Porphyry deposits hold winning trifecta of copper, gold and silver

Copper, gold and silver have been on a tear lately.

Here’s the latest year to date performance for these three commodities:

It’s this broad lift across different commodity classes (precious and base metals) that’s starting to create an air of ‘commodity super cycle’ within mining circles.

Rumblings of the 2003 to 2011 upswing years are starting to stir. Back then, everything swelled — from rare earths to iron ore to wheat. The list of commodities that experienced exponential rises in value over that time is extensive.

That includes high-profile commodities like gold, which in 2003, was just US$340 an ounce.

By the end of the boom years in 2011, it had surged 400%, reaching a high of more than US$1,900 an ounce.

And just like today, copper followed in gold’s wake.

Despite having different demand drivers, the last commodity boom witnessed a 528% gain for copper.

It went from a low of US70¢ per lb. in November 2022 to a peak of more than US$4.40 per lb. by 2011.

So, are gold, copper and silver prices signalling something big in 2024?

Last year, S&P Global wrote a piece titled: ‘The world isn’t in a commodity supercycle, but it should be.’

Its analysis was based on strong, broad demand for commodities and poor supply outlooks as companies and investors dismissed project developments based on extreme capex demands.

Add in permitting delays and lack of discoveries and this coming potential boom could be as much of a demand story as it is about supply.

So, what’s the angle here for investors?

Ideally, they should focus on high-quality geological assets with several decades worth of mine supply, and target companies entering production within one to two years to capitalize on higher metal prices.

But there is one class of deposit that should sit high on investors’ watchlists.

Porphyries in the supercycle

Investing in companies that can push beyond junior mining status means they must own or have potential of finding enormous deposits.

That’s why companies exploring or developing porphyry deposits could benefit enormously in the years to come. These are the world’s largest storehouses for copper.

Escondida in Chile, the world’s biggest copper mine, began production in the late 1990s. The deposit holds an enviable 40-year mine life.

But there is another key feature positioning these deposits for potential outsized gains in the years ahead. Porphyries are often endowed with gold and silver.

Given the unfolding trend in 2024, gold, silver and copper motherlodes could become the winning trifecta if a commodity supercycle plays out.

Common along the west coast of the Americas, dense oceanic plates collide and subduct below the continental crust.

This slow-motion collision compresses the crust, forming a long north-south chain of mountains from Patagonia all the way up to Alaska.

But this subduction zone also gives birth to gigantic porphyry deposits; where rich mineralized fluids combine with plumes of rising magmatic rock.

While gold and silver are typically considered byproducts at these mines, at times, the quantity can be so large that it exceeds the total ounces at a standalone precious metals mine.

For example, one of the world’s largest development projects, Filo Corp.’s (TSX: FIL) Filo Del Sol project in Argentina, holds a ‘byproduct’ totalling 4.6 million oz. of gold.

That would be an enormous gold mine in its own right. Yet the company’s primary focus is copper. The project holds a global resource of 3.2 billion lb. plus almost 160 million oz. of silver.

Assets like this are potential takeover targets for majors.

This is another bonus for those investors looking at these porphyry hunters.

Supercycle now?

Copper is a clear bellwether for the broader strength of the commodity market. Rising red metal prices should see a lift across base metals from nickel to aluminium.

That’s why investors ought to watch the copper market to find clues of a budding supercycle ahead. With the recent strength in 2024, copper has just begun testing an important resistance level. 

This is a critical juncture for the copper market, and perhaps the resource sector more broadly.

If the metal can break through this level, copper may head rapidly to its next major test, around US$4.80 per pound.

This would be a retesting of its all-time highs from early-2022.

Copper still has two major hurdles to overcome.

Eventually though, if copper follows gold’s lead and breaks out into all-time new highs, this would be a definitive indication that we have entered a new commodity supercycle.

And we may be far closer to this outcome than most would believe.

The coming weeks will be pivotal for the resource sector, and copper remains the key metal to watch.

Positioning ahead of the crowd

The resource market is notorious for doing very little for years and then exploding rapidly with little warning.

As mining legend Rick Rule would say, ‘Commodity bull markets move a little at first, then all at once!’

What we’re seeing right now could be the ‘little.’ It may pay to start preparing now in case we enter the ‘all at once’ phase.  To capitalize on the potential commodity boom ahead, remain selective and focus on companies with high quality geological assets. That includes porphyry deposits.

James Cooper runs the commodities investment service Diggers and Drillers. You can also follow him on X @JCooperGeo.