This morning, copper has lost 34% of its value. What!?
If you trade futures, look for an opportunity to grab this before its gone.
BUT make sure you don't get caught in a bad trade, and use a trading service to help limit your risk.
Showing posts with label Copper. Show all posts
Showing posts with label Copper. Show all posts
November 9, 2012
April 16, 2012
Gold, Silver and Copper Investing Strategies and M&A Ideas: Vishal Gupta
Source: Sally Lowder of The Gold Report (4/16/12)
Precious and base metal companies both have to obey the basic laws of
physics and economics to be profitable. In this exclusive interview with
The Gold Report,
geologist turned analyst Vishal Gupta of Fraser Mackenzie shares names
of small-cap companies that could successfully take advantage of unique
mineralogy to produce profitable mines.
The Gold Report: You are an analyst and a geologist. Can you explain the fundamentals behind investing in base metals compared to precious metals?
Vishal Gupta: The fundamental difference is that base metals can be fairly straightforward in quantification when it comes to supply-demand balances. The world needs a certain amount of base metals to keep up its growth rate. Growing economies like India and China require base metals for their industrialization initiatives. For instance, copper would be required in electrical wiring and zinc would be required in steel galvanization. There is a specific purpose for base metals in industry.
Gold is valued more from a currency standpoint. There are actually very few uses for gold. That is why it is difficult to quantify the supply-demand balances for gold. This leads to the turmoil we see in the gold market. Any material piece of macroeconomic information that hits newswires will have some sort of an effect on the gold price because it is traded as a currency.
TGR: You have talked about how even when there is a downturn in global economies, jewelry demand remains. Why is that?
VG: I am originally from India and I lived in that country for about 16 years before moving to Canada. India is by far the biggest retail market for gold. The Indian wedding season, which runs from September to December, is typically the high time for gold markets. The reason for this traditional demand for gold in India goes back to what I said about gold being used as a currency. People in India treat gold as a commodity that holds its value better than paper currency. So when they give gifts of gold jewelry, it is because they want to invest in something that is going to hold its value. The result is that in lean times, when the markets are down and unemployment is high, people have that reserve in gold that they can take to the market and sell.
TGR: When North Americans think of investing in gold, we think of investing in maple leaves, gold bars, coins or other physical forms of gold. But in India, they think of purchasing a necklace, bracelet or gold earrings. Is it the same investment dynamic in a different package?
VG: That's absolutely right. Gold has held its value better than paper currency in the past, especially relative to Indian currency. The Indian rupee has devalued significantly over the last few decades, so people put their faith in a physical commodity, such as gold, rather than the paper currency.
TGR: We've seen a lot of volatility in the U.S. stock market. We haven't seen a whole lot of industrial growth, but the price of copper seems to be holding up right around where it is today at $3.74. Turning to the base metals, what is your outlook on the supply and demand fundamentals for copper going into Q212 and through next year?
VG: I always view copper as the leader of the pack when it comes to base metals. You'll see in the past, whenever the base metals markets have turned around, copper is the one that has led the charge. We are going into a lean time for commodities right now. However, when the commodity markets do turn around in the next five to six months, driven by the traditional surge in demand for commodities during September/October, I would expect copper to again lead the charge for base metals. Copper is the London Metal Exchange's flagship metal. Whenever we talk about base metals, we first talk about copper and then we talk about everything else.
TGR: What are the copper equities that most interest you?
VG: One is a base metals company, Foran Mining Corp. (FOM:TSX.V). Its flagship McIlvenna Bay project hosts a volcanogenic massive sulphide (VMS) deposit in the prolific Flin Flon belt of Manitoba-Saskatchewan, on the Saskatchewan side of the border. That region is traditionally known as HudBay Minerals Inc.'s (HBM:TSX; HBM:NYSE) backyard because the major miner has been mining zinc and copper there for over 100 years. Most junior explorers in the area typically form partnerships with HudBay simply because of the major's regional processing power. Because most of the deposits that the juniors are finding contain 3–5 million tonnes (Mt) of very high-grade ore, these deposits are too small to make building their own plant possible. Foran Mining is currently sitting on a 22 Mt, high-grade zinc and copper deposit at McIlvenna Bay. Going forward, I expect the tonnage to increase to 30 Mt, which would make McIlvenna Bay several times bigger than your average VMS deposit in the Flin Flon belt. Therefore, I believe Foran's deposit is substantial enough to warrant a stand-alone mining and processing operation, and it should not require HudBay's partnership to go into production.
I also follow Arian Silver Corp (AGQ:TSX.V; AGQ:AIM), a company active in Zacatecas, Mexico. It trades more than 1 million (M) shares/day on the London's AIM Exchange. Arian Silver has a 120 million ounce (Moz) silver resource in Zacatecas. In the next year or so, I expect the resource to increase to about 140 Moz.
TGR: What's the market cap of Arian?
VG: Arian's market cap is about $95M currently.
TGR: So you really do focus on the small caps.
VG: Yes. My educational background and my work experience are in geology. As a geologist, I believe my maximum value add is analyzing companies at a very early stage where I can use my knowledge to estimate which of the junior companies' assets have the best odds of becoming producing mines and generating cash flow in the future.
TGR: So you think both Foran and Arian have the mineralogy to be successful mines?
VG: Yes. That is why I cover these two names.
I have been to Arian's property myself. I see a lot of potential. The resource could conceivably go from the current 120 Moz all the way to the 200–250 Moz range. The next catalyst in Arian's development is going to be a scoping study on a sovereign mill. It is considering mill options ranging from 750 tonnes per day (tpd) up to 2,000 tonnes per day (2 Ktpd). That decision is going to be made in the next two to three months. Once that decision is made, I would estimate about 18–24 months for this large-scale production scenario to be put into operation.
TGR: Are there other juniors in that area that could be potential acquirers that would use Arian's ore and put it through their own mill?
VG: Mexico is prime silver country. The best possible scenario for Arian to build shareholder value would be to actually put its own mill into production. That saves it all sorts of operating costs. Obviously, the up-front capital expenditure (capex) is going to be significant. For 750 tpd, you're looking at about $15–20M in capex; for a 2 Ktpd mill, you're looking at about $50–55M in capex. But once that investment is in place, I think the benefit to Arian shareholders is going to be tremendous. At a 2 Ktpd production scenario, it is looking at producing about 4.0-4.5 Moz silver/year. That is very significant cash flow.
TGR: How is Arian planning to finance that mill?
