That other precious metal: The potential earnings power of copper miners
- November 1, 2021: Vol. 8, Number 10

That other precious metal: The potential earnings power of copper miners

by Goehring & Rozencwajg

Copper made a new all-time high during the quarter. After bottoming in January 2016 at $1.94 per pound, copper rallied 150 percent to reach $4.77 on May 11, 2021. Although copper pulled back somewhat, it remains at $4.32 — the highest level in a decade.

Far from being over, this copper bull market has just started. The current cycle will ultimately take copper prices above $10 per pound. Although this may sound outlandish, copper rallied seven-fold from its 1999 bottom of 61 cents to its 2011 high of $4.57 per pound. Forecasting models show the fundamentals are much better today than they were during the previous bull market. Copper stocks have been strong performers as well. The average copper mining stock, as measured by the COPX ETF, is up nearly 100 percent year-on-year and 20 percent year-to-date.

Generalist investors are beginning to take notice and are establishing positions in copper mining equities, helping push prices higher. As we have noted in the past, investor interest across the natural resource equity space has remained muted despite prolonged periods of very strong performance over the past two years. This has been particularly true with gold and energy-related equities. Flow of funds into the various energy and precious metal equities ETFs have been trivial, which tends to be a good proxy for investor interest. The same has not been true for copper stocks. Shares outstanding of the COPX are up 319 percent so far this year, and 640 percent compared with the same time last year, as investors have rushed into the space. By comparison, even though E&P stocks are up 66 percent year-to-date and nearly 100 percent year-on-year, shares outstanding of the XOP ETF are flat.

Thus far, most investors have been attracted to the copper equities due to copper’s robust demand outlook, given that renewable energy and electric vehicles are both extremely copper intensive. Furthermore, several countries still must add large volumes of copper to their installed base to meet demand for things like electricity distribution.

We continue to recommend exposure to high-quality copper-related mining equities. Over the past several weeks, copper stocks have consolidated last year’s rally and have retraced by 22 percent. This simply presents a more attractive entry point. Despite having found support from generalist investors, we continue to believe the true potential of many copper equities is being overlooked. Copper continues to be our preferred base metal investment and one of our highest conviction themes overall.


This article is excerpted from a report published by Goehring & Rozencwajg, a  firm focused on natural resource investing. To read the full summary and download complete report, go to this link:


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