China is going through its third batch of strategic reserves selling, commencing on September 1. This sale will include 150,000 tons of metal, including 70,000 tons of aluminum, 50,000 tons of zinc, and 30,000 tons of copper. Due to this selling, copper has fallen from its highs in May. Gianni Kovacevic, CEO of CopperBank discussed with David Lin, anchor of Kitco News, China’s goals and what the downside target of copper may be, as well as the long-term upside potential.
copper has had a tremendous run over the last year. Climbing a hundred percent from its lows in 2020, but can this trend continue? We're talking about potential headwinds and tailwinds for the market. With Johnny Kovacevich, CEO of copper bank, Johnny has been bullish and cough. For quite a while. And his calls have so far been correct.
Johnny, welcome back to the show. You have a very important announcement for copper bank, but we'll get to that towards the end of the interview. But first I want to talk about China selling metals right now. Now this is the third batch of strategic reserves that the government is releasing into the market.
China has announced that they're selling 150, 150,000 tons of metals on September 1st. Part of that, we'll be aluminum part of that zinc. And part of that will be copper. So how much of the selling that they've been doing has contributed to the selloff that we've seen the copper price since April? Well, nice to be back on the show, David and I, when I tapped you on the shoulder on these things, it's almost like a bit of a report card we're going to come through labor day and these low volumes that for people that watch this show that we've seen.
Sort of the, the juniors and the developers. I think that's going to wake up. So your question is what's going on with China, who everyone knows is a pervasive user of all of the industrial metals and they're the single largest consumer of almost every commodity. Um, the copper market is 25 million tons and growing, and it's this kegger growth rate is going to be something that I believe is going to be spectacular.
And it's going to surpass all of that. Sort of mega cycles as we go through this pivot into electrification. Everyone knows that we've already talked about that, but why are they selling their strategic reserves of metals and copper particularly? So this has happened over three batches. They told the market and everyone copper places went to $4 and 82 cents of how way through the all-time high.
But there was no euphoria in the market. There was no a bullion. And we went into this. What is now been a mini bear market? So all of these different shares that people follow all the way up from Freeport Mack Moran to companies like copper bank it's because they, when they told the market that they're going to sell that first batch.
You know, nobody in the world wants to pay high prices for copper. Nobody. There's not one fabricator. Just think about it. Who celebrates a high copper price. So they told the market that we want to mitigate speculation. We think the price is too high and we're going to sedate the market by selling. It was like 20,000 tons.
Then they did a further 30,000 tons. And now they're doing this, this third round, which is 30,000 tons of metal. And copper's currently trading about $9,500 a ton. So what is that? That's about $280 million is a trade, but why would they do that? You know, this is a commodity and that is going to be increasingly important.
And so the real question is how much total strategic reserves to the Chinese actually. This is a bit of an opaque number. I thought I doing, anyone's going to tell you the exact number and I think we need to compare it to, you know, the greater economies. How much did they have in petroleum reserves and how much did they have in copper reserves and in particular what's going on in China.
And I'd like to dig into those details in your next batch. The next series of question. Absolutely. So let's talk, uh, first question I have regarding this is that, uh, I'm reading this Bloomberg article and it says that the reserves bureau has so far released a total of 270,000 tons of, uh, of not just copper, but also aluminum and other base metals, as well as part of Beijing's wider initiative to quote unquote stabilized prices.
So you're right. They do think that the commodities have rallied too far. This year. I'm wondering though why sell their strategic reserves? Don't they need this copper. I mean, I can understand that they're not buying any more copper because of the prices where they're currently at, but why sell what you already have?
Well, it's, it's almost like a spoof in the market, but this third goal around it hasn't really worked. The first time copper prices went down to about four, $4 and 5 cents. It was in three days, there was a dramatic sense. Once again, who wants to pay a lot for copper? Nobody. So the tide went out and everyone went hand to mouth for those fuels.
And in this goal around the price actually has went up. It didn't go down so that the auction should have occurred yesterday. And you ask yourself, well, how much copper does actually trying to consume? So the total copper market is 25 million tons and growing just over that, China's about just over 10 million tons.