VG: If Arian settles on the 750 tpd scenario, a $15–20M capex could potentially all be done through equity financing. But if Arian goes for that $50–55M capex associated with a 2 Ktpd mill, then it will probably pay for it through a combination of debt and equity.
TGR: We didn't really discuss the investing scenario behind silver. Are you equally bullish on the copper, silver and gold commodity spaces?
VG: I think silver is a very undervalued commodity right now. The market seems to follow what the gold price is doing but silver has so many industrial uses that you can view it as a precious metal or a base metal. Many of the silver names, including First Majestic Silver Corp. (FR:TSX; AG:NYSE; FMV:FSE), are just starting to come into prominence. Very few silver-only production companies exist today. What is out there is starting to get the value that traditionally has been reserved for gold and base metals.
TGR: What other names do you like either because they are potential acquisition candidates or possess particularly good deposits.
VG: There are a couple of companies that I visited down in Arizona about a month or so ago. One is Redhawk Resources (RDK:TSX; QF7:FSE; RHWKF:OTCQX). It has about 3.5 billion pounds (Blb) of copper in the ground currently at its flagship Copper Creek deposit at a grade of about 1% copper. Management is expected to release a new resource estimate in the next couple of weeks that could push the total resource to about 5 Blb copper. That would put Redhawk on the radar screens of all the consolidators operating in the region.
Arizona is prime copper country. Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) has five operations there. In the adjoining state of New Mexico, it has another couple of operations. ASARCO LLC (AR:NYSE) has two to three operations in that area as well. BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK), Rio Tinto (RIO:NYSE; RIO:ASX) and Quadra FNX Mining Ltd. (QUX:TSX), now KGHM International Ltd.—all of these players are in the area. They are all looking for sizable copper deposits and, at 5 Blb in-situ copper, Redhawk meets this criteria. I think the mineability of it has to be determined by a major and not by Redhawk itself. I don't think a junior like Redhawk will be the one to actually put Copper Creek into production because the capex requirements for something like this would be well in excess of $1B.
TGR: But couldn't one of the existing players in the area just truck the ore to its smelter because some operate already in the area.
VG: That's absolutely right. That would save a lot of capex requirements and one of the reasons Redhawk is a prime acquisition target for a consolidator in the area that can take advantage of operational synergies.
TGR: Do you think permitting will be a problem? Augusta Resource Group (AZC:TSX; AZC:NYSE.A; A5R:FSE) has had trouble getting its Rosemont mine in Arizona permitted. Does Redhawk have aquifer permits in place, for instance?
VG: Yes, Redhawk does have this permit. And, Augusta has had permitting issues in the past, but recently received a key environmental permit—the Aquifer Protection Permit—for its Rosemont development project. Permitting could be an issue in any jurisdiction. You have to take things on a case-by-case basis.
As a jurisdiction, Arizona is full of open-pit copper mines. That says to me that it is a favorable jurisdiction for copper mining. There could be an odd blip here or there, but the overall scenario in Arizona is very mining friendly.
TGR: You're an unusual analyst in that you're bullish on gold and silver and copper. Do you have any other names in the junior space that are interesting to you?
VG: I was going to tell you about the second story that I saw in Arizona. The company's name is Toro Resources Corp. (TRK:TSX.V). It's a very small company; it's trading at about a $4M market cap right now. I usually don't visit a junior explorer that small, but this has what I call an enriched copper deposit; it's a supergene blanket, which means it has a higher percentage of copper than most sulphides. This is leachable copper, not millable copper. The capex requirements for leachable copper are much lower than for millable copper.
Toro Resources has the Morgan Peak deposit in Arizona. Within a 5-kilometer (km) radius from it is BHP's Pinto Valley, Rio Tinto's Resolution copper mine, Freeport-McMoRan's Miami mine, Quadra FNX's (now KGHM International Ltd.) Carlota mine. The best part is that it is on a ridge about 800 meters in elevation higher than all of these other major consolidators in the valleys. All it needs is 100 Mt at 0.4% copper and it could put two valley fill leach pads right on top of the ridge, take the pregnant solution from the leach pad, put it into a pipeline and either go to Carlota's SX-EW plant or Miami's SX-EW plant just 5km down the hill. That scenario would save Toro on the overall capex requirements tremendously and would improve the economics of a potential future operation on the deposit. The mineability is very compelling for such a small-cap junior exploration company.
TGR: Interesting. That is certainly a new approach. Just do the leaching and then run it down the hill.
Any final words of wisdom about investing in today's volatile markets?
VG: I know that the commodity markets have been in great turmoil. People say, oh, gold has fallen from $1,750/ounce (oz) down to about $1,670/oz and the commodities have started coming off now. That is not the case. If you compare where the commodity markets were in 2008–2009 and where the commodity markets are now, we've gone through a huge growth spurt. We have found a level where things have stabilized. $1,500/oz gold is ideal for a lot of companies and could lead to a lot more production coming online. Anything over $1,500/oz gold to me is beautiful. When you're looking to invest in the commodity markets, it helps to have a longer term view. If you have a solid, longer term view on gold, copper or silver, you should make a lot of money.
TGR: Thank you so much, Vishal.
Vishal Gupta is an equity research analyst for Fraser Mackenzie, covering resource exploration companies in the base metals and precious metals space. He holds a Master of Science degree in geology from the University of Toronto. Prior to joining Fraser Mackenzie, he worked in the resource exploration industry as a consulting geologist with Noront Resources, Northern Gold Mining and Nuinsco Resources. Gupta entered the financial community in 2009 with Desjardins Securities as a base metals equity research associate, followed by a brief stay in mining corporate finance at Cormark Securities. Most recently, he held the position of equity research analyst at Dundee Capital Markets covering junior mining companies in the precious metals, base metals and uranium space.
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DISCLOSURE:
1) Sally Lowder of The Gold Report conducted this interview. She personally and/or her family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Gold Report: Redhawk Resources. Streetwise Reports does not accept stock in exchange for services.
3) Vishal Gupta: I personally and/or my family own shares of the following companies mentioned in this interview: None. I personally and/or my family am paid by the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this story.
April 12, 2012
Antimicrobial Copper - Still on Sale
Gold Avalanche: This article was written way back in July of 2011, but it has important implications right now as the stocks mentioned below are on sale. Or at least they will be ... but maybe not for long.
In less than two hours this material
can kill 99.9% of most of the bacteria on its surface, including
E.coli, influenza, staphylococcus and H1N1. A recent four-year trial has shown that using it on such frequently
touched hospital items as bed rails, IV poles, tray tables and nurse
call buttons reduces infection rates by more than 40%.
