Copper Is Your Next Profit Opportunity

Date 26/08/2008

The Right Side

Garry White

Falls in the copper price are almost at an end. A profit opportunity is approaching.

I expect the market will bottom over the next two months... so you need to be ready to pounce.

I will tell you what to buy and when.

The copper price is continuing to slide - despite the fact that global stockpiles are down by almost a fifth this year. This defies logic.

Miners are not discovering enough copper to meet the world’s insatiable demand. It is getting scarcer by the day.

Some analysts believe that current reserves of the metal will run out in less than 30 years.

As things get scarcer, prices soar. This is what I expect will happen to the copper price... no matter what the dollar does.

The fundamentals for the copper market are so stunning that Lakshmi Mittal reckons that the copper market offers his next chance to make big money. And you don’t get to be Britain’s richest man by not being able to spot a money-making opportunity, do you?

Here’s our opportunity

The company I am looking at is developing one of the largest copper deposits in the world. It is right on the doorstep of those key Asian markets. I had the opportunity to speak to its chief executive a couple of months ago. He was very impressive.

The company has 22.3 billion pounds of copper in the ground and 9 million ounces of gold. And that’s just a conservative assessment.

The value of the company’s copper in the ground is $78 billion at today’s prices... and the gold is worth $7.3 billion. The company is valued a fraction of this amount.

I’ll give you more details about the specific investment soon. But first, I want to explain why the copper price may be about to hit a bottom.

The biggest sign that a bottom is approaching is last week’s movements in the spot market. It’s all down to the "copper spread".

There was a significant price move on the London Metal Exchange over the course of last week. The difference between copper for immediate sale and the price for copper to be delivered in November jumped by 33% to $105.

This is an indication of a tightening market.

The jump came after four weeks of declines. The premium hit a six-month low of $12.50 on 11 August.

Copper stockpiles have actually risen by 15% at the London Metal Exchange in August. But this needs to be taken in context. These gains are seasonal... and they are about to be reversed. The copper market is usually weak in August. European holidays means many factories are closed in France and Italy — and copper stockpiles have risen by 15% at the London Metal Exchange this month.

This trend has been compounded by China.

Factories were closed to cut pollution ahead of the Olympics. This stifled demand for copper. Now the party is over, these factories are going to start producing goods again... and copper demand will rise.

Despite the seasonal rise in inventories this month, total stockpiles of copper have fallen 17% so far this year. Demand still outstrips supply... and I expect it will for the foreseeable future.

The reason I expect that copper demand will rise significantly is because of Mr Gore and his hybrid cars.

Double the amount of copper

The average new car contains 27.6kg of copper. Hybrid cars contain twice as much because they also have an electric motor as well as an engine.

Hybrid car use is going to soar. Governments are encouraging the use of hybrids as a way to cut emissions. It’s starting to make financial sense to buy a hybrid car.

If you have a hybrid, you don’t pay the London congestion charge. I expect this will be the same in Manchester when their scheme starts in 2012 and in other countries currently looking at introducing similar schemes such as New York and Tokyo.

On Australia’s Gold Coast, hybrid-only car parks have started to open already... all of them at plum locations. The best parking spots at IKEA in Houston, Texas are all reserved for hybrid vehicles. The charge towards green vehicles is unstoppable... and the outlook for copper is brighter than ever.

Because of this political will, sales of hybrids are expected to rise 400% over the next seven years. By 2013 hybrids are expected to make up around 6% of annual US auto sales... that's more than a million hybrid vehicles per year. All with twice as many copper components than the average car.

High fuel costs will also accelerate the move to hybrids. So I expect demand for copper is about to go through the roof over the next few years... at a time when global stockpiles are falling rapidly.

All this means that copper is about to rise again... and I am about to reveal what I believe is the best way to play this trend. Click here to sign up for Smart Commodities and get into the stock when the time is right.

Watch this space.

Regards,

Garry White
Editor
Smart Commodities UK

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