So each single day, uh, the Chinese economy is consuming some 27,000 tons of copper. It we believe. And from the sources that I follow, and this has numerous sources, the, the, the off warrant or hidden reserves would be about 500,000 tons in China could be a little bit more, could be a little bit less. So if they're using 27,000 tons a day, that would imply they've got about 17, 18, 19, 20 days of their, of their consumption in strategic reserves.
This is a rounding error. Compare this to the oil market who are the three biggest importers of oil? Well, I mean, America, when they were, um, before the big oil Renaissance, they were always the biggest oil importer, but it goes between China and America and the Chinese had some one over 1 billion barrels of oil in their strategic petroleum reserves.
The United States. Has the capacity. And in fact, they have that in storage about 750 million barrels of oil in strategic petroleum reserves, the Japanese have about 350 400 million barrels. Namely we're talking about 200 days. In these various strategic petroleum reserve, maybe a little bit less than that.
And this all came from the, the first oil embargo where countries were scrambling and in the price of oil shot up. So there was this understanding if you're a country that isn't a net importer of oil, you should have at least 90 days of strategic reserves and most countries have 90 days or far more than that.
So let's go back to copper. They've got splitting hairs 17, 18, 19 days, and they're selling this commodity. But they're going to have to buy this back. So if you, if you, if you think bigger picture, which is exactly how the Chinese think in the next five years, and let's assume there are 10 million, tons of annual consumption is growing probably six, 7% in China, more than the global average, they're going to consume 53 50 4 million tons of copper in the next five years.
And they are going to consume this. They're they're electrifying more than any other accounts. So when you look at this ridiculous 27,000 times or 27, um, 30,000 tons of metal that they've sold now a third time, this is not sustained. It's not sustainable. So Johnny going back to the 150,000 tons of metals that China is selling.
So 70,000 tons of it is aluminum, 50,000 tons, zinc, 30,000 tons copper. So you're saying that of the 30,000 tons, uh, that they're selling, it's only a fraction of their total strategic reserves of copper. So they're not selling their entire stock. That makes sense to me. Now, what I'm wondering. Is that what point they're going to stop selling their strategic reserves.
They're trying to move the market downward. At what price do you think of copper? Are they going to be satisfied? Is there a downward target that they're looking for? You think? Well, the first clue that investors have to look at is 30,000 tons at today's price is about $280 million. And in a world of, of, of global investors, this is something that would get soaked up by the market in a, in a, in a fraction.
And then who moves the market? Nobody wants to pay high prices for commodities. The only reason that happens is because you actually run out and then there's a scramble, but because of the, the added, um, Invisible hand, which, which are these speculators. When they come into the market, they disrupt this unholy Alliance where what has been a relatively balanced market or a market that obviously people are very happy to pay a little bit lower for whatever commodity copper included.
We saw this over the past six or seven years. Now, all of a sudden you had a radical price move higher. And that was, I will submit to people done because speculators got involved and they disrupted that and people were scrambling for money. So th the global fabricators, you know, I continue to say, is business going to be good for them?
Is it going to be good for them? There's a bit of nervousness. Now, once again, the Delta barium is it's going to slow down economies. I think you're going to see more and more places starting to live with the virus and get moving on with, with business. I don't think it's going to be the Australia or New Zealand or Canada example where they're locking in their economies.
I think most people are going to move on. And this stimulus money is still going into these massive energy projects. So if you're in any type of business, making anything that creates transfers or utilizes electrical energy business is going to be better and better and better. And that pressure is going to continue to be on the, on the real supply and demand of copper.
And of course the Chinese are the single biggest buyer. So I believe, and I firmly believe that this spoofing or this selling of it, of a tiny portion. Of of their, of the global copper market. And if there, what is only 17, 18, 19 days of, of daily demand, which is what they have in strategic copper reserves, not the 200 days that they would have in a strategic petroleum reserve.
This is something that not only are they going to stop doing this, it's not sustainable. It's going to go the other way. And I think you're going to see a place where many countries are going to want to. 50 in a hundred days of whatever copper they use on a daily, weekly basis, they're going to want to have that fortified in some sort of a strategic, uh, copper reserve.
