An important graphic from our friend John Gross. Copper price vs inventories since January 2016. The graphic speaks for itself, however, we are still perplexed by the inventory draw that started June 2018 after POTUS announced the first China tariff. The price drop from $3.30 /lb to $2.55/lb would be expected as trade-war uncertainty put the brakes on the business cycle.
That said, how can there be a scramble for copper metal during a price collapse? Answer: There is indeed a new paradigm for all commodities, especially with so much “financialization” of commodities by smart and dumb money. We are still fascinated by the fact that only ~1% of Family Office money has an allocation to commodities.
Some rotation is underway – we know this from our recent marketing trips!
In our view, as electrification enters Page ONE of Global Media, many side-line investors will lean towards being overweight copper, when they start to allocate to under-valued commodities. What will they buy? There are only 20 serious names in the copper mining universe?!
My answer? Some of these investors will search for companies that own established projects, in premium locations with plausible expectation that they can be de-risked for modest capital. CopperBank is well positioned to benefit from any rotation towards copper as our NPV per share rises dramatically for every 0.25 move in the copper price.
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