Copper prices breached the US$10,000 per ton mark again this week, propelled by projections of tightening global supplies and heightened demand from the electric vehicle and power sectors, which offset weakening demand from China, the largest consumer of the red metal.

Copper has seen a 16 per cent increase in price this year, driven by anticipated shortages and aging mines struggling to meet demand. The high prices have been a boon for copper producers, such as Torex Gold Resources Inc., which is set to greatly increase its production of the red metal. According to chief executive officer Jody Kuzenko, “We're so pleased to be in the copper story. When [our] Media Luna [project] is up and running it will produce about 45 million pounds of copper a year.”

Media Luna, in Mexico, is expected to come online at the end of the year, by which point copper prices could be as high as $12,000 per ton, according to Goldman Sachs. The bank cites persistent supply challenges and potential severe shortages by the end of the year as bullish indicators, and Ms Juzenko holds a similarly positive point of view, “We like copper. We're quite bullish on it. I see no scenario where supply meets demand over the next 10 to 15 years.”

The Panamanian problem

One of the factors contributing to those supply challenges is a lack of copper coming out of First Quantum Minerals Ltd.’s Cobre Panama mine, which has been closed since November following a court ruling and subsequent civil unrest in Panama over the company’s mining contract.

The country’s president-elect, Jose Raul Mulino, has stated he will not discuss reopening the Cobre Panama copper mine, which accounted for over 1 per cent of the world’s supply of copper unless First Quantum drops arbitration claims against the nation. Mr Mulino's stance follows a Supreme Court decision that found First Quantum's mining contract fraught with legal issues. He said on the "Panama en Directo" radio show that a new operating model would be required for any future negotiations.

First Quantum has sought $20 billion from Panama through arbitration under a free trade agreement with Canada. Mr Mulino emphasized that he would not engage in discussions while the arbitration was pending and insisted that any solution would involve changing the existing contractual framework. Analysts predict prolonged negotiations, possibly extending over a year before any potential reopening of the mine.

Possible M&A in copper

There have been reports that another major mining company could snap up Cobre Panama – Barrick Gold Corporation is said to be one such firm, but chief executive officer Mark Bristow has firmly rejected the idea. Nonetheless, mergers and acquisitions are on the table in the copper space, the largest of which is BHP Group Limited’s move for Anglo American Plc.

BHP’s acquisition proposal has electrified the sector, prompting other major miners to contemplate counter-offers, while financial advisors zealously pitch various strategies. The mining sector, known for its intense M&A activity featuring bidding wars and strategic takeovers, finds all major players eager to augment their copper resources, which is a primary motive behind BHP’s bid for Anglo.

Jamie Beck, chief executive officer of Filo Corp., which has BHP as its second-largest shareholder, told BNN Bloomberg this week that “We've seen [BHP’s] approach to Anglo and I think that just heightens everyone's desire to grow in copper. Whether they're successful in this proposed takeover attempt one way or another, I think this is going to kick-start a bunch of M&A, and it's really great for all of us to have copper in the headlines, and highlights how hard it is for companies to grow their copper business.”

At the moment BHP’s largest competitors, Rio Tinto Group and Glencore Plc, are currently observing from the side-lines. These firms are strategically poised to capitalize on potential divestitures from Anglo’s portfolio as BHP’s acquisition attempt progresses, rather than presenting competing bids for the whole entity.

This takeover saga has prompted a heightened evaluation of the mining landscape, with investment banks not yet aligned with BHP or Anglo pitching potential strategic moves to other significant players in the industry, such as Freeport-McMoRan Inc. and Vale SA. The outcome of BHP’s bid could redefine the industry’s hierarchy, potentially making BHP the dominant force with a highly desirable mix of copper and iron ore assets, thereby reshaping competitive dynamics and strategic opportunities across the sector.

Copper traded at just over $9,904 a ton on the London Metal Exchange at market close on Friday.