The Supply Crisis No One Is Talking About (Uncut) 03-27-2025

The Supply Crisis No One Is Talking About | Ian Harris

What does the future of global economic growth look like? After the Trump inauguration, we’re talking with Ian Harris, CEO of Libero Copper. Welcome to the show. Nice to see you in person.

First in-person interview. We can revisit our last interview with Ian where we talked about the overall energy and commodity markets, commodities, base metals overall. But let’s talk about what’s happening with global growth this week.

This came in from S&P Global Research. This was a report dated December 31st, right before the New Year. It says here, copper market fundamentals, including supply and demand, will take a backseat to US trade policy, assuming Trump slaps broad tariffs on many of the country’s key trading partners, including Canada, for example.

We’re both based in Canada. Copper would suffer if Trump is serious about casting a wide net of import penalties, analysts said. The move could bolster the US dollar and sustain high interest rates as the Federal Reserve grapples with likely inflation.

All right. So, inflation, slower growth, stronger dollar, weaker copper. You agree? So, first of all, we’re talking copper price, right? Not equities.

And what you can see is around May of last year, there was a huge run in copper price, broke $5, all because there was a longer term supply demand focus. We had coppers in the new oil, there was a lot of kabang. And then all of a sudden, it was a more short term focus.

We saw, is it going to be a soft landing, hard landing? And then the tariff questions come up. A lot of different things came up and it was very short term focus that drove copper price. Copper price, too, over the last month or so, has also seen a nice bit of a rise because China economy is getting better, et cetera, et cetera, and you see the stimulus going back into copper price.

So, I would agree. Right now, the short term drivers are what are managing copper price, right? And I would even say that tariffs, that initial reaction is going to hurt global economies and copper price would go down as Dr. Copper. But on an equity side, and when a long term focus starts taking over is when you get back into, I have a lot of feeling right now that all that would stimulate investment into production chains and seeing money flow might have a massively positive impact on the equity side of the market, which it really, really, really, really needs.

So, it’s really interesting to watch and see how it plays out. What is really driving the price? Is it medium and long term, which I think is extremely bullish, or is it short term factors that are bumping it up and down and it’s that tug of war? Even after May of last year, you saw even the volume of trading of copper probably doubled since that big run up to $5, and that means there’s more volatility. There’s more of that tug of war going on, on short term indicators of where copper price goes.

So, it’s interesting because the report also says that the copper market suffered last year because of weakening Chinese economic growth. But the caveat here is that if Trump were to implement tariffs and slow down trade even more, China could stimulate the economy even more, and that could potentially be good for base metals. That is absolutely true.

China always has a big, big impact overall on where copper prices go. And so, it’s health, but I think in a battle over tariffs, which I think it will be interesting to see how it even plays out. Is it just a threat to get everybody to sit down on the table and start these discussions and how it’s actually going to play out? But it’s the anticipation has a significant impact on price.

Now, I wonder, because the copper price is $4.3 a pound, it was at $5 earlier last year. I wonder if it’s a barometer for future economic growth, meaning the markets have already priced in the most growth middle of 2024, and now that we’re into 2025, there’s going to be a little bit slower growth for whatever reason. But I do think if you look at the beginning of last year, the big drive in copper was not because everybody was super happy over the world economy chumming.

It was because the overall narrative of supply-demand crunch. And also interesting, despite the drop in copper price and a lot of volatility up and down on short-term news, China is bad, China is good, tariffs, no tariffs, hard landing, soft landing, these type of narratives really pulled up and down on copper price in the second half of last year. But if you actually look at the physical market, right, there is an overall, the premiums paid on processing copper concentrate have been so low.

There’s so much tightness in the physical market. So there’s real true supply-demand issues going on in the market itself. It’s just not playing out overall in the price, and it’s more of a short-term purpose.

There’s a report on copper concentrates. Commodity Insights has forecast a growing surplus in refined copper for 2025, but a deficit in copper concentrate markets amid scant mine supply. Can you comment on that? Well, you actually have to think, well, we’re in a market where things are so tight, where you have excess refined, under concentrate.

You’re always playing a very fine line. It’s a very tight- How does that happen when we have a dichotomy there? Well, what happens is you have a country that sees the future as electric vehicles. We need more smelting capacity.