With hospital-acquired infections (HAIs) the fourth-leading cause of death in the United States, such a wonder material could have a profound impact on the health care industry. The Centers for Disease Control and Prevention have estimated that each year HAIs kill more than 100,000 people and inflict costs of $45 billion. Nearly one out of every 20 patients in U.S. hospitals acquires an HAI. So what is this miraculous material? Is it a technological breakthrough born of years of experimentation and hard work by hundreds of scientists toiling in hidden labs?
Not quite. In fact, you probably have some in your pocket right now - this magic material is none other than ordinary copper, although its advocates prefer the term "antimicrobial copper."
With hospital-acquired infections (HAIs) the fourth-leading cause of death in the United States, such a wonder material could have a profound impact on the health care industry. The Centers for Disease Control and Prevention have estimated that each year HAIs kill more than 100,000 people and inflict costs of $45 billion. Nearly one out of every 20 patients in U.S. hospitals acquires an HAI. So what is this miraculous material? Is it a technological breakthrough born of years of experimentation and hard work by hundreds of scientists toiling in hidden labs?
Not quite. In fact, you probably have some in your pocket right now - this magic material is none other than ordinary copper, although its advocates prefer the term "antimicrobial copper."
Scientific Proof
Preliminary results of the most recent study of antimicrobial copper, which was paid for by the U.S. Department of Defense, were presented last week at the World Health Organization's (WHO) First International Conference on Prevention and Infection Control in Geneva, Switzerland.Conducted in the intensive care units of three U.S. hospitals, the trial showed a 40.4% reduction in the risk of patient infection. "We started with an idea and four short years later we now have a potential solution to one of the world's most devastating problems," Dr. Michael Schmidt told Reuters. Schmidt is a trial leader as well as professor and vice chairman of microbiology at the Medical University of South Carolina, which took part in the research.
And this isn't the first such study of the powers of antimicrobial copper. Previous research has been validated by the U.S. Environmental Protection Agency, which in 2008 registered five copper-alloy products and approved the claim that the metal could kill 99.9% of bacteria within two hours. According to the Copper Development Association, an umbrella group for companies that develop and sell antimicrobial copper products, there are now 355 registered copper alloys.
It's a market just waiting to take off. What's puzzling is why antimicrobial copper isn't already a popular commodity. In this case, modern science is playing catch-up to our ancient ancestors. Throughout human history people seem to have recognized the red metal's mystical powers, often using copper containers to store and transport water; a practice still common today. Ancient civilizations such as the Egyptians and the Aztecs used copper as a medicine and to forge medical instruments. Although they couldn't have understood how it worked, they could readily observe the health benefits.
So how does it work?
Copper releases ions that penetrate the cell walls of microbes, disrupting their ability to function and reproduce. Better still, copper retains its bacteria-killing effectiveness even when mixed with other metals such as nickel and tin. That has helped ease aesthetic concerns, as many of the current antibacterial copper products are alloys of a lighter color and a finish closer to that of stainless steel.
Copper Everywhere
The innate ability of copper to kill microbes could have profound implications in several industries if it becomes widely adopted. We've already seen what it can do for health care. If hospitals replace their most commonly touched surfaces - most of which have no bacteria-killing properties whatsoever - with antimicrobial copper, it could not only save lives, but billions of dollars.And that could prove very compelling to an industry facing rising costs and uncertainty over insurance reimbursements as a result of last year's Patient Protection and Affordable Care Act. "It's the goal of every hospital to discharge you as quickly as possible ... in order to protect you from hospital-acquired infections and to control costs," Schmidt told Reuters.
Schmidt said bacteria on ICU surfaces cause up to 80% of patient infections. Similarly, widespread use of antimicrobial copper for railings and door handles in public buildings such as schools, offices and sports complexes, as well as on public transportation, could help prevent the spread of the flu and other infectious diseases among the general public. That would save the healthcare industry even more money and benefit many businesses by reducing employee sick days.
Antimicrobial copper's effectiveness against E.coli in particular has applications in the food and hospitality industries. The use of more copper surfaces in food processing plants and kitchens would likely greatly reduce the outbreaks of such dangerous infections. And at least one company, Richmond, VA-based Cupron, has found a way to use antimicrobial copper in fabric, including socks, sheets and pillowcases. The bedding is supposed to fight facial wrinkles, but the socks were sent to the trapped Chilean miners last year to keep their feet free from infection.
Of course, should antimicrobial copper catch on in a big way - and with such clear benefits, there's good reason to think it will - one of the biggest beneficiaries will be the world's copper producers such as Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), Southern Copper Corp. (NYSE: SCCO), and Teck Resources Ltd. (NYSE: TCK).
With plenty of demand from countless industrial uses and growing emerging economies such as China, the price for copper is already over $4.00 per pound. Increased demand from antimicrobial copper products could help push prices even higher over time. In fact, copper's high cost may be the biggest factor holding back greater adoption of the metal in its rediscovered bacteria-killing role. "The question is whether despite clear health benefits, you are going to be able to persuade governments and hospitals they need to rip out stainless steel or something else they've got in already," Jon Barnes, of metal industry consultants CRU Group, told Reuters.
However, the copper producers already are looking forward to the new markets antimicrobial copper could create. "It's an exciting opportunity for the industry to have applications in hospitals and clinics, but also in public buildings in general," Freeport McMoRan president and chief executive Richard Adkerson told Reuters in March. "The science clearly supports it ... copper kills bacteria, and when you look at the statistics of the illnesses and mortalities from infections in health facilities, in hospitals, it's mind-boggling."
Canada Sees Mining Resurgence
Source: Scott Jobin-Bevans, The Gold Report
The Gold Report: What are the key challenges the mining industry faces in 2012–2013?
Scott Jobin-Bevans: PDAC, under the leadership of newly appointed Executive Director Ross Gallinger, will be conducting a strategic review involving the board of directors, staff and gathering membership input. There are a number of issues facing the association and the industry, and I am sure that human resources challenges will surface as a key issue.
TGR: When you say human resources, what are you talking about specifically?
SJ-B: It's the skilled workforce: geologists, geophysicists, process engineers, mining engineers, miners and skilled labor. There's a huge gap between the young people who are out there now and the older ones who know those skill sets from years ago. For instance, we're nearly missing the 35-to-45 age bracket.
