Thursday , 29 February 2024

The Implications of Coming "Peak Copper" for America – and the World! (+3K Views)

We make the [above] points in light of a recent report issued by Goldman Sachs, with which we agree, on October 28th as follows:

Copper prices may be ‘unimaginably’ high in 3 years with China growth spurring consumption.

This is a truly frightening statement…Indeed, in terms of probable or potential scarcity, I think copper may even surpass rare earth elements, oil and many other commodities. Copper grades, i.e., the amount of copper you get from every ton of ore mined, as well as grades for almost every other base metal and precious metals such as gold and silver, look like a scary playground slide. They continue to fall, and fall dramatically quickly.

Implications of “Unimaginably’ High Copper Prices

A so-called “unimaginably high” price for copper would imply unimaginably high prices for our electric grid, building homes, and perhaps for drilling oil. Clearly other commodities would become ever scarcer, in a vicious circle to end all vicious circles.

Our government seems wholly oblivious to this. Somehow they must be praying to, or simply have an abiding faith in a technology god somewhere out there – one who will come down and rescue us from the threat of resource depletion. Yes, there could possibly be technologies in development now or in the future that will come on stream and provide such a rescue – but to be sure of such a possibility? That can hardly be the basis of sound policy. To have no credible alternative solutions or coping strategies in place is irresponsible – or sheer madness…

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We know that China doesn’t believe in such a solution…because, while we’re fighting a shooting war in Afghanistan, China is spending comparable amounts of money in the same place – mining copper. Indeed, China seems desperate to get all the copper it possibly can…to ensure their standard of living into the next decade and beyond.

America Doesn’t Realize It is In An Economic “Commodities” War

The real war here is an economic war. It’s the war China is fighting to assure that its civilization continues, and it should be the one we’re fighting to save our own civilization.

I use the word ‘war’ because I think it transcends political distinctions. Once it is recognized as a war, presumably liberals, conservatives, and even most libertarians (i.e., those who allow for at least some legitimate role for government) can come together. We are being attacked – at least implicitly – as our standard of living is under attack. Fighting this war should be the biggest and most important priority we have.

To say more, China is not only spending tons of money in Afghanistan, but whatever they’re spending there is merely a drop in the proverbial bucket, as they will be spending 2 ½ trillion dollars between now and 2015 to find, acquire and process commodities. That’s a comparable amount to what the U.S. spent during the Second World War.

We could go on with example after example, but the bottom line is that for our civilization to have any chance of survival we’re also going to have to spend massive amounts of money. How can we, given our debt crisis and associated problems right now? Then again, how can we not do so, given what’s at stake?…

I recall giving a keynote address at a J.P. Morgan energy conference earlier this year. The audience consisted of extremely knowledgeable utility executives, presidents, financial officers, etc. I asked them “How many of you consider copper to be a potentially scarce metal?” Not one of them answered affirmatively.

You can be sure that at the moment I was posing this question China was busily mining copper in the midst of that war-torn country where our own troops go on fighting and dying for what appear to be the most nebulous political and strategic objectives…[I]f we can wake up to the fact that the current situation in terms of risks to this country easily rises to the level of a
full-scale war, then we’ll have a chance – but as the situation with copper shows (and don’t just take it from me, listen to what Goldman Sachs is saying), time is running out very, very quickly…

How to Capitalize on Coming “Peak” Copper

As someone who advises people about investments [here is my advice on how to capitalize on the future “unimagineable” price of copper]:

  • copper stocks stand out. The best of the major copper companies is clearly Freeport-McMoRan (FCX) and for those of you who want to swing for a home run, we continue to like NovaGold (NG). Neither of these stocks, despite the longer term prospects for profound copper scarcity, is going to be for the faint of heart. Freeport, I think, could trade as low as $10 and as high as $150 and over; NovaGold, perhaps could move between $4 to $50 or more.
  • As far as gold and silver stocks go, my recommendations remain the same:  Goldcorp (GG), SPDR Gold Shares (GLD),  iShares Silver Trust (SLV) and Barrick Gold (ABX), which incidentally bought a huge copper mine recently, and by virtue of infrastructure built by China it will almost certainly ship its entire product to that country. And again, NovaGold (NG), which in addition to a massive copper deposit also has a massive gold deposit.
  • Gold [bullion is highly recommended.] Obviously in the context of severe resource scarcity, paper currency makes no sense for anyone. Pricing resources cannot be a battle of printing presses; that just won’t do it as a rationing device. Rather, we are going to need something for this purpose that is constant or close to it [such as] gold [bullion] – the clear first choice – and silver… because of its history as a monetary metal. [Furthermore], from what I know now, [silver] could become nearly as scarce as copper in the years ahead, which would likewise pose a major threat to everything else…


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