February 14th, 2022
New Anti-mining Regulations to Crush Copper Supply
Dear Rebel Investor,
What do Chile and Peru have in common?
(Besides abutting each other on the west coast of South America.)
They’re the top two copper producers on Earth.
Together, they were responsible for nearly 46% of the world’s copper ore exports in 2020.
Thanks to the global crusade to “go green” – which will require countless copper-hungry EV batteries… solar panels… wind turbines… and so much more green infrastructure – you can bet that the world will demand even more copper from these countries in the coming years.
Unfortunately, we may get less.
Take Chile, the world’s top copper producer.
That country delivered 5.7 million metric tons of the red metal to the market in 2020, 28.5% of the world’s supply.
But in March, president-elect Gabriel Boric takes office.
His critics believe he’ll make it much harder for copper miners to operate in the country.
Boric won handily by promoting a campaign that promised to overhaul the Chilean economy, support green industries, and protect the environment.
Soon after his victory, he announced that he’d oppose a huge new copper and iron mining project – the proposed $2.5 billion Dominga Mine.
He fears it will pollute a nearby coastal ecosystem, La Higuera.
Boric’s anti-mining stance doesn’t stop there
He also wants to raise taxes on miners operating in Chile.
Worse, in the eyes of the country’s state-run Codelco, he wants to pass legislation currently under debate that would limit mining activities near glaciers in the mineral rich Andes.
Officials of Codelco – the world’s biggest copper producing company – said as much as 40% of its copper production would be at risk if that bill passes.
Other mining companies are warning that the legislation could curtail production of several other huge Chilean mines.
These mines include Anglo American’s (AAL.L) Los Bronces, Los Pelambres of Antofagasta (ANTO.L) and the Caserones open pit mine, which is operated by privately owned SCM Minera Lumina Copper Chile.
Make no mistake – a major drop-off in Chilean copper production could trigger a serious supply crunch.
Peru could make a worldwide copper shortage even worse
Peru is the world’s second biggest copper producer, producing 2.14 million metric tons from October 2020 through September 2021.
And like Chile, Peru is headed by a leader who’s no friend to the mining industry.
He’s President Pedro Castillo, who said during his 2021 presidential campaign that he wanted to nationalize all mining operations in the country.
Lately he’s softened his stance on nationalization.
But he still wants to double the state’s share of mining profits to 70%.
He also wants to levy new royalties on mineral sales and raise mining taxes.
As you can imagine, that isn’t sitting well with miners operating in Peru.
It doesn’t take a Nostradamus to see how higher taxes and royalties would hurt Peruvian copper production.
But the country’s mining industry has a much bigger problem – anti-mining activists.
In October 2019, anti-mining protesters blocked a stretch of vital highway in the copper-rich province of Chumbivilcas for almost a month.
Then there’s the $1.4 billion Tia Maria project, in the southern Islay province of the Arequipa region.
Area residents have held that project up for 11 years by occupying roads and a railroad used to haul minerals.
Angry residents have also delayed other major Peruvian copper projects through similar blockades.
These projects include the Cerro Verde deposit, run by Freeport-McMoRan (NYSE: FCX); the Las Bambas mine, operated by MMG Ltd.; (OTC: MMLTF) Glencore PLC’s (OTC: GLNCY) Antapaccay mine; and Hudbay Minerals’ (NYSE: HBM) Constancia project.
As you can see, the Chilean and Peruvian mining industries are facing some serious headwinds.
That’s bad news for the world’s copper importers… especially the U.S.
In 2020, U.S. refined copper imports clocked in at 1.7 million metric tons
And with President Biden’s call for copper-intensive green initiatives, it’s clear America will need much more copper in the years ahead.
Much of that could be produced domestically.
During his presidential campaign, Biden pledged to push for more mineral production on U.S. soil to reduce dependence on imports.
That’s doable because the U.S. is no slouch when it comes to copper production.
In fact, it’s the fifth largest copper producer in the world.
But since he’s taken office, Biden’s shown he’s not serious about ramping up domestic production.
Take the proposed Resolution Copper Project in eastern Arizona.
Instead of permitting this massive project – which is supposed to mine up to 1.4 billion tons of copper ore – he sided with environmentalists and Indigenous rights activists.