We need to be able to drive it, because in China, economics are more political, and everybody is more tied closely together. They saw a big anticipated need for more refined copper. They put in more capacity, but then the concentrate is not there.

There’s a little bit of extra capacity anticipating what’s coming up in the future, but the supply is not there. Now, I want to go into a scenario where you put in tariffs, and there’s a disruption to those production chains. That means that you need excess capacity and able to manage those fluctuations.

I think that’s where the big thing, if tariffs really happen, and there’s a little bit of a shakeup, there’s a breakup of globalization, that’s where you’re going to see more volatility. Because the long-term vision of copper is that there’s going to be a supply crisis, you’ll see the price respond to simulate more investment. Describe this supply crisis for the audience who may not have seen our prior interviews.

What is this supply crisis we’re talking about? I’m going to say what caused it in the past, but really what’s some of the fundamentals. When it took a rise to $5, it was on the back of, we need to decarbonize the planet. We need more electricity.

We need more sustainable energy. All this requires more copper, but what’s really happened is over the last 20 years, every year, copper goes up 2%, call it, and supply goes up 2%. They kind of went hand in hand in hands.

The major use of copper is electrification. In developed countries, it’s just a replacement. China was a big growth many, many years ago when it took off and it was bringing its economy.

The middle class was coming up, more copper consumption. But you still have a lot of developing nations. They continue to pull, and that’s why you see a consistent growth.

But what’s happened is that it was layered on top of it, the energy transition, call it, which put more, but what’s really driving it, even though it’s not a huge percentage, it’s an insatiable percentage. It’s one that is not negotiable as the data center concept. It’s the AI concept being laid on top of a traditional use.

On the supply side, we had many things that have happened in the industry. In the 80s, for example, we had leaching of copper and it brought on a lot of new capacity. Mines got bigger.

Trucks got bigger. Mills got bigger. Everything got bigger.

So the majority of new supply actually came from brownfield expansion projects. But what’s happened is there’s been no discoveries, a lack of investment and exploration. I think I saw a statistic in the last 30 years, there’s been 250 discoveries.

In the last five years, there’s been four. There’s no new projects because the majority of the copper was always there. When the world needed three more percent, copper was there.

It was there. And it just milked it out of the same. But what’s happening is it’s running dry at the same time when you have new added layers of demand and it’s not there.

And BHP’s report was excellent. We basically need two million, as we need a million tons of copper each year, about 750,000 tons of copper for growth and 250 to replace what can no longer produce. And that’s a lot of copper.

That’s a million tons per year. Growth in which sectors? There’s the traditional growth that’s always there. Layered on top of it is the energy transition.

So electric vehicles and sustainable energy. Both require. So if you now use gasoline in your car before and now you’re using an electric vehicle, you’re converting energy that was in the form of hydrocarbons into electricity.

And electricity requires more copper. And if you’re going to produce that electricity through sustainable, it also uses more copper. So it adds an additional amount of demand into copper.

On top of that, the other big consumer of electricity are these new data centers and AI. And they’re adding on to the need for more electricity. The copper for these data centers, that’s primarily going to be used in the construction of these data centers themselves.

Or are we talking about the chips in these data centers? Like, where is this copper going to fit in? The majority would go into the distribution. So the distribution of electricity, when you have low voltage, you need copper. I don’t think it’s enough inside of chips.

It’s inside of the construction. And even construction is associated. You say, oh, we need this big building that’s using all this copper.

Where is all in the wires? I think 50% of the copper demand currently is still construction, right? Globally. Correct. But it’s still in the distribution of electricity in those construction projects.

I see. So copper, electricity, electricity, copper. It’s a very straight line, a very close correlation.

Can the industry replace copper with something else? So there are, in certain areas, there is a factor of replacement, right? But you’re going to a second best alternative, which would be aluminum, right? And normally, there’s some rules of thumb that aren’t playing out as much in the past. Aluminum can take up some of it. But would you put aluminum wires in your house? No, because you would be worried that your house is going to catch on fire.

The other replacement would be something like silver, right? But that’s extremely expensive, right? So that’s why it always has a tendency to be so closely correlated with the need for electricity. See, what I’m wondering is whether or not if Trump implements these broad-based tariffs on their trading partners, would that create a disconnect between the spot and the actual physical market? Suppose you were to trade between Mexico and the US. There’s a tariff on Mexico, silver, copper, gold, whatever metal coming out of Mexico, that’s going to have a tariff on it.

