Copper is very much in demand now due its integral role in everything from key infrastructure to electric vehicle (EV) parts to renewable energy. As the world moves forward in the transition to clean energy, the spotlight grows on copper mining companies. The market is ripe with many inviting investing opportunities, from multinational mining conglomerates that mine for copper as well as other metals, such as BHP Group (NYSE: BHP), Vale (NYSE: VALE) and Rio Tinto Group (NYSE: RIO) or copper producer specialists such as Southern Copper Corp. (NYSE: SCCO) and Ero Copper Corp. (TSX: ERO).

Junior Mining & Copper

For investors with a stronger stomach for risk and the upside potential of significantly higher rewards, the world of copper exploration and development companies awaits. These junior mining companies are focused on exploration, development and working to get the mine(s) permitted with the goal of producing upwards of 100 million lbs. per year.  Once production surpasses that, the companies move into mid-tier or major company status.

When reviewing junior mining companies, it is important to look at the management to ensure that the leaders have a strong record of transitioning from discovery to production with other companies they have led. It is also important to assess that the team has a unique skill to navigate the mining sector in the regions they are focused on, and that the companies have substantial capital market experience and broad-based shareholder and investor support. So, before making that investment in that junior copper mining company, attend and review shareholder presentations and review the team’s credentials to make an intelligent investing decision.

As the President & CEO of a company focused on the exploration and development of copper porphyry projects in the United States and Chile, I think it is also important for investors to look at the junior copper mining company’s geopolitical ramifications of its properties looking for friendly regions, particularly South America, North America and Australia, rather than China.

“If China’s dominance of rare earth element supplies is the global energy transition’s ‘elephant in the room,’ then copper is the 800-pound gorilla,” according to the Baker Institute. President Biden has invoked the Defense Production Act to expand domestic production of critical minerals, which includes copper, should facilitate ongoing efforts of mining companies to produce geopolitically friendly copper in the United States.

By investing in copper mining companies, you are investing in the future of clean energy.  Alternatively, investors can hold copper in physical form, just like gold and silver which can be done by purchasing copper bullion bars or coins which sometimes attracts the ‘Doomsday’ crowd.  Investors can also gain exposure to the value of copper through the purchase of exchange-traded funds (ETF’s), futures or by investing in companies that mine and prospect for copper.

Copper has been used for thousands of years and faces increasing global demand with the advent of new technology, while simultaneously forecasted to experience significant declines in supply. Given its attributes, copper is often used for electrical purposes such as power transmission and generation. Like its base metal sibling nickel, it has a major role in the electric vehicle (EV) revolution, with the CRU Group expecting consumption of copper to jump five-fold by 2030 due to demand from the green energy market.

Copper is the third most consumed industrial metal in the world, behind iron ore and aluminum, as per the US Geological Survey. With copper’s starring role in the electric vehicle (EV) revolution, some analysts predict copper consumption will jump five-fold by 2030 due to green energy demands.

In November 2021, CitiBank wrote that “decarbonization will drive consumption,” and “higher prices will be needed to draw in enough copper scrap to meet longer-term demand.”

President Biden is contemplating removing tariffs on some Chinese goods to ease trade tensions between US and China, which could result in upside movement for copper. The major factors contributing to copper prices are supply and demand, economic growth, inflation, and the value of the US dollar. The bullish fundamentals for copper are driven by supply shortages and low global inventories, and its starring role in green electrification, transport and infrastructure.

Copper has been a critical metal for the global economy since the Bronze Age and its importance is only set to grow in the future. A savvy investor stands to benefit from adding some exposure to this critical metal as its growing importance begins to be realized.

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As S&P Global reports, as stricter sanctions with Russian trade continue, global markets could be squeezed, with mining companies in geopolitically friendly countries getting a bump in price as industrial metal prices affected by the Ukrainian conflict, such as copper, push higher. Industrial metals include copper, zinc nickel and aluminum, and are used in a variety of commercial and industrial applications crucial to our green economy transition.

“Heightened volatility on the escalation of the conflict shows markets had not fully priced in the likelihood of deeper conflict,” said Mark Haefele, chief investment officer, UBS Global Wealth Management, on markets’ reaction to the invasion. “We expect continued volatility in the near term as leaders calibrate and announce their response to this escalation.”

Reuters reports that “mining companies with ties to Russian businesses are scrambling to sever them in the aftermath of Russia’s invasion of Ukraine.”

The United States has banned Russian oil and gas, but as Washington, DC looks to expand sanctions, industrial metals that are vital to America’s green revolution including copper and nickel, may soon be blacklisted as legislators are seeking to revoke Russia’s most-favored nation status, which would significantly increase duties on imports from Russia which includes many industrial metal products.

We all hope for a swift resolution to conflict in Ukraine; we must also realize that it is unlikely to return to “business as usual” for some time, if ever.  Sanctions will create lingering investment risk that will dissuade future investment for years or decades to come.

