The increasing global demand for electricity and the rapid development of new energy sources are set to benefit entities involved in sourcing and refining copper, presenting potential investment opportunities. As countries accelerate efforts to reach net-zero carbon emissions, copper mining companies could see substantial value growth, offering economic benefits to investors who include these firms in their portfolios.
Copper's exceptional electrical conductivity and contribution to energy efficiency make it a critical element in energy transmission. It has the necessary properties to transform and transmit energy from sustainable sources such as solar, wind, hydro, and geothermal to their useful final state, such as moving a vehicle or heating a home. According to a whitepaper by Sprott, an electric vehicle requires 53 kilograms of copper for its electric motors, batteries, inverters, wiring, and charging stations, which is about 2.4 times more than a conventional combustion vehicle.
Recently, copper prices surpassed the US$10,000 per ton mark, driven by projections of tightening global supplies and increased demand from the electric vehicle and power sectors. This has made the copper market of keen interest to various stakeholders. As reported by Bloomberg, some of the biggest energy traders are re-entering the metals market in anticipation of long-run production shortfalls. Mining companies are capitalizing on this momentum, with one notable producer seeking an upfront payment of as much as $1 billion for their copper and aluminum production.
However, copper is predominantly a long-cycle commodity, with the process from discovery to production averaging 16.5 years. This lengthy timeline is at odds with the aggressive sustainability goals of major economies. In the U.S., President Biden's Federal Sustainability Plan calls for 100% carbon pollution-free electricity by 2030 and 100% zero-emission vehicle acquisition by 2035. Similarly, the European Union has enacted policies with a 2035 deadline. Meeting these ambitious goals will require a significant increase in copper mining capacity. A recent report by The International Energy Forum states that to meet current business-as-usual trends, 115% more copper will need to be mined in the next 30 years than has been mined historically; electrifying the global vehicle fleet alone would require 55% more new mines.
Given the copper industry's capacity constraints, the ability to fulfill the rising demand for clean energy and electric vehicles is likely to be limited, potentially resulting in continued price appreciation. Economic insight from Sprott suggests that copper may be entering a supercycle, a sustained period of expansion driven by robust growth in demand. This macroeconomic shift could benefit companies capable of supplying copper, reflecting the fundamental economic value derived from the critical mineral and offering potential wealth-building opportunities for investors.
The Sprott Copper Miners ETF (NASDAQ: COPP) and Sprott Junior Copper Miners ETF (NASDAQ: COPJ) provide pure-play exposure to a broad range of copper miners positioned to capitalize on the increased demand for copper. While COPP offers comprehensive exposure across the large, mid-, and small-capitalization spectrum, COPJ focuses predominantly on small copper miners with potential for significant revenue and asset growth. Additionally, Sprott launched an at-the-market equity program to issue up to $500 million of trust units via its Sprott Physical Copper Trust (TSX: COP.UN), the world’s first physical copper investment vehicle, created to invest and hold all its assets in physical copper metal.
As electric vehicles and clean energy technologies become mainstays in the global economy, companies that produce copper may present long-term investment opportunities, as highlighted in Sprott’s recent educational video, Copper: The Essential Power Player in the Energy Transition.
