Investors often focus on how much demand there is for something rather than on supply. The assumption is that if people want it, the market will find a way. But there is one story developing regarding mining stocks, where the supply question is increasingly being considered: Copper.
The last few years have seen a significant increase in copper demand. The growth in electrification and renewable energy, not to mention the growth of artificial intelligence and the impact this has had on new data centres and other digital infrastructure being constructed, has meant that the need for substantial quantities of copper has arguably never been greater. But as that need has grown, copper supply has largely lagged behind it.
Generation Mining (TSX: GENM) is one company looking to capitalise on this challenge. Its Marathon Copper-Palladium Project in Ontario is designed to bring new supplies of both metals to market. But its development also illustrates just how difficult it can be to increase mining supply.
The world needs copper, but getting it is harder According to data provided by Generation Mining, copper demand is expected to grow from 28 million metric tonnes in 2025 to 42 million metric tonnes in 2040. Source: Generation Mining company presentation However, it also highlights that without brand-new supply, that demand is likely to be matched by supply, with production peaking in 2030. Another core problem is that new copper supply can’t be added easily.
Firstly, new copper deposits need to be found, and then a copper mine needs to be approved, studied, and constructed. This means that even before the first material can be mined, many years have passed, potentially over ten years. So, if a new mine wants to help add copper supply to meet the level of demand in 2030, it already has to be far along in the process of developing its mine.
Bringing a new copper mine online can be difficult There are numerous barriers to bringing new copper or palladium supply onto the market. New mines require finding economically viable deposits, completing feasibility studies, obtaining permits, securing hundreds of millions or even billions of dollars in funding, constructing a mine, and finally starting to operate it. Source: Generation Mining company presentation Emphasising this is the fact that many copper mines which have moved through the process of development have eventually been acquired by larger mining companies such as Eldorado Gold (TSX:ELD) , BHP Group (ASX:BHP) , Lundin Mining (TSX:LUN) and Fortescue (ASX:FMG) who have all acquired smaller mining companies in the last year.
Copper demand may be strong, but with supply lacking, those who are closest to be able to add new supply in this market have an advantage. Can Generation Mining become part of the solution? Generation Mining’s core project is its Marathon copper and palladium project in Northwestern Ontario.
This region is already home to meaningful copper projects and, as such, already has a lot of the necessary infrastructure required, including a serving rail line. Generation’s mining project has already completed major steps on the path to production, including feasibility studies, construction permit approval, financing, and construction. Importantly, Generation is expecting commercial production to begin in the third quarter of 2029, just before the year when Generation expects copper supply to start declining.
The mine is expected to produce around 42 million pounds of copper (approximately 19,000 tonnes) and 168,000 ounces of palladium annually, at an all-in sustaining cost of US$2.05 per equivalent pound of copper and US$781 per equivalent ounce of palladium. Generation expects the mine to pay itself back within 2 years of operation. If Generation can successfully build its mine and produce, it could become an important part in solving what is currently a major challenge for the industry, closing the gap between copper demand and copper supply.
Now, it is up to it to prove that it can. New: Manage All Your Stock Portfolios in One Place We've created the ultimate portfolio companion for stock investors, and it's free. • Connect an unlimited number of Portfolios and see your total in one currency • Be alerted to new Warning Signs or Risks via email or mobile • Track the Fair Value of your stocks Try a Demo Portfolio for Free Have feedback on this article? Concerned about the content?
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Source: Simply Wall St