They, they, I mean, obviously they think that the price of copper has run up already too much. So maybe they're not going to be buying, like you said, they're not going to be buying in a huge quantity anytime soon. Right? Maybe there has to be some sort of other external catalyst that's going to prompt them to buy at these higher prices.
Maybe they're waiting for prices to come back. Yeah, but it's a global market. They won't. And once again, the people that make the things that create transfer and utilize electrical energy, if their business is good. And we're talking about millions of people that manufacture these things all around the world, they're competing with it.
And business is going to be good and you will pay more because you're selling these products and you're getting th th the, the POS issue to make these products. And they're going to continue to buy copper cable transformers and motors, and it will not impact the price or the overall economics of these big projects.
If copper was to go up another dollar, a pound, for example, hypothetically, you know, this does not disrupt the overall economics of these big projects, which are being built because the only substitute is aluminum. And aluminum will increasingly be used at to, to, uh, borrow a phrase from my friend, Richard, the CEO of Freeport Mac Moran.
They asked him, well, what about substitution for aluminum? With the price of copper goes too high. He says, look, we're not going to be able to produce enough copper for the world talking the next 3, 5, 7 years because these projects are not going to be built. We cannot build them fast enough. And you're going to have to use aluminum for many applications because we will be in a copper short.
And this does not play well to this dumping of what is a very small amount of copper to try to disrupt the copper price where, you know, you're competing in a global market, not going to work. It's not worked. We looked at now in this third auction, the price of copper actually went up, not down. Yeah. And it's not sustainable.
Anything that's not sustainable will not continue. Period. Well talking about trends now, co uh, Johnny we've, uh, you've been bullish on copper for quite a, quite a while. Now, if you take a look at the corporate price here, we'll see that it's rally from $2 a pound, roughly $2 a pound last year, all the way up to $4 and 50 cents beyond four 50 cents at the height of this year.
Now it's come back down to. Just about $4, a $4 and change. So that's still a hundred percent appreciation despite the fall we've had from this year, it's still a hundred percent appreciation from last year. Is this trans sustainable? Yeah, it's, it's amazing how fickle investors are. Copper is near its all time high.
The all time high, which occurred back in the 2011 period was about $4 and 60 cents. Copper's currently trading around 4 30, 4, 25, somewhere there where we're within an onion skin of the old all time high. And of course, as everyone can appreciate, as I've already alluded to when the, the all-time high was surpassed earlier this year, there was no euphoria in the market.
David, there was no bullying. So that will come. I believe the overwhelming fundamentals are there. And now we look quarter after quarter, the companies that are going to move the needle, which are the large mining companies, those board of directors are meeting and they've met again. And I think there's a lot more confidence who makes up a board of directors of a large copper mining.
Well, they're typically accountants and lawyers and people that are very risk averse. So when the market was bad, they were curtailing and not spending. But now when you look at what investors want, if they want to be rewarded with a higher share price, with a growth oriented type of business. And of course the copper business is going to be very good for many reasons that we've talked about over the last months and years, you know, they need to also show growth.
So the question is. Where are they? These are the companies that moved the needle for juniors. Where are they going to allocate capital? Because what there's also thinking about, and they're also considering are those classic large copper mining camps where you have a little bit of. Somebody's election risk.
And I would say future election risks, and some royalty things are changing and taxes are maybe a little bit unknown, but all probably going higher, not lower. And you also have this happening in the copper belt, in a country like Zambia. So when they're looking at spending three, four, $5 billion on developing a large copper project, a lot of that's coming back and they're saying we've got to focus on places like Arizona, like Nevada, like Australia, right?
The copper bank in our strategy is paying dividends. We have not been sitting on our, on our hands all summer. We've been talking about moving our projects forward. And with that, we are looking to significantly fortify the copper bank team. And I will once again, uh, suggest that people follow our news flow.
There are going to be very few copper juniors that are going to drive news like copper bank for the rest of this year and into 2022. Right. And it's following these next steps and people can follow us on our, on our website or what have you. And as we get through labor date, I will also submit to people that it's the market in general.
It looks like it wants to wake up again. And we saw the volumes and I'm talking about the world's largest exchange for junior type of resource development companies, which is the Toronto stock exchange event. We saw volumes are now one quarter of what they were in the, in the February, euphoric highs.
