Copper’s Growing Demand Presents Investment Opportunities for Mining Firms

As global demand for electricity and new energy sources grows, entities involved in sourcing and refining copper are poised to benefit, presenting a potential investment opportunity. With countries accelerating efforts to reach net-zero carbon emissions, copper mining companies could see increased value over time, benefiting investors who include them in their portfolios.

Copper’s exceptional electrical conductivity and role in energy efficiency make it crucial for energy transmission. It can transform and transmit energy from sustainable sources like solar, wind, hydro, and geothermal into useful forms, such as powering vehicles or heating homes. A recent whitepaper by Sprott highlights that an electric vehicle requires 53 kilograms of copper, about 2.4 times more than a conventional vehicle.

Recently, copper prices surpassed US$10,000 per ton, driven by projections of tightening global supplies and heightened demand from the electric vehicle and power sectors. As reported by Bloomberg, major energy traders are re-entering the metals market, anticipating production shortfalls. One notable mining producer is seeking an upfront payment of up to $1 billion for their copper and aluminum production.

However, copper is a long-cycle commodity, with the process from discovery to production averaging 16.5 years. This long-tailed nature conflicts with current policy actions of major economies. In the U.S., President Biden's Federal Sustainability Plan targets 100% carbon pollution-free electricity by 2030 and 100% zero-emission vehicle acquisitions by 2035. The European Union has similar policies with a 2035 deadline.

To meet these goals, copper mining capacity must increase exponentially. A recent report by The International Energy Forum states that 115% more copper will need to be mined in the next 30 years to meet current trends, and electrifying the global vehicle fleet would require 55% more new mines.

Economic insights from Sprott suggest copper may be entering a supercycle, a sustained period of expansion driven by robust demand growth. This would benefit companies supplying copper, reflecting economic value from the critical mineral and offering potential wealth-building opportunities for investors. The Sprott Copper Miners ETF (NASDAQ: COPP) and Sprott Junior Copper Miners ETF (NASDAQ: COPJ) offer exposure to copper miners positioned to capitalize on increasing demand.

Earlier this month, Sprott launched an at-the-market equity program to issue up to an additional $500 million via its Sprott Physical Copper Trust (TSX: COP.UN), the world’s first physical copper investment vehicle. As electric vehicles and clean energy technologies become more prevalent, companies producing copper may offer long-term investment opportunities.