Highland Copper's Copperwood: Assessing Its Place in a Shifting Market Balance

The copper market is caught in a powerful tug-of-war between immediate scarcity and looming oversupply. Prices have surged to record highs, rallying more than 20% since the start of 2025, driven by acute supply disruptions. The most significant of these is the force majeure at Grasberg in Indonesia, where a fatal mudslide closed the mine's critical Block Cave portion-accounting for 70% of its forecast output-until at least mid-2026. Compounding the problem, production guidance at Chile's Quebrada Blanca mine has been downgraded. This has created a tangible deficit, with J.P. Morgan forecasting a global refined copper shortfall of approximately 330 thousand metric tons for 2026.

Yet this tightness is facing a powerful counter-narrative. Goldman Sachs Research sees a different path, forecasting a 300-kiloton global surplus for the same year. Their outlook hinges on a significant pullback in Chinese demand, a key driver in recent years. This tension between the two major banks' forecasts captures the market's current flux. J.P. Morgan's bearish view on long-term supply growth, citing a drop in mine supply estimates, supports the deficit thesis. Goldman's surplus call, however, points to weakening demand fundamentals and the eventual exhaustion of speculative stockpiling ahead of potential tariffs.

The immediate price action reflects this conflict. Copper hit a record high of $13,387 per tonne in January, fueled by stockpiling ahead of a potential U.S. tariff and strong data center demand. But Goldman sees this as a speculative peak, expecting prices to decline to around $11,000 by year-end once tariff uncertainty resolves. The bottom line is that the market is in a state of disequilibrium. Short-term disruptions are creating a deficit and driving prices higher, but the long-term trajectory, as seen by some analysts, points toward a surplus that could pressure project viability.

Highland Copper's Production Potential vs. Market Needs

Highland Copper's Copperwood project is a small but strategically positioned player in a market of immense scale. Its designed average annual production of approximately 30,000 tonnes of copper represents a mere fraction of the global supply chain. For context, that output is less than 0.2% of the world's annual refined copper production. In the current tight market, where deficits are measured in hundreds of thousands of tonnes, Copperwood's contribution is negligible on a supply-and-demand ledger. Its value lies not in moving the needle for the entire market, but in its potential to generate returns for shareholders as copper prices fluctuate.

The project's economic case is built on robust fundamentals. An updated feasibility study shows a robust 17.6% IRR at a copper price of $4.02 per pound. This provides a clear baseline for viability, indicating the project can deliver strong returns even at a price that is below the recent record highs. The study also outlines a 10.7-year mine life and a profile that allows for rapid commercial production. This combination offers significant leverage to sustained copper prices. If the market remains tight, as J.P. Morgan forecasts, Copperwood's operations could be highly profitable. Conversely, if the Goldman Sachs surplus scenario materializes and prices soften, the project's economics would be tested, though the high IRR at current benchmarks suggests a degree of resilience.

The bottom line is that Copperwood is a pure-play bet on copper's price trajectory. Its small scale means it is immune to the macroeconomic forces that dictate global supply balances, but it is acutely sensitive to them. The project's viability is directly tied to the market equilibrium discussed earlier. If a deficit persists and prices hold firm, Copperwood's low-cost, permitted status becomes a major asset. If a surplus emerges and prices fall, the project's high IRR provides a buffer, but its ultimate fate will depend on whether the broader market finds a new, lower equilibrium. For now, it stands as a microcosm of the tension between scarcity and oversupply.

The 2026 Plan: Advancing a Project in a Volatile Market

Highland Copper's 2026 work plan is a focused sprint to de-risk the Copperwood project and secure the capital needed for construction. The plan's core objective is to complete Front-end Engineering and Design (FEED), a critical step that transforms a feasibility study into a detailed blueprint for building. This work includes a comprehensive review of the mine plan, incorporating updated cost surveys and market inputs. The company has already made significant progress, having awarded FEED contracts for mine and process plant engineering in 2025. Advancing this engineering work is directly tied to the company's financing push, as a mature design is essential for finalizing loan agreements and attracting equity investors.

Securing that financing is the other pillar of the 2026 strategy. Highland Copper has already taken a major step by receiving a $250 million U.S. EXIM Letter of Intent for project financing, which covers about 60% of initial capital. The company is now actively initiating discussions with the Department of Energy and Department of Defense for additional federal capital. This multi-pronged approach to funding is a direct response to the market's uncertainty. With copper prices swinging between record highs and forecasts of a surplus, the company is working to lock in capital at favorable terms before market sentiment shifts.

To maintain investor confidence during this critical phase, Highland Copper is making a concerted effort to stay visible. The company's CEO will present at multiple investor conferences in February and March, including the major PDAC event in Toronto. These appearances are not just about updates; they are a deliberate strategy to reinforce the project's value proposition and counter any market volatility that might affect the stock. This visibility is especially important after a period of trading overhang, which the company notes has been reduced by a recent block trade that eliminated a near-term seller.

The project's entire 2026 plan operates against the backdrop of the market balance tension described earlier. Its economic case is built on a high internal rate of return at a copper price of $4.02 per pound. Any forecasted decline in prices, such as the one Goldman Sachs anticipates, would directly pressure that IRR. By advancing engineering and financing now, Highland Copper is trying to position Copperwood for construction before a potential price softening could make the project less economically viable. The company's strategy is to navigate the current volatility by executing a disciplined, forward-looking plan that prepares the project for whatever market equilibrium emerges.

Key Commodity Metrics and Catalysts to Watch

The path for Highland Copper's Copperwood project is inextricably linked to a handful of specific market metrics and upcoming events. The company's 2026 plan to advance engineering and secure financing must navigate a volatile landscape defined by these key catalysts.

First and foremost is the ongoing battle of forecasts between major banks. The market's immediate financial environment will be dictated by which view proves correct. J.P. Morgan's forecast of a global refined copper deficit of ~330 kmt in 2026 supports a tight market and higher prices, which is favorable for Copperwood's economics. Conversely, Goldman Sachs's call for a 300-kiloton global surplus points to a potential price decline. Investors must monitor these supply-demand metrics closely, as they directly impact the copper price used to value the project and the terms available for project financing.

A major external catalyst is the resolution of U.S. refined copper tariff policy, expected in mid-2026. This is a pivotal event that could dramatically shift price direction. The current price rally has been fueled in part by stockpiling ahead of a potential 15% tariff, creating a temporary scarcity outside the U.S. Once the tariff decision is made and implemented, that speculative premium is likely to fade. Goldman Sachs Research notes that any delay in the announcement or implementation could dramatically impact the direction of copper prices this year. For Highland Copper, a clear tariff path by mid-year is critical for locking in financing and construction plans before the market reorients.

Finally, tracking physical inventory levels at LME-recognized warehouses is essential for gauging the real-time supply-demand balance. The recent price surge has been accompanied by a surge in requests for metal from LME warehouses, confirming tightness in markets outside the U.S. The LME publishes detailed warehouse and stock reports that show opening and closing stocks, movements, and wait times. These data points can signal whether the current tightness is a physical shortage or a temporary stockpiling effect. For Copperwood, sustained low global inventories would support a bullish price outlook, while a rapid build-up of warehoused metal could be an early warning of an impending surplus.

The bottom line is that Highland Copper is not just advancing a project; it is betting on a specific market outcome. The company's 2026 plan to de-risk and finance Copperwood must succeed before the key tariff catalyst arrives and the market's fundamental balance-whether deficit or surplus-becomes clear. Monitoring these three levers-bank forecasts, tariff policy, and physical inventories-will reveal whether the project's high-IRR economics are being built on a foundation of scarcity or a coming oversupply.