There is a tremendous opportunity for industry associations such as ours, the government, private sector and educators to work together. This is a hugely important sector that represents nearly 3.5% of our national GDP and pays billions of dollars in tax revenue and royalties to the various levels of government.
It presents an opportunity to university students, but it also presents a challenge to the industry. The Mining Industry Training and Adjustment Council led an industry-sponsored study released in 2005 that found that the Canadian mining and mineral industry would need at least 80,000 people in the next 10 years just to replace current jobs. The industry has grown quite a bit since 2005. So, the estimates in Canada are now something like 100,000 jobs will need to be filled in the next 10 years.
TGR: Where are those numbers coming from?
SJ-B: You can find them on the Mining Industry Human Resources Council of Canada's (MiHR's) website. The PDAC supported a more recent sector study by MiHR, "Unearthing Possibilities," which looks specifically at the exploration sector; it's important to understand that mineral exploration is different than the mining sector. In this study, we were able to show how many women are in mineral exploration, how many people are employed overall and the demographics on the age distribution.
You can see the late '80s downturn in the 35-to-44 age group when the industry and the economy tanked. People left the industry and never came back. You can also see the effect of the Bre-X scandal and market decline in 1997, which saw the departure of record numbers of professionals from the industry. The report does show an increase in the 25-to-34 age group coming into the industry, which is really encouraging.
The connection between human resources and supplying the metals of tomorrow is that we can still find the mines but we can't put them in production because we simply don't have the people. The only way we survive now is by poaching from other projects, so it's not a healthy environment for industry success.
PDAC has been making efforts in terms of our support for educating the work force of tomorrow. We have a strong program that we support through PDAC Mining Matters that has helped educate nearly 500,000 school-age children about the sector. We've got a number of university programs and scholarships but the industry needs to do more.
TGR: What are some of the other challenges facing the industry?
SJ-B: I'm not sure it's a challenge so much as a new opportunity in Canada in terms of working with First Nations and aboriginal communities, which ties into land access. Canadians are leaders in developing strong dialogues with our aboriginal partners and PDAC is very committed to ensuring our members are equipped and prepared to have those conversations, whether in Canada or abroad.
TGR: Is this a global issue?
SJ-B: I think we need to understand this in a different context. This isn't a problem as much as it is a reality that companies need to adjust to. The issue of aboriginal and indigenous people's rights is extremely complex and extends into places like Chile, for example, which is not dealing with the issue to the same degree as Australia or Canada; but it recognizes that it must be dealt with soon. The major mining companies and Codelco, the state-owned enterprise in Chile, haven't had to deal with it because most of their mines are in remote areas where there are very small villages; companies tend to be good corporate citizens by making donations and providing infrastructure and job training to the local villages. But, as the industry expands in Chile, I believe there will be more focused attention on indigenous peoples.
Another issue is profit sharing and the desire for local communities to want a piece of the pie, a portion of the production royalty. We also see this happening in India, Peru and many other countries, as well as in Canada. India has proposed that iron ore and copper miners set aside 26% of the royalty they pay to states to share with locals affected by mining. The PDAC is in favor of resource revenue sharing as long as it is introduced in a fair and sustainable manner.
TGR: On another subject, Canadian Natural Resources Minister Joe Oliver spoke at PDAC. Do you think we'll ever see a national securities regulator, like the SEC in the U.S.?
SJ-B: PDAC supports having a single regulatory system administered by one regulator, applying one set of rules in a consistent manner across Canada. We would welcome a one-window central process. But it isn't easy because each province has the right to control the regulatory process and collect fees in its own jurisdiction. This results in duplication and higher cost for financings and ongoing compliance. We need to have a system that allows all potential Canadian investors the equal opportunity to participate.
TGR: What is another industry challenge?
SJ-B: Mine permitting and the related regulatory process. This is a global issue. Governments often don't have the capacity to administer their own acts and legislation. I believe we are going to see this capacity issue in Ontario with the current revision of its Mining Act. We see capacity issues in British Columbia and the Yukon Territory, largely brought on by increased industry activity and record mineral claim staking. We also see a lack of capacity within the provincial governments and within First Nation governments to deal with the required paperwork, which is becoming more and more onerous. Minister Oliver spoke at length about this at the Association for Mineral Exploration British Columbia Roundup in January and again at the PDAC Convention. He believes that regulation should be practical, useful and not overly bureaucratic, and I, for one, support that.
Another example is Finland. Finland is a great jurisdiction for mining. It embraces and promotes it. The GTK or Geological Survey of Finland actively maps, explores and even drills holes to build up resources, which it then puts out to auction. It recently introduced a new mining act and at the same time made changes to staff size and location, which almost overnight resulted in license granting going from a 6–12 month window to a 3–5 year time frame to establish land tenure. This is very discouraging to mineral exploration companies thinking about investing exploration dollars in Finland. My recent discussions during the PDAC convention with the Federal government does suggest that they are committed to improving the system in the very near future.
TGR: I guess this makes Ontario and Nevada look better all the time.
SJ-B: Finland still beat Ontario in the Fraser Institute's annual survey of the best jurisdictions for mining in the world. We also saw New Brunswick being ranked as number one and for the first time ever we saw Ireland in the top 10 along with the Yukon Territory.
The survey ranks jurisdictions on things like administration, corruption, environmental regulation, duplication, fair trade, transparency, taxation etc. The most recent survey came out in the last few weeks.
TGR: Northern Ontario's Ring of Fire region includes chromite, base metals and gold deposits. There are billions of dollars of potential revenue there, but there is zero infrastructure. You have to have rail to get the minerals out of there. All these different deposits have been found and they have NI 43-101 resources on them, but they're not going anywhere.
SJ-B: I think we have to see the various levels of government as partners in the extraction of our mineral wealth and my view is that there really is an opportunity for the government to partner with industry and help build infrastructure in the north. There is a huge discovery that could be world-class size. The potential for northern development—for wealth generation in the province—is very real. I think both federal and provincial governments are still recovering from the financial crisis and at this point are not able to invest the dollars today for the long term in spite of the economic development opportunities that exist. Economic development is all based on favorable returns and future earnings through increased taxation and other revenue, and right now governments have a tremendous opportunity to show that measure of foresight for this industry.
We think that we finally got the Feds to understand the importance of mining to this country. We have had Minister Oliver at the conference, a record number of members of Parliament, members of Provincial Parliaments, senators and we were really pleased to see Jean Charest, the Premier of Québec, join us at the conference.