What happened was the U.S. Department of Agriculture (USDA) decided in March 2021 to pull back an environmental review that would have cleared the way for the project to begin.
The idea was for the government to transfer a parcel of land to Resolution Copper, a joint venture of mining companies Rio Tinto (NYSE: RIO) and the BHP Group (Nasdaq: BHP).
But environmentalists and local activists vehemently oppose the project because they said it will destroy nearby recreational areas.
So the project is delayed while federal officials conduct a “consultation period” with them and Resolution Copper.
And while it’s possible things will eventually move forward, that’s by no means guaranteed.
A copper and nickel mining project in Minnesota’s Boundary Waters area is also at risk from the Biden Administration.
The Bureau of Land Management (BLM) halted that project in October 2021.
The reason – BLM decided to conduct an environmental analysis of the area at the behest of project opponents.
That reversed the Trump Administration’s action to allow Twin Metals Minnesota (private) to mine the area.
We’re not talking about a minor mining operation here.
In fact, Twin Metals officials say the area they want to mine comprises the world’s largest undeveloped copper-nickel project.
Biden seems determined to make sure it stays undeveloped.
To that end, the federal government is also reviewing whether to bar mining on property managed by the U.S. Forest Service for 20 years.
That property includes the Boundary Waters area that Twin Metals wants to mine.
One thing seems clear – Biden’s contradicting himself
Biden says he’s committed to the green revolution.
To that end…
- He wants an aggressive transition to EVs
- He wants to rebuild America’s infrastructure
- He wants the country to produce 100% pollution-free electricity
- And he wants to do all that (and more) while reducing America’s reliance on foreign mineral imports
To make the above points a reality, he needs to move some major domestic copper mining projects forward.
That’s not happening.
Instead, he’s throwing a monkey wrench into projects that could help him achieve his goals.
Bottom line – you can expect the U.S. to continue to rely heavily on copper imports for the foreseeable future.
Most other countries are in the same boat.
After all, they have their own green initiatives.
According to Bloomberg, the global push to go green will help boost worldwide copper demand – which was 23.5 million metric tons in 2020 – by an additional 10 million metric tons by 2030.
That’s an increase of 42.5% in just eight short years.
And when you consider the fervent anti-mining sentiments brewing in Chile and Peru, it seems that a worldwide copper shortage is baked in the cake.
But there’s a flip side to all this…
The world’s copper woes can be a boon to retail investors like us
Unlike gold and silver, copper’s too bulky to invest in as a physical asset (unless you’re willing to pay a crazy storage fee).
But there are two good alternatives to buying a truckload of copper.
One is the United States Copper Index Fund ETF (CPER).
It’s designed to mirror the performance of real copper through returns of copper futures contracts.
CPER’s done well of late – it’s up 23% over the last year.
While I like this play, there’s another one I like even better… a LOT better.
I’m talking about a Canadian company operating in a mining-friendly jurisdiction far away from the mayhem in South America.
That company is CopperCorp (TSXV: CPER), which has acquired one of the most highly prospective copper districts in Tasmania.
Did you know that Northwest Tasmania is highly mineralized?
And that it’s got a 150-year history of copper exploration and mining?
In fact, Tasmania was ranked the second-best Australian state in Mining Journal’s World Risk Report 2018, Investment Risk Index.
It’s also true that Tasmania has an embarrassment of mineral riches.
Consider the Mt. Lyell mine.
It was discovered in 1893… and is still producing copper today.
As for the copper district CopperCorp acquired, it sits smack dab in the middle of Tasmania’s major mining belt.
I could go on much more about CopperCorp and its copper mining project, but Dear Retail Investors Founder Dylan Berg beat me to the punch.
He just put together a report that goes into great detail about it all, and why CopperCorp should be on your radar.
What you should know is that the stock is still relatively “undiscovered” in the US because it hasn’t yet received its OTC listing (an OTC listing will make it easier for American brokers and investors to buy the stock). This means there is still huge upside potential waiting in the wings.
And here at Dear Retail, we’ve got our finger on the pulse – so we’ll be alerting you to when CopperCorp gets its OTC listing. It should happen within the next few months, so stay tuned for that email.
In the meantime you can read about why some of the world’s most successful mining pros are also betting on CopperCorp here.
Until next time,
Contributing Editor, Dear Retail Investors
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