Producers might charge a premium to distribute the metal, but the underlying spot price doesn’t change. Could that happen? What I think is when you hear tariff, the fear and the impact on price is that it would be a global recession. That tariff war affects world economies.

World economies are affected. Dr. Copper is called Dr. Copper for a reason. Slowing of world economies means that copper price would go down, right? Because there would be less consumption of copper.

I think that is the very short-term driver. But because we work in a globalized world, any disruption created by tariffs on production chains creates a stimulus to create new production chains. That is, I think, in the medium and long term, it’s very bullish for commodities, right? Because you need more room.

You need more production in your backyard. You need new projects. And that is created through the new production.

What’s the best case for base metals this year? In terms of pricing or what would be? In terms of the driver and how that’s going to impact the price ultimately. What events or series of events do you see that could really put a bulk case on the base metals? So in terms of base metal pricing, I think some of the, for me, I look for my number one biggest catalyst. And this might be a little strange because I could say world economy getting stronger, et cetera, et cetera.

When I see a Microsoft, a Google, a Meta, whoever coming in, right, and putting investment directly into raw materials, you know you’re there, right? Because you know the system is broken and they are fearful that their growth will be affected by a lack of a proper supply chain. And it sounds crazy what I’m saying, but it was, you know, this last year too, they were willing to cut checks to buy nuclear power plants because they were fearful there wasn’t enough energy. The next thing down the line is going to be a lack of raw materials.

And in a tariff scenario, then everybody gets really worried because these guys need to grow. It’s a battle day to day. Every day they’re competing with each other, especially in terms of data centers and AI, they cannot get behind on those races.

And so I think that would be the biggest stimulus to kind of rip the blindfold off that’s more short term focused and see the bigger underlying problems in the commodities that we have today. So what does Libero Copper fit into this picture? Like, what are you trying to do to fill this supply gap? So for me, there is, because there’s been a lack of investment, there’s an overall lack of good projects. We know sooner or later, very soon, we’re going to need more greenfields projects.

The big companies still don’t want to do that, right? They’re like, oh, my goodness, we don’t want to go through that again. That was very painful. A lot of people got fired, et cetera, et cetera.

So there’s a lot of M&A going even here now, Rio Tinto and Glencore talking to each other again because they just say, man, I got to show growth to my shareholders. And the best way to show it is through M&A for me right now. It’s lower risk than actually taking on new projects.

So it’s only exacerbating the problem that we have that there’s a lack. In copper, most of the additional capacity has come out of brownfields. There’s been a lack of discovery.

So for me, it is getting that cycle correct. Having their very few high quality, near surface, great projects that exist. So it’s about advancing those projects, de-risking it, creating value for shareholders and every single one of those steps of the way so that when the day comes and it will come, then the value is actually realized in Makoa.

I don’t want to be looking for a new discovery because from discovery to production, it’s 18 years and I know it’s not going to be 18 years. I think it’s going to be playing out over the next couple of years, this whole scenario where projects will be properly evaluated. Are you planning to take this to production, Tim? I think that my mentality and my past history is getting it to the point where it can be constructed or starting the construction.

You cannot de-risk a project more than that. You can, but that is fully de-risked. You’re showing that it can be constructed and then that is the biggest fear of some of the bigger companies is you buy something for a billion dollars and you can’t even construct it.

So de-risking a project, getting it there. So my mentality is, and the way I always think every day is, how do I make this become a mine into the future? I act like I am going to build it, not independently if I’m the one who’s actually going to do it. I’m curious to get a CEO’s perspective of how you add shareholder value to an explorer, to a junior explorer.

You’re not producing yet and there isn’t steady cash flow. So how do you make the stock price trade, let’s say, a premium to NAF? What do you have to do for it to decouple from copper and say, look, if even the copper is going down, my share price is going up? Okay, so the famous Lassonde curve, it’s obviously an oversimplification. There’s three areas where you can make value for your shareholders as an exploration development company.

One is in discovery. Discovery hole, things go crazy, things go up, right? And you’re getting into building an initial resource. Then there’s kind of a drop down and then it transitions to what’s called project development.

And it’s basically saying, Makoa has four billion pounds of copper. Four billion pounds of copper is worth 16 billion dollars. But why are your value as a company not the same as 16 billion? But the closer you get to realizing that production, your valuation gets closer to that.