Today, Russia is the second largest exporter of refined copper in the world. While sanctions are not affecting copper exports directly right now and may not in the future, the broader question must be asked and answered; will companies be comfortable risking capital in the Russian market?  If not, how will mining operations continue and critical future developments be funded?  These questions are not easy to answer, and may lead to sustained supply gaps in key commodities.  For the copper sector, we are fortunate that this is a gap that is easily addressed as development is being pushed all around the world including many geopolitically friendly countries.

Navigating the Industrial Metals Geopolitical Landscape

So, with international mining companies operating in Russia severing ties, and super power countries including the United States seeking to reduce or eliminate their mineral ties, what countries are rich with industrial metals and geopolitically friendly?

Chile, is a stable and mining-friendly country, is the top copper producer in world with 28 percent of global copper production and the world’s second largest producer of lithium with a 22 percent share of world production. Peru produced about 2.2 million metric tons in 2020, and China, stands as the world’s third-largest copper producer.

Outside of Russia, major producers for zinc, vital to rechargeable batteries and electronic circuitry, are Indonesia the Philippines, and New Caledonia.

Aluminum plays a critical role in automobile energy efficiency with China the world’s leading exporter.  However, India, Canada and the United Arab Emirates are significant producers.

Industrial Metals Vital to Renewable Energy Sector

With the United States, Europe and China committed to the renewable energy transition and over 190 countries committed to the Paris agreement, there will be an immense global demand for industrial metals for decades. Nearly every renewable energy system including electric vehicles, solar panels, grid level batteries, and carbon capture system, uses significant quantities of industrial metals. The events in Ukraine are having an immediate global impact and forcing a reorganization of the World’s economic ties and trade flows. Governments and investors alike must begin investigating and pursuing geopolitically friendly options to source  critical industrial metals required to enable our transition to a greener planet and future.

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There is no more omnipresent and vital metal to the low-carbon economy than copper.  The transition to renewable energy requires tons of metals, and copper is considered the most essential. Our global shift to a clean energy paradigm is set to drive a huge increase in the requirements for copper. Clean energy technologies are becoming the fastest-growing segment of demand – directly affecting copper.

Climate scientists have made it clear that greenhouse gas emissions must be reduced drastically by 2050 to stave off catastrophic levels of global warming. To do so, the rate of transition to carbon-free technology alternatives is increasing exponentially.

A decarbonized economy – also referred to as a low-carbon economy – is based on energy sources that produce low levels of greenhouse gas emissions.  The goal of a low-carbon economy is to put a stop to climate change while ensuring a high level of efficiency.  Clearly, electric cars drive a lot of the ‘go-green’ messaging and are very important to centralizing our power source and production, but reducing chemicals and pollutants and dependence on plastic is also crucial. 

Copper plays a vital role in the transition to clean energy. Clean energy technologies are becoming the fastest-growing segment of copper demand, including applications such as wind turbines, solar panels, EV batteries, and large-scale energy storage. The world is finally starting to discover the vitality of copper as it is the prime metal used in electrification. From cellular devices to EV’s, copper is everywhere. 

What properties does copper have that make it so ideal for our clean energy economy?  Copper has four properties – conductivity, ductility, efficiency and recyclability – that make it perfect for electric vehicles (EVs), renewable energy and energy storage. Copper has the highest electrical conductivity of all non-precious metals, can be easily shaped, has 60% greater thermal efficiency than aluminum and is 100% recyclable.

Usage of copper in electric vehicles (EVs) is up to 4 times more than in the conventional cars. Per the Copper Development Association Inc., traditional cars have 18-49 pounds of copper, hybrid EVs contain approximately 85 pounds and plug-in hybrid EVs use 132 pounds.

By 2027, the International Copper Association (ICA) reports that copper demand for Electric Vehicles will rise by 900%. Each generation of car needs more copper wiring.  Significant new copper-based infrastructure will be needed to support electric cars (such as charging stations).

Copper Mining

So, where are we going to find all this copper?  Chile, a stable and mining-friendly country, is the leading copper producer in the world which produced about 5.7 million metric tons of copper in 2020 which represents about 28% of the world’s global production. Peru produced about 2.2 million metric tons in 2020 with China standing as the world’s third-largest copper producer.

In 20 years, Bloomberg estimates that copper miners need to double the amount of global copper production just to meet the demand for a 30% penetration rate of electric vehicles.

Copper Mining & Sustainability

Copper mining firms worldwide are committed to reducing their carbon emissions. The Copper Alliance reports that “Freeport-McMoRan, one of the world’s largest copper miners, lowered its carbon emissions by more than 21 percent from 2015 to 2019. This puts the company on track to meet the COP21 framework to limit global warming to below 2°C from pre-industrial levels by 2050.”

Copper mining companies are reducing carbon emissions by employing energy-efficient technologies, equipment recycling and clean-energy deployments. It is important that copper mines adhere to best management practices and be as protective to the environment as possible.  Miners need to prevent toxic pollutants from entering groundwater, mitigate air quality impacts, and ensure that mines reclaim the land as soon as a particular mining area project is completed.  Copper is a critical component required for the ‘Green Revolution’ to happen and it needs to move forward as a model green energy player for the world’s efforts to transition to an electric economy to be successful.

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