Copper prices seen staying above $14,000; Hindustan Copper banks on cost discipline for expansion

The global benchmark copper prices are anticipated to remain above the $14,000-per-tonne threshold, according to Hindustan Copper's Chairman and Managing Director, Anupam Misra. Speaking to The Hindu, Mr. Misra explained that the current surge in copper prices is primarily due to a widening demand-supply gap. Presently, global copper demand stands at approximately 28 million tonnes, while the supply is around 23 million tonnes.

This discrepancy in supply and demand is expected to keep benchmark prices at the London Metal Exchange above $14,000 per tonne. At the time of writing, the benchmark copper prices were trading 0.05% higher than the previous close at $14,508.85 a tonne. Hindustan Copper's earnings before interest, taxes, depreciation, and amortization (EBITDA) margin currently sits at more than 50%, indicating that the company's costs are less than 50% of its revenue.

This means that even if benchmark prices were to fall, Hindustan Copper would still remain profitable. The company has an ambitious capital expenditure program of over ₹7,000 crore over the next five to six years, aiming to expand its mining capacity to 12.2 million tonnes per annum (MTPA). This expansion involves modernizing existing operations, adding new capacity, and replacing outdated equipment.

Mr. Misra expects unit costs to decline further as production scales up. Hindustan Copper has also set intermediate milestones towards its 2030 targets to ensure the expansion program stays on track. The company plans to focus on brownfield development at its Khetri, Kolihan, and flagship Malanjkhand mines, along with further exploration.

Exploring new areas is crucial for strengthening India's resilience amidst evolving global copper dynamics, with significant efforts being driven by public-sector entities. However, private sector participation in exploration is limited due to the lengthy gestation periods of 15 to 18 years associated with mining projects. Hindustan Copper is also exploring the acquisition of four copper blocks in Chile, the world's largest copper-producing country.

While regulatory requirements make this a time-consuming process, the company is actively working on forming a joint venture in India and Chile to diversify risk.