TGR: Most of the readers of The Gold Report are precious metals investors. Can we talk about your personal view as to what you see as opportunities for North American investors right now who like resource stocks? What are some of the commodities that you see really gaining traction in 2012? Do you see particular interest in micro caps, in the near-term producing stories?
SJ-B: Certainly, I'm in agreement with gold and silver being the mainstay of the industry and, of course, copper. There's a big push with anything having to do with country- or economy-building commodities, iron ore, for instance. Rare earth minerals are a complicated commodity, but I think a lot is going to happen in that space.
For example, Germany canceled its nuclear power program and is now having to look for alternative green energy. It recently created an alliance for securing critical raw materials after it essentially closed down the mining and metals industry 20 years ago, thinking that mining was a sunset industry.
TGR: Well, it's pretty clear that Europe is waking up to the idea that these critical metals are very important for growing clean energy.
SJ-B: For sure. Germany is a good case in point because the German market is really hunting for those metals, not only for internal consumption but also for building the technologies that it exports. To produce a windmill for instance, you need neodymium for the magnets and so a source for this rare metal needs to be secured to be a successful producer. The Germans asked Canada what we have. Well, the short answer is nothing because we basically shut down all of those operations years ago. To bring any production on-line in the near term is going to be very costly.
Look at Thor Lake's Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX). PDAC Director Don Bubar is heading up the company and PDAC Past President Bill Mercer is also involved. Avalon has a great story, a great deposit in Thor Lake. Infrastructure-wise it is fairly remote. In the global size of rare earth deposits, it's small and has a very specialized suite of minerals that are desirable, but it will take very high production costs to extract and build a plant. Doing that in Canada is challenging. I don't believe that there is enough critical mass in Canada to justify such a high capital expenditure. I am, of course, always hopeful that it will work, but it's not like a copper or nickel discovery or a base-metal discovery where you have five or six deposits in one general area that you can then aggregate to feed a smelter or a processing facility. In the case of most rare earths in Canada you have a relatively small deposit with complex metallurgical challenges that would be feeding a $1 billion production facility.
TGR: How do you feel about copper, silver and gold?
SJ-B: Canada is a fantastic jurisdiction in which to explore and I think people are realizing that we still have the opportunity to make discoveries in commodities like copper. We're seeing the copper porphyry business come back to British Columbia (B.C.) with interest from Newmont Mining Corp. (NEM:NYSE). We've also got interest in the region from Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) and even BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) is known to be watching the area. The majors are taking note of projects that until recently have been considered too small a target for copper-gold or copper-moly porphyries. I'm involved with junior explorer Tiex Inc. (TIX:TSX.V) working in B.C. in the Quesnel Trough. We believe we are sitting on a brand new Cu-Au porphyry discovery that is off-trend from the traditional Quesnel Trough past producers. We have another project that is right next to Spanish Mountain Gold Ltd. (SPA:TSX.V), so there is great gold in sediment opportunities.
Overall, I would say that we are seeing a resurgence in Canada. Most people I speak to are saying it's a great opportunity for copper-gold in B.C. and gold in the Yukon, and strong interest continues in Quebec and Nunavut. I find B.C. is particularly interesting because it has a recent track record of actually permitting mines. With almost half of Canada's proposed mining projects located in B.C., it has shown the industry that exploration and development projects can be moved into mine permitting–a step that many other jurisdictions in Canada are failing to make. Plus, in Canada you've got diamonds, and we are well positioned to become the third-largest diamond producer in the world.
TGR: Do you mean the third-largest producer by value?
SJ-B: Yes, we do produce some of the highest quality diamonds in the world, but we are also gaining on total production with additional projects turning into mines. In terms of gold, we still have the prolific Abitibi gold camps in Ontario and Quebec. I think around half of the Abitibi Greenstone Belt is covered by clays and impermeable surface material that you can't see through with traditional exploration techniques such as geophysics and geochemistry. So you have to drill it. This is the world's largest continuous greenstone belt with some 160 million ounces of production with about 50% of it covered. So the opportunities for gold and base metals in that region alone in Canada are huge.
TGR: You are saying that investors looking for opportunities in the junior mining space have plenty of opportunities in their own backyard?
SJ-B: Absolutely. Canada is politically stable, reasonably well regulated and has a fairly streamlined process to put the mines into production. Minister Oliver said he is committed to making the process even tighter. So, it will become a less-than-two-year process.
Also on the list of metals to watch, I would add platinum group metals (PGM).
TGR: In Canada or elsewhere?
SJ-B: In Canada. I think that although we have a high palladium-to-platinum ratio in our deposits, it's usually 2:1 or 3:1. The sustained price in platinum, and now palladium, is great for the industry.
TGR: What are the names in that space?
SJ-B: There are Magma Metals Ltd. (MMW:TSX; MMW:ASX) and North American Palladium Ltd. (PDL:TSX; PAL:NYSE) near Thunder Bay. North American Palladium is our only producer. Also there is Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE), which is working on a project in the Yukon and on projects in northern Manitoba.
TGR: There are definite supply and demand issues with PGM because of conflict in South Africa.
SJ-B: South Africa controls 80% to 90% of the world's platinum. And Russia still has a significant portion of the world's palladium. But, my consulting group does not have clients in South Africa because there are issues in working in that jurisdiction that most junior exploration companies are not comfortable with. Most of our work in Africa is elsewhere such as Tanzania, Zambia, the Democratic Republic of the Congo, Ghana and Mali. There has been a big rise in interest from Canadian companies in Western Africa. I also predict that we can see a significant increase in interest from Canadian explorers and investors in the Dominican Republic.
TGR: Well, that's another whole topic.
SJ-B: It is. For example, we are seeing Sierra Leone coming back on the map in a big way.
TGR: I think that is a perfect ending to today's conversation. Thank you so much, Scott.
Scott Jobin-Bevans is the president and a director of the Prospectors and Developers Association of Canada (PDAC) and an exploration geologist with more than 20 years of mineral exploration industry experience. He is a director and founding partner of Caracle Creek International Consulting Inc. (CCIC) where from 2001–2008 he served as managing director. Since May 2011 he has been at Caracle Creek as a director and vice president of corporate development, Latin America. He is also a director of numerous companies including Maudore Minerals Ltd., Tiex Inc., Strike Minerals Inc., Jiminex Inc., Lakeside Minerals, Mukuba Resources Ltd., Ateba Resources Inc. and Northern Skye Resources Ltd. Jobin-Bevans has also served as president, CEO and a director of Treasury Metals Inc., vice president of exploration of Takara Resources Inc. and as a director of Absolut Resources Corp.
