Host Rock Capital

Silver miners have never been cheaper. This is one of the most compelling mid-cycle opportunities I’ve ever seen. tavicosta.substack.com/p/zig…

The world’s copper giants are shrinking just when we need them most. The largest copper miners are expected to report their lowest annual production in over a decade this year. In 2024 the top 10 producers mined a record 10.4M tonnes. This year they’re expected to mine 8.7M, a 16% drop. Put in perspective, the 1.7M tonnes they’ve lost is more copper than the entire United States mines in a year. And this is the metal the AI build-out and the power grid can’t run without. It’s all happening with copper trading within 10% of its all-time high. When prices are this strong and output still falls, the problem runs deeper than money. The industry is running out of good rock. BHP estimates the average copper mine grade has fallen about 40% since 1991. Every tonne of copper now means digging up and processing far more rock than it did a generation ago. The same story is playing out at the smelters. Miners normally pay smelters a fee to process their ore. That fee has now gone negative, meaning smelters are effectively paying miners just to keep their plants fed. Meanwhile, demand is heading the other way. BHP sees copper demand rising 70% to more than 50M tonnes a year by 2050, driven by power grids, electric vehicles and data centers. The IEA has warned supply could fall as much as 30% short of demand by 2035. New supply can’t simply be switched on to meet it. On average it now takes almost 18 years to take a mine from discovery to first production, so a deposit found today wouldn’t produce copper until the 2040s. Resolution in Arizona shows how slow this can get. It could one day supply up to 25% of America’s copper demand. It was discovered in 1995 and still isn’t expected to produce until the mid-2030s. JPMorgan thinks the US could more than double its copper output, but most of that arrives after 2030 and roughly half of it depends on Resolution alone. That’s why I believe discovery is where the real value in this cycle will be made. The majors are focused on expanding the mines they already have, and the market will pay a premium for whoever finds the next big one.