And even from like the main June period, it's less than half the volume. So the velocity of money has left this environment or less left this, this, this arena and that's coming back. Cause it's, it's, we're, we're closer to the bottom than we are the top. And that velocity of learning is going to rush back into these things.
And there's very few opportunities. Where the, the, the, the large money is going to, um, participate in. And I, I believe it's going to be things that have, uh, exposure to copper that are very well situated, managed by, but by really triple a blue ribbon teams that have performance history that have proven track records, but they have to have projects they're moving forward in places that larger companies are going to want to do Cox.
And that all comes back to Arizona and Nevada, which is why I continue to say copper bank has a distinct advantage over many, many other companies that are listed, um, in, in the copper junior space. Good Johnny. Uh, now let's talk about this end, all the announcement that you have for us, you have a change in leadership for a copper bank.
Well, it's, it's an adjustment and correct. So we want to have like a, like a true team and there's, you have to have different, different disciplines and different strengths. So I am not a technical process person that needs to be led by someone that has, as I said, has the proven track record and the pedigree and, and, and the success.
Too, as we allocate shareholder money because our, our, our objective at copper bank is not the spent a fortune of cash to go on the project. The money's already been spent already. We have, it would take over $120 million to duplicate everything that's already occurred in our portfolio. And as we say, internally, we, we look at the puzzle.
The pieces are all basically there. And by that, I mean all the different studies and all the, all the. Um, established, um, historical results that have already occurred on these projects. It's really about putting them in a different format. And maybe augmenting some of the work just to give us a little more confidence to give the market more confidence.
And how is that going to be presented to as, as I, as I suggested two companies larger than copper bank, because they're the ones that not only move the needle for juniors, they're the ones that could move the needle on a company like copper bank. They're the ones we want to talk to. Don't argue with. The other project, what do they need?
Do you rest on a project on projects like ours? That is what we're addressing. And that is what people will see with this. Uh, as we augment management and the leadership of copper bank, and I will continue to be one of the, uh, the, the, the largest shareholders of the company, very involved. Um, I'm a director and I'll be, I'll be there more in a sort of a communication.
And, um, trying to communicate the results that our team is going to provide, uh, with, uh, with the new slow over the, over the rest of this year and into 2022. Okay. Now Johnny, with, before I let you go, um, we did talk about, uh, the copper price performance leading up to this year. And earlier in the year you had come on the show late last December, you had said that the green new deal will propel copper and a bunch of other base metals to new, new highs this year.
And so far. You were correct. I want to know what the next catalyst will be. What's going to push us to $6 per head, perhaps even $7 has ever we'll see those prices. Well, going through the all time high, that was, that was last year story, the green new deal, and it becoming a page, one story and fringe investors getting involved in this space in whatever category, but what pushes copper to levels that people couldn't even imagine.
It's one word engineers. Engineering when you understand the various levels, um, and the economics of, and where the projects, the future projects that we, that are currently resources that can not become reserves unless the copper price stays at these higher levels and probably goes much higher is engineering there's.
They have not been able to reinvent the wheel, the copper industry, like so many other industries, namely oil and gas, where for many, many innovations in many, many technologies, And the reason is we already extract over 90% of the copper metal from the rock at every, almost every project around the world.
So it's Milla metrical progress, smarter trucks, or sorting a little bit of efficiencies here. There are a few percent, few percent, but are we going to be able to triple copper production in a certain geographical area because of this? Like they didn't oil and gas. Of course not. We need to go in mine at higher elevation.
No infrastructure, no water and all the other issues that everyone should be well aware of. And the only way that's going to be possible is to make it a reserve for the engineers. And that is why the copper price is going to go to H and levels that most people can't even imagine. And then of course, at times there's going to be the speculators that come in that really push it to a level that it probably doesn't.
Um, this copper under the planets aligning at seven, eight, $9 a pound. Let's see, maybe by then, uh, the Chinese government will put a flood the market again, we'll see. We'll fall off new more as the price develops. Thank you so much for coming on the show today, Johnny. It's a pleasure. Thank you and have a very good labor day weekend.
Thank you. And thank you for watching kicker news. I'm David Lynn.