By Salini Krishnan
Copper is approaching a rare supply inflection point just as mining valuations are being reassessed across copper, gold, lithium, nickel and critical minerals.
Global mined copper production fell 1.1% in the first half of 2026, according to Sprott and International Copper Study Group data. That puts the market on track for its first annual decline in mined supply since 2017. Disruptions at Grasberg and Kamoa-Kakula, declining grades, aging infrastructure and Chile’s weakest output in 19 years have left producers unable to respond quickly to record prices.
LME three-month copper closed at approximately US$14,492 per tonne after reaching a record near US$14,694/t earlier in the month. Yangshan premiums have also risen to a near four-year high, suggesting stronger Chinese physical demand and tighter regional availability. The next major policy catalyst is the expected U.S. Section 232 decision window around Sept. 30.
For investors, the issue is no longer simply whether commodity prices are rising. It is whether a company’s net asset value is deliverable, financeable and capable of generating cash flow under normalized assumptions.
Market snapshot
| Market | Reference level | Investment read-through |
|---|---|---|
| LME copper | ~US$14,492/t | Record pricing alongside the first potential annual supply decline since 2017; separate tariff positioning and stockpiling from end-user demand |
| SHFE copper | CNY107,740/t | Chinese pricing and Yangshan premiums signal regional demand and inventory flows |
| Gold | ~US$4,400/oz (Comex settle) | Strong bullion margins offset by elevated costs (AISC above US$1,500/oz) and conservative long-term planning assumptions |
| Silver | ~US$66.10/oz | Industrial and monetary demand support, volatility remains high |
| Lithium carbonate | RMB140,000–185,000/t | Recovery depends on battery demand, inventory interpretation and the Jianxiawo restart; methodology change lifted reported Chinese inventories to about 175,000 tonnes, which Macquarie called information-driven rather than fundamental deterioration |
| LME nickel | ~US$16,290/t | Indonesian RKAB ore quotas remain the central supply-floor variable |
| Uranium | ~US$89.50/lb | Term-market strength supports longer-cycle development interest |
| 10-year Treasury | Above 5% | Higher real yields raise the discount rate applied to mining assets |
Copper supply is tightening faster than projects can respond
The Sprott analysis estimates that disruptions at Grasberg in Indonesia and Kamoa-Kakula in the Democratic Republic of Congo removed roughly 600,000 tonnes of expected 2026 production. Chile has added to the shortfall: first-half output fell 6.6% year over year, while July production declined 9.4%.
The country’s copper commission has cut its official output forecast, reinforcing concerns that the world’s largest copper producer is struggling to restore volumes despite strong prices. Declining ore grades, complex underground expansions and aging processing infrastructure are limiting the response from existing operations.
The supply problem is structural. The average discovery-to-production pipeline is approximately 17.5 years, meaning higher prices can improve project economics but cannot quickly create new mines. Sprott also noted that copper concentrate output has been weaker than total mine production, contributing to extremely low treatment charges and greater bargaining power for miners.
The Section 232 decision could intensify this imbalance. U.S. stockpiling ahead of possible tariffs has redirected metal toward American warehouses, while inventory outside the United States has tightened. A tariff announcement could support prices in the short term, but investors should distinguish policy positioning from real end-user consumption.
That distinction is central to the copper outlook. Grid investment, electrification, defense programs and data-center construction represent underlying demand. Metal moved into the United States ahead of a policy decision represents a location trade that can reverse.
Processing infrastructure is becoming as important to copper valuations as resource size.
P/NAV: a discount is a diligence trigger
Gold equities remain near an estimated 40% discount to NAV, partly because many company models use long-term gold assumptions of US$2,200–2,400/oz while spot prices are above US$4,300/oz. Goldman Sachs retains a year-end gold view near US$4,900/oz, but investors should not assume that spot prices will flow directly into published NAVs.
The same caution applies to copper and development-stage companies. A low P/NAV may reflect permitting risk, weak metallurgy, insufficient infrastructure, high remaining capex, jurisdictional uncertainty or limited funding runway.
| Segment | Indicative P/NAV | What investors must verify |
|---|---|---|
| Royalty and streaming platforms | 1.2x–2.0x | Counterparty quality, mine life, step-downs, buyback rights, production timing |
| Copper majors | 1.1x–1.2x | Permits, metallurgy, infrastructure, expansion capex |
| Mid-tier copper | 0.5x–0.8x | Funding runway, construction execution, processing route |
| Gold juniors and developers | 0.4x–0.6x | Permits, metallurgy, capex, financing, jurisdiction |
| Early-stage explorers | 0.3x–0.45x | Discovery quality, capital access, technical evidence |
| Recent M&A reference | ~0.73x deliverable NAV | Whether transaction value reflects deliverable, not headline, NAV |
The recent M&A clearing level near 0.73x deliverable NAV is useful because it measures what strategic buyers are willing to pay for assets they believe can actually be built or operated. It is not equivalent to paying 0.73x an unadjusted resource estimate.
Royalty and streaming deal flow
Royalty transactions continue to show how capital is being deployed around mine life, production timing and downside protection.
Empress Royalty agreed to acquire a gold stream on the Tongon mine in Côte d’Ivoire for US$62 million in cash. The transaction is funded through a US$75 million senior secured credit facility, with an initial US$55 million draw. Empress will receive 3.58% of payable gold production, stepping down to 2.93% and eventually 0.81% over a 29-year term. Contingent and participation payments provide additional upside to the seller.
Elemental Royalty completed its approximately C$327 million acquisition of Vizsla Royalties. Consideration included up to C$82 million in cash and approximately 8.1 million Elemental shares. The transaction provides exposure to 2.0%–3.5% life-of-mine net smelter returns over the Panuco silver-gold project in Mexico.
