiked gold’s glittering upside during the Mines and Money gold outlook panel discussion.

The panellists suggested that with the gold price soaring to record highs, a gold correction was inevitable. Historically, gold price is linked to market volatility and the much of new money printed in the United States.

In 2022, panellists expect plenty of market volatility and money printing, with an overinflated US dollar set to weaken in value, and subsequently drive up the price of gold.

Through the Commodity Discovery Find, Middelkoop has studied the gold price in relation to increased money supply over the past decade.

“If you look at the current graph, the gold price needs to move back toward over $US2000 ($2678), and it should move toward $US8000 ($10,938)-$10,000 ($13,314) to be in line with money growth. If you look at that statistic, there is so much upside,” said Middelkoop.

“A doubling of the gold price within 12 months is easily possible,” said Middelkoop.

The need for speed

The US has the need for speed with car manufacturing adopting electric vehicles (EVs) at an accelerating rate. The rising demand for EVs, which is expected to surge to 10 per cent in global sales by 2025 according to Bloomberg New Energy Finance, will require startling quantities of lithium.

The price of lithium hydroxide continued to soar in 2021 and shows no sign of slowing down in 2022. Prices topped $US23,375 ($31,333) per tonne at the time of writing, which is up from a $US6,300 ($8,444) average per tonne in the September quarter of 2020.

During the Mines and Money battery metals session, Piedmont Lithium president and chief executive officer Keith Phillips said the EVs market is fuelling the demand for lithium hydroxide.

“I’ve always had the view that the market would speak, and the time would come, and it will,” said Phillips.

Phillips said Ford’s ‘Blue Oval City’ required 125,000 tonnes per year of lithium hydroxide to service its three battery plants, which surpasses the production capacities of all lithium projects currently planned in the United States.

“Tesla has been a leader here, but LG and General Motors are making big commitments. Everyone is talking about bringing more capacity to the US, which we desperately need, and even if we all succeed, we are still going to be short, and require lots of material from outside the US,” said Philips.

China’s quiet copper rush

Copper was the metal of the hour during the Mines and Money’s China commodities supply and demand outlook 2022 panel. Companies from Australia’s biggest trading partner are digging for strategic commodities to enhance diversification and survival in an uncertain marketplace.

Gold Mountains general manager Maggie Huang said sourcing and developing copper mines was critical to not only Gold Mountains, but to the Chinese economy.

“We see copper as a highly strategic metal for China, we are the largest consumer in the world. We consume half of all output of copper but produce only 20 to 25% of what we actually use,” said Huang.

Huang pointed out that whilst Australia and Canada represented stable and mature investment destinations in the past, “an investment is an investment”, and Chinese companies are now seeking new opportunities in other mining destinations.

As Africa and South America mature as mining destinations, Huang said emerging opportunities in Africa and South America could be more profitable and signify a more attractive investment than Australia or Canada.

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