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Is copper on the rebound as new fuel?

As global copper prices continue firming and demand of the commodity likely to surge on massive capital expenditure on the green projects, Zimbabwe has set sights on resuming copper production by 2023, a Cabinet minister said.

While oil remain a key energy sector, analysts believe the use of copper will play a critical role in quest to replace internal combustion engine vehicles with electric cars.

In May this year, Goldman Sachs described copper as “the new oil”, suggesting that the mineral is now strategically most important resource in the commodity mix.

Nick Snowdon of Goldman Sachs Research noted the key areas of the green economy — whether electric vehicles, electric vehicle infrastructure, renewables, wind turbines, solar — the use of copper will be much higher than in the current economies. But he also warned of the supply side “that is completely under prepared.”

Zimbabwe last produced copper at Mhangura around 2000 before the mine was closed due to subdued international prices. 

The depth levels of the mine increased costs of production. Copper is currently trading at US$10 000 per tonne on the London Metal Exchange, the highest in a decade. 

In April last year, it was trading at below US$5 000, the same price it was selling in November 2015 and October 2016.

Goldman Sachs has projected the price would hit about US$15 000 per tonne by 2025.

This week, Zimbabwe’s Cabinet approved the Greater Chinhoyi Copper Development Programme, which aimed at operationalising six copper projects by 2023. 

Additional three new projects will have resource definition being undertaken.  

The Ministry of Mines and Mining Development will be submitting proposals of six projects to be revived including the re-treatment of the Mhangura and Alaska copper dumps while Angwa Mine in Chinhoyi and Shamrock Mine in Hurungwe will be re-opened. 

Proposals on other two unidentified projects will be presented in due course, Information, Publicity and Broadcasting Services Minister Monica Mutsvangwa, told a post Cabinet briefing on Tuesday.

Govine Enterprises will partner the Zimbabwe Mining Development (ZMDC) to reopen Shamrock Mine and is expected to resume operations by end of 2022, employing about 4 500 people and generating as much as US$32 million per annum.

Hongua International has entered into a joint venture with ZMDC to re-open Angwa Mine and the Chidzikwe dump which will be operational by mid-2022, employing an estimated 400 people and generate an estimated US$33 million per annum.

Zimbabwe is targeting to boost mineral exports to US$12 billion by 2023 and currently, gold, platinum, ferrochrome, diamonds and nickel constitute the majority of exports.

Green capex boom

Under the Paris accord, nearly 200 countries pledged to keep warming to below 2 Celsius, and strive for a ceiling of 1,5 Celsius by 2030 through Nationally Determined Goals (NDGs). The NDCs are climate action plans or commitments by signatories to the Paris accord to cut planet-warming emissions over the next decade.

“Well, I think when you look at the Paris Climate goals and, ultimately, the path to net zero emissions, if that’s going to be achieved predominantly via abatement; that is via electrification and renewable energy; then copper is going to be the most critical raw material to achieving that goal because it is the most cost effective conductive metal. It’s used in capturing, storing, transporting electricity,” said Snowdon.

“But I think the other parallel to oil, and certainly oil in the 2000s, relates to the lack of supply side preparation for this demand boom. 

“And I think that’s equally important to why we are talking about copper. Because I think you’ve got this very strong green demand story. 

“But you also have a supply side that’s completely under prepared. There’s no real investment in new mine projects. And so, essentially, the copper market is sleepwalking into, you know, a really sizable supply crunch akin to what we saw in the oil market back in the 2000s,” added Snowdon.

Zimbabwe recently launched a pilot project for lithium, a critical gradient in the production of batteries for electric cars. 

On Wednesday, the European Union proposed to phase out new petrol and diesel cars from 2035 as it looks to switch to zero-emission electric vehicles as part of its commitments to combat global warming. BusinessWeekly

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