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DISCLOSURE:
(Companies Mentioned: AVL:TSX; AVL:NYSE; AVARF:OTCQX, MMW:TSX; MMW:ASX, PDL:TSX; PAL:NYSE, NKL:TSX.V; PNIKD:OTCPK; P94P:FSE, TIX:TSX.V)
The Gold Report: What are the key challenges the mining industry faces in 2012–2013?
Scott Jobin-Bevans: PDAC, under the leadership of newly appointed Executive Director Ross Gallinger, will be conducting a strategic review involving the board of directors, staff and gathering membership input. There are a number of issues facing the association and the industry, and I am sure that human resources challenges will surface as a key issue.
TGR: When you say human resources, what are you talking about specifically?
SJ-B: It's the skilled workforce: geologists, geophysicists, process engineers, mining engineers, miners and skilled labor. There's a huge gap between the young people who are out there now and the older ones who know those skill sets from years ago. For instance, we're nearly missing the 35-to-45 age bracket.
There is a tremendous opportunity for industry associations such as ours, the government, private sector and educators to work together. This is a hugely important sector that represents nearly 3.5% of our national GDP and pays billions of dollars in tax revenue and royalties to the various levels of government.
It presents an opportunity to university students, but it also presents a challenge to the industry. The Mining Industry Training and Adjustment Council led an industry-sponsored study released in 2005 that found that the Canadian mining and mineral industry would need at least 80,000 people in the next 10 years just to replace current jobs. The industry has grown quite a bit since 2005. So, the estimates in Canada are now something like 100,000 jobs will need to be filled in the next 10 years.
TGR: Where are those numbers coming from?
SJ-B: You can find them on the Mining Industry Human Resources Council of Canada's (MiHR's) website. The PDAC supported a more recent sector study by MiHR, "Unearthing Possibilities," which looks specifically at the exploration sector; it's important to understand that mineral exploration is different than the mining sector. In this study, we were able to show how many women are in mineral exploration, how many people are employed overall and the demographics on the age distribution.
You can see the late '80s downturn in the 35-to-44 age group when the industry and the economy tanked. People left the industry and never came back. You can also see the effect of the Bre-X scandal and market decline in 1997, which saw the departure of record numbers of professionals from the industry. The report does show an increase in the 25-to-34 age group coming into the industry, which is really encouraging.
The connection between human resources and supplying the metals of tomorrow is that we can still find the mines but we can't put them in production because we simply don't have the people. The only way we survive now is by poaching from other projects, so it's not a healthy environment for industry success.
PDAC has been making efforts in terms of our support for educating the work force of tomorrow. We have a strong program that we support through PDAC Mining Matters that has helped educate nearly 500,000 school-age children about the sector. We've got a number of university programs and scholarships but the industry needs to do more.
TGR: What are some of the other challenges facing the industry?
SJ-B: I'm not sure it's a challenge so much as a new opportunity in Canada in terms of working with First Nations and aboriginal communities, which ties into land access. Canadians are leaders in developing strong dialogues with our aboriginal partners and PDAC is very committed to ensuring our members are equipped and prepared to have those conversations, whether in Canada or abroad.
TGR: Is this a global issue?
SJ-B: I think we need to understand this in a different context. This isn't a problem as much as it is a reality that companies need to adjust to. The issue of aboriginal and indigenous people's rights is extremely complex and extends into places like Chile, for example, which is not dealing with the issue to the same degree as Australia or Canada; but it recognizes that it must be dealt with soon. The major mining companies and Codelco, the state-owned enterprise in Chile, haven't had to deal with it because most of their mines are in remote areas where there are very small villages; companies tend to be good corporate citizens by making donations and providing infrastructure and job training to the local villages. But, as the industry expands in Chile, I believe there will be more focused attention on indigenous peoples.
Another issue is profit sharing and the desire for local communities to want a piece of the pie, a portion of the production royalty. We also see this happening in India, Peru and many other countries, as well as in Canada. India has proposed that iron ore and copper miners set aside 26% of the royalty they pay to states to share with locals affected by mining. The PDAC is in favor of resource revenue sharing as long as it is introduced in a fair and sustainable manner.
TGR: On another subject, Canadian Natural Resources Minister Joe Oliver spoke at PDAC. Do you think we'll ever see a national securities regulator, like the SEC in the U.S.?
SJ-B: PDAC supports having a single regulatory system administered by one regulator, applying one set of rules in a consistent manner across Canada. We would welcome a one-window central process. But it isn't easy because each province has the right to control the regulatory process and collect fees in its own jurisdiction. This results in duplication and higher cost for financings and ongoing compliance. We need to have a system that allows all potential Canadian investors the equal opportunity to participate.
TGR: What is another industry challenge?
SJ-B: Mine permitting and the related regulatory process. This is a global issue. Governments often don't have the capacity to administer their own acts and legislation. I believe we are going to see this capacity issue in Ontario with the current revision of its Mining Act. We see capacity issues in British Columbia and the Yukon Territory, largely brought on by increased industry activity and record mineral claim staking. We also see a lack of capacity within the provincial governments and within First Nation governments to deal with the required paperwork, which is becoming more and more onerous. Minister Oliver spoke at length about this at the Association for Mineral Exploration British Columbia Roundup in January and again at the PDAC Convention. He believes that regulation should be practical, useful and not overly bureaucratic, and I, for one, support that.
Another example is Finland. Finland is a great jurisdiction for mining. It embraces and promotes it. The GTK or Geological Survey of Finland actively maps, explores and even drills holes to build up resources, which it then puts out to auction. It recently introduced a new mining act and at the same time made changes to staff size and location, which almost overnight resulted in license granting going from a 6–12 month window to a 3–5 year time frame to establish land tenure. This is very discouraging to mineral exploration companies thinking about investing exploration dollars in Finland. My recent discussions during the PDAC convention with the Federal government does suggest that they are committed to improving the system in the very near future.
TGR: I guess this makes Ontario and Nevada look better all the time.
SJ-B: Finland still beat Ontario in the Fraser Institute's annual survey of the best jurisdictions for mining in the world. We also saw New Brunswick being ranked as number one and for the first time ever we saw Ireland in the top 10 along with the Yukon Territory.
The survey ranks jurisdictions on things like administration, corruption, environmental regulation, duplication, fair trade, transparency, taxation etc. The most recent survey came out in the last few weeks.
