January 30, 2023

America’s reliance on foreign metals shows no sign of slowing. Last Thursday, the White House issued a 20-year moratorium on new mining in northern Minnesota. This moratorium effectively blocks Antofagasta Plc's anticipated Twin Metals copper and nickel mine project from going forward. The leases on this proposed mine have had a turbulent history. Last Wednesday, the Department of Interior pulled the leases, claiming that the Trump administration had reinstated them “in error.” The leases were initially pulled by then-President Obama in 2016; however, Trump reversed that decision. According to their website, the company projected the mine would process approximately 18,000 mt of ore per day that would have produced separate concentrates – copper, nickel/cobalt, and platinum-group metals.

According to the New York Times, the US was “nearly self-sufficient” for its copper usage until the 1990s. However, because older mines have closed or become depleted, the US now relies on foreign supply for about half of its copper usage. This reliance on imports could increase to nearly two-thirds of usage by 2035, according to S&P Global. (Sources: Reuters, Bloomberg, S&P Global, New York Times, Antofagasta)

Are you an end-user of either copper or nickel? AEGIS is very adept at developing strategies for both metals. For example, stainless steel producers might consider using a costless collar to hedge their nickel input costs. In this case, a “zero-cost collar” creates a maximum and minimum metals price for an end user, as they would simultaneously buy a call option (creating a cap, or maximum) and sell a put option (creating a floor, or minimum). The call and put premiums offset, making the construction costless. It is popular because of the upside price protection, but you sacrifice access to much lower prices if prices should fall. Such positions are standard for consumer hedging but can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (1/30/2023)

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Price Indications

Today's Charts

AEGIS Insights

01/25/2023: AEGIS Factor Matrices: Most important variables affecting metals prices

01/24/2023: Peruvian Protests Could Support Copper Prices

01/11/2023: Nickel Prices Could Remain Volatile Into 2023

12/21/2022: Nickel Prices Rally While 2023 Supply Picture Remains Unclear

12/14/2022: Could Peruvian Protests Affect Zinc Production or Prices?

1/29/2023: China's MMG flags production halt at Las Bambas in Peru due to protests

1/27/2023: Norway finds 'substantial' mineral resources on its seabed

1/27/2023: Electric vehicles throw palladium's mega-rally into reverse

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