Franco-Nevada agreed to pay A$170 million to increase its Bullabulling gold royalty to approximately 3.90%, alongside a A$30 million equity subscription in Minerals 260. The combined A$200 million commitment shows how established royalty companies are using balance-sheet strength to secure long-duration exposure to development assets.
Vox Royalty completed an A$8.4 million acquisition covering the White Dam, Kalman and Sylvania Australian gold and copper royalties. Separately, Chancery Royalty signed a non-binding term sheet for a US$20 million royalty financing with Fulcrum Metals covering a 5% NSR on gold from the Teck-Hughes project in Ontario.
The recurring risks are clear: delayed production, operator liquidity, contract enforceability, changes to mine plans, step-down provisions and buyback rights. A headline royalty percentage is not enough. Investors must evaluate when payable metal begins, how long the stream lasts and whether the operator can fund the mine.
Gold margins remain strong, but royalty value depends on production timing and operator execution.
M&A intelligence: buyers want strategic access
Recent transactions suggest that buyers are paying for districts, infrastructure, processing routes, permitting status and strategic optionality rather than headline resource tonnes.
Luca Mining agreed to acquire 100% of the El Barqueño gold-silver-copper project in Jalisco, Mexico, from Agnico Eagle for up to US$60 million plus a 2% NSR. The consideration includes US$10 million in Luca shares at closing, US$30 million in milestone-linked payments and up to US$20 million tied to production milestones. Luca can repurchase half of the royalty for US$12.5 million. Closing is targeted for the fourth quarter, subject to regulatory and exchange approvals. Luca’s announcement identifies permitting as a key remaining issue.
Huayou Cobalt’s US$210 million takeover of Atlantic Lithium has cleared Australian foreign investment approval, although shareholder, court and other regulatory approvals remain. The deal illustrates the geopolitical importance of controlling lithium assets and downstream battery supply.
China Rare Earth Group is also reported to be in talks to acquire Shenghe Resources, which holds approximately 3% of U.S. rare earth producer MP Materials. Because MP Materials is partly backed by the U.S. Department of Defense, the proposed transaction raises questions about indirect state ownership and cross-border control of strategic assets.
Other transactions underscore the same trend, including Boliden’s reported acquisition of a controlling stake in Nexa, Critical Metals’ proposed acquisition of European Lithium, Lithium Argentina’s strategic investment from Ganfeng, First Au’s all-scrip takeover of Javelin Minerals and discussions involving Glencore, InfraVia and Eramet’s lithium assets.
The United States is also pressuring Brazil to review a reported US$500 million sale of nickel assets to China’s MMG. Meanwhile, Chile, Argentina, Bolivia and Peru are working to integrate critical-minerals supply chains as the region responds to a projected 25% copper shortfall by 2035.
Commodity price scenarios
| Commodity | Bear case | Base case | Bull case | Key catalyst |
|---|---|---|---|---|
| Copper | US$11,000–13,500/t | US$12,800–14,500/t | US$15,000–16,000/t | U.S. Section 232 decision expected around Sept. 30 |
| Lithium carbonate | Below working range if inventories rise | RMB140,000–185,000/t | Above range if Jianxiawo remains offline and battery demand strengthens | Jianxiawo restart and Q4 demand |
| Nickel | Below US$16,000/t if quotas loosen | US$17,000–19,000/t | Upper end if Indonesian RKAB quotas tighten | Indonesian ore quotas |
| Uranium | Below US$90/lb if term demand weakens | Around US$90/lb | Higher on contracting and development-cycle strength | Term-market activity |
For copper, the bear case assumes tariff delays, a U.S. stockpile release, softer Chinese demand and stronger scrap flows. The base case assumes physical tightness persists while the policy premium moderates. The bull case requires tariffs to be implemented and ex-U.S. inventories to tighten.
Citi’s bullish three-month target is near US$15,000/t, although declining U.S. inventories may reflect stockpiling rather than new consumption. In lithium, the reported rise in Chinese inventories to approximately 175,000 tonnes followed a methodology change. Macquarie described the move as information-driven rather than evidence of fundamental deterioration. Jianxiawo’s restart remains a key uncertainty.
Investor checklist
- Treat a low P/NAV as a diligence trigger, not proof of undervaluation.
- Test NAV using normalized prices below spot.
- Separate copper stockpiling from genuine end-user consumption.
- Compare transaction value with deliverable NAV.
- Review permits, metallurgy, infrastructure and remaining capex.
- Track funding runway and operator liquidity.
- Examine royalty step-downs, buyback rights and contingent payments.
- Monitor real yields, the U.S. dollar and central-bank policy.
- Watch the Section 232 decision window, Jianxiawo and Indonesian RKAB quotas.
- Prioritize infrastructure, processing access and production timing over headline tonnes.
Market information in this edition is provided for journalistic and educational purposes only. It is not financial advice or a recommendation to buy, sell or hold any security or commodity.
Social snippets
LinkedIn: Copper mine supply is on track for its first annual decline since 2017, while royalty deal flow and mining M&A are resetting valuation benchmarks. With recent transactions clearing near 0.73x deliverable NAV, the key P/NAV test is not whether an asset looks cheap. It is whether the tonnes are permitted, financeable and deliverable.
X: Copper supply is weakening as royalty and M&A deal flow accelerates. Recent transactions are clearing near 0.73x deliverable NAV, but a low P/NAV is only a diligence trigger. Test the mine plan, funding, permits, infrastructure, operator liquidity and royalty terms before calling it undervalued.
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