Yeah, why is the net asset value, so to speak, of the four billion pounds of copper so much higher than the current market capitalization? I mean, how do you bridge that gap? So the biggest one is slowly devalue, or sorry, slowly de-risking a project, demonstrating you’re making tangible steps, advancing and people can see how this one day can become a future mine. But if somebody were to purchase you today, I mean, don’t they assign a value based on everything you have and you’re indicating in reserves? Absolutely. There’s actually, when you’re in that stage, you normally, and you can do this, you can take different companies, you can say, what is their value per pound in the ground of resource? Once you’re into a proper project development, then there’s a transition where your NAV is versus an NPV, right? So it’s some multiplier divider, right? A 0.1, a 0.125, a 0.2, a 0.3 versus your NPV, it then becomes your NAV.

So your valuation is no longer based upon your resource because you have something more tangible to base it. And but along that line, too, then the multiplier goes up. They’re getting more value for what you have in the ground as you de-risk a project.

And so correct me if I’m wrong, but I think as you drill more, as you show more of your reserves as being actual potential, you’re de-risking the project and your share price climbs closer to that because it’s now more feasible to actually extract those resources. Whereas before, it was probably more unlikely you would ever see those resources. Is that the logic here? Yeah, the overall mathematical problem is pounds times x is value, right? Where x is some sort of de-risk factor.

So add more pounds, your value goes up or show it’s de-risked, you add more value. So in the case of Libero, we hadn’t drilled in two years. So just the fact that we’re drilling is showing that the project is actually advancing forward, creates value because you’re de-risking it just by the mere fact it is moving forward.

But obviously, there’s more things we can do. If I told you eventually we need mines, more mines. So the bigger the mine, the better because they don’t want to build 50 mines.

So scale is also important. Demonstrating scale, you get another checkbox. Moving forward and doing the initial engineering, there’s a checkbox.

Working out your relationships with the local community and the government is another checkbox. All these things are gaining confidence. And then that factor versus your risk should go down versus what you have and your value will go up.

I know that’s a simplification, but it pretty much outworks. You wholly own the McCoy project, right? Correct. There’s no JV or anything.

Correct. Okay. So what’s the next step in realizing the 4.6 billion pounds of potential? So if I’m taking a more closer view, I see a bifurcation in overall copper projects, right? There’s a value per pounds in the ground for a class A and there’s a value per pounds in the ground for a class B. So the big one for me is demonstrating it’s a class A. Moving it forward, drilling, showing its scale potential, but mostly moving it forward and showing its quality, right? I think that it would be a class A. You want to have a big resource, decent grade, near surface, and showing to market all of these things is what our near-term focus is with our current drilling that we’re doing.

And to be able to expand the resource, we’re sitting on 600 million tons and we want to be able to get it over that billion ton mark because that’s also a psychological checkbox to say, this is now a project of interest, right? Because you can only build so many projects. Scale is critical when it comes to copper because we need so much of it. By the time we realize it, people will want the quickest, easiest, fastest production and the most production that they can possibly have.

Can you give us a recent drill result or any other development that happened recently? So the big one is in the very beginning of the year, we put out 1100-meter hole and most people are used to seeing drill results of intervals within a drilling. We put out the entire hole, the grade of the entire hole. We showed mineralization from the surface all the way down to the bottom of the hole for the reason I just explained.

That helps demonstrate the scale potential that Mirador has, sorry, that Makoa has in the quality of project, that Makoa is the size and scale potential that it is, but it also de-risked our expansion because we have a 14,000-meter program that’s on the basis with some assumptions of the continuation of mineralization. So I call it a backbone hole too. So it’ll allow us to now go forward, start our drilling to expand the resource.

So how it can grow. We have a hole, we’re down about 500 meters today on our second hole that is doing the same, but moving to the west because another big part of our news last year was the redefinition of the forestry reserve boundary that pushed it further to the west that opens up the western side, which is open to further resource expansion. It was wonderful news, helps de-risk the project.

So right now, my number one goal is demonstrating the size and scale potential, demonstrating the quality of the project. Step two is to grow the resource and focus on maximizing the growth potential and hitting that psychological box because I know those will help the X multiplier gets better for the company and create some significant value for shareholders. Okay.

