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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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This International Infrastructure Deal Could Change Global Copper

Drama continues in the global copper sector this week. With key LatAm producer Southern Copper seeing workers end a strike at the Toquepala mine in Peru — but Freeport McMoRan announcing it may suspend expansion plans at its Grasberg, Indonesia mega-mine over regulatory uncertainty.

And elsewhere in the world, one little-followed event may have a bigger impact than any of those happenings.

A long-awaited power project in one of the world’s most prospective copper centers.

That’s the Democratic Republic of Congo. The world’s sixth-largest copper producing nation — but a place where development of a massive in-ground resource base has been hampered by limited access to power.

But the electricity challenge here could at least partly solved now. With Congo’s state utility SNEL reportedly signing a term sheet to import surplus power from neighboring South Africa.

The scope of the deal is large. Under the term sheet, SNEL would bring in 200 megawatts of power from South African utility Eskom.

That amount would be a significant boost to Congo’s overall power supply — which is currently running about 1,200 megawatts. In fact, local sources said the South African imports could increase available electricity across the country by as much as 20 percent.

Such a rise in power to mines would have a major effect on copper production. Congo’s output has been flatlined since hitting a record 1.03 million tonnes in 2014 — largely because of a 750 megawatt power supply deficit across the country. Related: Is Canada’s Oil Industry Regaining Momentum?

Miners have been working on dedicated power projects to meet this shortfall. But imports would bridge the gap much more quickly than expected — with officials saying power could start flowing from South Africa as early as June.

If extra power does arrive that quick, it would de-bottleneck a lot of new mining capacity. Allowing Congo producers to ramp up supply over the next few years.

That would be good news for those companies, and for copper buyers globally. It would also affect the cobalt market, with 50% of global production coming as by-product from Congo copper ores. Watch for news from utilities SNEL and Eskom on finalizing the import contract.

Here’s to turning on the lights.

By Dave Forest

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