TGR: Northern Ontario's Ring of Fire region includes chromite, base metals and gold deposits. There are billions of dollars of potential revenue there, but there is zero infrastructure. You have to have rail to get the minerals out of there. All these different deposits have been found and they have NI 43-101 resources on them, but they're not going anywhere.
SJ-B: I think we have to see the various levels of government as partners in the extraction of our mineral wealth and my view is that there really is an opportunity for the government to partner with industry and help build infrastructure in the north. There is a huge discovery that could be world-class size. The potential for northern development—for wealth generation in the province—is very real. I think both federal and provincial governments are still recovering from the financial crisis and at this point are not able to invest the dollars today for the long term in spite of the economic development opportunities that exist. Economic development is all based on favorable returns and future earnings through increased taxation and other revenue, and right now governments have a tremendous opportunity to show that measure of foresight for this industry.
We think that we finally got the Feds to understand the importance of mining to this country. We have had Minister Oliver at the conference, a record number of members of Parliament, members of Provincial Parliaments, senators and we were really pleased to see Jean Charest, the Premier of Québec, join us at the conference.
TGR: Most of the readers of The Gold Report are precious metals investors. Can we talk about your personal view as to what you see as opportunities for North American investors right now who like resource stocks? What are some of the commodities that you see really gaining traction in 2012? Do you see particular interest in micro caps, in the near-term producing stories?
SJ-B: Certainly, I'm in agreement with gold and silver being the mainstay of the industry and, of course, copper. There's a big push with anything having to do with country- or economy-building commodities, iron ore, for instance. Rare earth minerals are a complicated commodity, but I think a lot is going to happen in that space.
For example, Germany canceled its nuclear power program and is now having to look for alternative green energy. It recently created an alliance for securing critical raw materials after it essentially closed down the mining and metals industry 20 years ago, thinking that mining was a sunset industry.
TGR: Well, it's pretty clear that Europe is waking up to the idea that these critical metals are very important for growing clean energy.
SJ-B: For sure. Germany is a good case in point because the German market is really hunting for those metals, not only for internal consumption but also for building the technologies that it exports. To produce a windmill for instance, you need neodymium for the magnets and so a source for this rare metal needs to be secured to be a successful producer. The Germans asked Canada what we have. Well, the short answer is nothing because we basically shut down all of those operations years ago. To bring any production on-line in the near term is going to be very costly.
Look at Thor Lake's Avalon Rare Metals Inc. (AVL:TSX; AVL:NYSE; AVARF:OTCQX). PDAC Director Don Bubar is heading up the company and PDAC Past President Bill Mercer is also involved. Avalon has a great story, a great deposit in Thor Lake. Infrastructure-wise it is fairly remote. In the global size of rare earth deposits, it's small and has a very specialized suite of minerals that are desirable, but it will take very high production costs to extract and build a plant. Doing that in Canada is challenging. I don't believe that there is enough critical mass in Canada to justify such a high capital expenditure. I am, of course, always hopeful that it will work, but it's not like a copper or nickel discovery or a base-metal discovery where you have five or six deposits in one general area that you can then aggregate to feed a smelter or a processing facility. In the case of most rare earths in Canada you have a relatively small deposit with complex metallurgical challenges that would be feeding a $1 billion production facility.
TGR: How do you feel about copper, silver and gold?
SJ-B: Canada is a fantastic jurisdiction in which to explore and I think people are realizing that we still have the opportunity to make discoveries in commodities like copper. We're seeing the copper porphyry business come back to British Columbia (B.C.) with interest from Newmont Mining Corp. (NEM:NYSE). We've also got interest in the region from Freeport-McMoRan Copper & Gold Inc. (FCX:NYSE) and even BHP Billiton Ltd. (BHP:NYSE; BHPLF:OTCPK) is known to be watching the area. The majors are taking note of projects that until recently have been considered too small a target for copper-gold or copper-moly porphyries. I'm involved with junior explorer Tiex Inc. (TIX:TSX.V) working in B.C. in the Quesnel Trough. We believe we are sitting on a brand new Cu-Au porphyry discovery that is off-trend from the traditional Quesnel Trough past producers. We have another project that is right next to Spanish Mountain Gold Ltd. (SPA:TSX.V), so there is great gold in sediment opportunities.
Overall, I would say that we are seeing a resurgence in Canada. Most people I speak to are saying it's a great opportunity for copper-gold in B.C. and gold in the Yukon, and strong interest continues in Quebec and Nunavut. I find B.C. is particularly interesting because it has a recent track record of actually permitting mines. With almost half of Canada's proposed mining projects located in B.C., it has shown the industry that exploration and development projects can be moved into mine permitting–a step that many other jurisdictions in Canada are failing to make. Plus, in Canada you've got diamonds, and we are well positioned to become the third-largest diamond producer in the world.
TGR: Do you mean the third-largest producer by value?
SJ-B: Yes, we do produce some of the highest quality diamonds in the world, but we are also gaining on total production with additional projects turning into mines. In terms of gold, we still have the prolific Abitibi gold camps in Ontario and Quebec. I think around half of the Abitibi Greenstone Belt is covered by clays and impermeable surface material that you can't see through with traditional exploration techniques such as geophysics and geochemistry. So you have to drill it. This is the world's largest continuous greenstone belt with some 160 million ounces of production with about 50% of it covered. So the opportunities for gold and base metals in that region alone in Canada are huge.
TGR: You are saying that investors looking for opportunities in the junior mining space have plenty of opportunities in their own backyard?
SJ-B: Absolutely. Canada is politically stable, reasonably well regulated and has a fairly streamlined process to put the mines into production. Minister Oliver said he is committed to making the process even tighter. So, it will become a less-than-two-year process.
Also on the list of metals to watch, I would add platinum group metals (PGM).
TGR: In Canada or elsewhere?
SJ-B: In Canada. I think that although we have a high palladium-to-platinum ratio in our deposits, it's usually 2:1 or 3:1. The sustained price in platinum, and now palladium, is great for the industry.
TGR: What are the names in that space?
SJ-B: There are Magma Metals Ltd. (MMW:TSX; MMW:ASX) and North American Palladium Ltd. (PDL:TSX; PAL:NYSE) near Thunder Bay. North American Palladium is our only producer. Also there is Prophecy Platinum Corp. (NKL:TSX.V; PNIKD:OTCPK; P94P:FSE), which is working on a project in the Yukon and on projects in northern Manitoba.
TGR: There are definite supply and demand issues with PGM because of conflict in South Africa.