Now, what’s next in the timeline? What can we look forward to this year? Major milestones we should be watching for? Well, the big one is I think because we’ve just started initial drill results, our big catalyst for us. So we’ll be seeing one about on a month, month and a half basis as we are drilling, but then the next big catalysts are demonstrating how this resource will grow and we get larger and start getting those important thresholds because I think really when you look at from a technical standpoint, Makoa is near surface. It’s got good grade.

It’s showing the scale sitting on 600 million tons. People want to see it. Oh, can it get over a billion? Right.

So that will be an important checkbox because as I said, there’s a bifurcation and valuation. So it can be very binary and a yes or no on what kind of valuation you get in market. Investors are concerned about the prospect of or the risk of Latin American countries nationalizing mines, right? You’re based in Colombia.

I think the government has maybe floated this idea in the past. How significant is this risk? Well, I think the big one and I would like to go back to my history, right? I’ve worked in South America. My 30 years, 25 are working in South America and I’ve dealt through a lot of different political changes.

You definitely, definitely, definitely have to have a long term vision if you want to build a mine, right? You have to understand that you’re going to go through multiple presidencies. And for me, that’s a part of my vision right now. I know that in Colombia, you have a president that cannot run for election again.

He’s got two years left. And my assumption will be is the next guy who comes in will want to stimulate his economy. He will want to show he’s creating jobs, etc.

So for me, it’s very important to position Makoa to demonstrate that this is a big potential to create a lot of investment, bring a lot of foreign investment into your country, which means getting it highly de-risked and getting it closer to a production decision within a two year period. And so it’s playing those ebbs and flows are more important. Because the other thing I say is nationalism gets the saber rattled when people don’t understand the industry.

It sounds good. So the other thing I talk about is the generation of political will. And that means being extremely strong.

You don’t go against a project if all the whole community loves it. And you don’t go against a project if the nation likes it, right? So it’s building a national reputation, right? Which is more, do they like you or don’t like you? Locally, it’s about, do they feel a part of your project? So building that triangle is what drives political will over time. We’re lucky.

I’ve actually participated in the construction of one of the biggest copper mines built over the last 20 years. And one of the few that were Greenville projects was built. Ernie Mast, the director, did the same thing in Cobre, Panama.

So we’ve seen how these projects actually get across the finish line. And applying that to Makoa is critical. We’re thinking about it today and thinking two years, where do we want to be? So we’ve become a part of the positive solution of Colombia, right? And then so that’s more important.

I think nationalist conversations are when you’re just sitting around and hoping bad things don’t happen to you, right? You have to be a little bit more proactive when you have a project this size and scale. So last question. This is a hypothetical.

Suppose you raised a billion dollars, right? It’s given to you. Now, all of a sudden, you’re a billion dollar company because of the cash reserve you have. How do you then double it to a two billion dollar company with now a billion dollars of cash? If I had a billion dollars right now, there would be picking up about 10 different copper assets because I truly believe there are very few quality assets out there.

Some are significantly undervalued. And just having that inventory is going to be critical when the wheels fall off. So I think that would be the number one thing.

And I don’t think I would even come close to spending all that. But the biggest one would be de-risking and advancing a project. If you look at something like Makoa, you know, I call it, it’s a billion dollar asset.

If I’m sitting here, there’s a long pathway between here and a billion dollars that you can create value along the way. If I had a billion, it would be a lot more about accelerating that timeline. So basically, you’re talking about expanding into other projects then.

Is that your long term vision? You’re going to, you know, after Makoa, you’re going to maybe buy up some other properties? I think that when I say there’s a bifurcation in the market, I would say some are worth point cents in the ground, and some companies are worth cents in the ground. Yeah. You know, that’s a five to 10x right there alone, just taking good projects and demonstrating they’re moving forward properly.

I think there’s value in that, right? So being able to take a unique experience, there is a need for consolidation in the market, right? And yes, would be repeating that in a very unique experience that Libero has is advancing significant projects. That process could be repeated, and there’s value creation that can be made doing that. Okay.

We’ll put the link to the Libero Copper website so people can follow your work and stay tuned for the next company update. Thank you very much, Ian. Thank you, David.

Enjoy speaking with you in person. And finally, thank you for watching. Don’t forget to like and subscribe and follow Libero Copper.