SJ-B: South Africa controls 80% to 90% of the world's platinum. And Russia still has a significant portion of the world's palladium. But, my consulting group does not have clients in South Africa because there are issues in working in that jurisdiction that most junior exploration companies are not comfortable with. Most of our work in Africa is elsewhere such as Tanzania, Zambia, the Democratic Republic of the Congo, Ghana and Mali. There has been a big rise in interest from Canadian companies in Western Africa. I also predict that we can see a significant increase in interest from Canadian explorers and investors in the Dominican Republic.
TGR: Well, that's another whole topic.
SJ-B: It is. For example, we are seeing Sierra Leone coming back on the map in a big way.
TGR: I think that is a perfect ending to today's conversation. Thank you so much, Scott.
Scott Jobin-Bevans is the president and a director of the Prospectors and Developers Association of Canada (PDAC) and an exploration geologist with more than 20 years of mineral exploration industry experience. He is a director and founding partner of Caracle Creek International Consulting Inc. (CCIC) where from 2001–2008 he served as managing director. Since May 2011 he has been at Caracle Creek as a director and vice president of corporate development, Latin America. He is also a director of numerous companies including Maudore Minerals Ltd., Tiex Inc., Strike Minerals Inc., Jiminex Inc., Lakeside Minerals, Mukuba Resources Ltd., Ateba Resources Inc. and Northern Skye Resources Ltd. Jobin-Bevans has also served as president, CEO and a director of Treasury Metals Inc., vice president of exploration of Takara Resources Inc. and as a director of Absolut Resources Corp.
Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Exclusive Interviews page.
DISCLOSURE:
- Sally Lowder and Brian Sylvester of The Gold Report conducted this interview. They personally and/or their families own shares of the following companies mentioned in this interview: None.
- The following companies mentioned in the interview are sponsors of The Gold Report: Prophecy Platinum Corp. Streetwise Reports does not accept stock in exchange for services.
- Scott Jobin-Bevans: I personally and/or my family own shares of the following companies mentioned in this interview: Lakeside Minerals, Tiex Inc., Ateba Resources, Mukuba Resources. I personally and/or my family am paid by the following companies mentioned in this interview: Caracle Creek International Consulting Inc.; Northern Skye Resources Inc. I was not paid by Streetwise Reports for participating in this story.
April 11, 2012
How to Play Rising Copper Prices
Gold Avalanche: Combined with our Fundamental Analysis of global macro trends, this article explains why copper, and virtually all commodities are poised for some big gains in the coming years. What makes copper a particularly interesting play is that it's at a low point in its own cycle.
Global economic uncertainty can create a volatile metals sector and lead some investors to bail on the industry altogether.
But doing so would mean missing the huge profit opportunities from rising copper prices in 2012.
With uses in both manufacturing and construction, copper remains one of
the world's most versatile metals. When economies are doing well,
copper prices do well due to increased demand.
Currently, global economic woes are still around us. Greece is still on the fritz, and European uncertainty is weighing on growth - which caused a slip in copper. Copper prices fell close to $3.00 per pound in September. They've climbed back to around $3.90 per pound, but are still about 18% from where they were a year ago. The uncertain European outlook has triggered concern for one of its biggest trading partners as well as copper's ultimate buyer: China.
China is the world's biggest producer and consumer of copper, soaking up 40% of the world's supply. Europe's economic effect on China has led to fear that the Red Dragon is headed for a cool down this year and that the slowed growth will weigh on copper prices. The International Monetary Fund (IMF) predicts Chinese growth to proceed at a rate of 8.2% this year, down a full percentage point from last year's actual growth of 9.2%. These concerns, however, are overblown - and off the mark. What's actually going on in the Chinese economy and copper market is supporting rising copper prices.
Here's why you, too, should be bullish on copper.
Currently, global economic woes are still around us. Greece is still on the fritz, and European uncertainty is weighing on growth - which caused a slip in copper. Copper prices fell close to $3.00 per pound in September. They've climbed back to around $3.90 per pound, but are still about 18% from where they were a year ago. The uncertain European outlook has triggered concern for one of its biggest trading partners as well as copper's ultimate buyer: China.
China is the world's biggest producer and consumer of copper, soaking up 40% of the world's supply. Europe's economic effect on China has led to fear that the Red Dragon is headed for a cool down this year and that the slowed growth will weigh on copper prices. The International Monetary Fund (IMF) predicts Chinese growth to proceed at a rate of 8.2% this year, down a full percentage point from last year's actual growth of 9.2%. These concerns, however, are overblown - and off the mark. What's actually going on in the Chinese economy and copper market is supporting rising copper prices.
Here's why you, too, should be bullish on copper.
Three Ways to Play Rising Copper Prices
The world's major copper producers were hit hard in the fall months when copper prices slipped.With the last few quarters' of copper output having been relatively stagnant, we'll be seeing the big mining companies working hard to get ready to meet the supply shortage. It looks like they'll spend the first part of this year increasing capital output to ramp up lagging copper production to meet global demand.
As these mining giants work hard to produce more copper, the companies that support their operations will become more vital. That's bullish for mining services companies like Boom Logistics, which just signed a $105.17 million ($100 million Australian) contract with BHP Billiton Ltd. (NYSE ADR: BHP). Boom Logistics signed a five-year deal with BHP Billiton to provide maintenance operations at BHP's Olympic Dam in South Australia. As the fourth largest copper deposit and with direct deliveries to the Chinese stockpile, this recently inked Olympic Dam contract is sure to send Boom Logistics' currently struggling stock up a few notches, making it a good buy for anyone with access to the Australian exchange.
Investors looking for a more straightforward play should consider copper mining giant Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX).
The slight dip in this mammoth company's recent stock price is due to investor concern over slowing Chinese growth uncertainty out of Europe (remember: copper prices trace economic fluctuations) - which presents a good buying opportunity. Wall Street's one-year price target for FCX is $54.26 - a 42% gain from Monday's $38.26 closing price. Freeport also offers a dividend yield of 2.6%.
Finally, a general way to profit from rising copper prices is the iPath DJ-UBS Copper TR Sub-Index ETN (NYSE: JJC), which tracks the price of copper futures contracts less fees and expenses. The index mirrors copper price performance and is up 13% already this year.
But let's face it... it's not just copper prices that are expected to climb.
Soon virtually every substance vital to modern life will become enormously expensive and profitable for investors who know how to play it. As commodities and mining expert Peter Krauth explains in his latest report, "today's scarcity and soaring costs could spur the biggest investment gains in history."
To read Peter's latest free report click here.
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