• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Fat Tail Daily

Investment Ideas From the Edge of the Bell Curve

  • Menu
    • Commodities
      • Resources and Mining
      • Copper
      • Gold
      • Iron Ore
      • Lithium
      • Silver
      • Graphite
      • Rare Earths
    • Technology
      • AI
      • Bitcoin
      • Cryptocurrency
      • Energy
      • Financial Technology
      • Bio Technology
    • Market Analysis
      • Latest ASX News
      • Dividend Shares
      • ETFs
      • Stocks and Bonds
    • Macro
      • Australian Economy
      • Central Banks
      • World Markets
    • Small Caps
    • More
      • Investment Guides
      • Premium Research
      • Editors
      • About
      • Contact Us
  • Latest
  • Fat Tail Series
  • About Us
Commodities Copper

The Looming Copper Shortage Is an Opportunity You Should Be Paying Attention to

Like 0

By James Cooper, Thursday, 06 April 2023

James Cooper continues to see strength building in the copper sector, despite the metal fading away from the spotlight in recent weeks. But with the metal up around 7% since its low in March, quality stocks tied to this important commodity are building strong upward momentum. This is not an easy sector to invest in, but James offers some tips…

Turn your mind back to early 2023 and copper was a dominating theme in financial markets.

China’s reopening sparked a flurry of interest.

After a disappointing year, producers were setting up for a major surge as the global economy suddenly hit the panic button on supply.

Overnight, financial commentators had become expert copper analysts, giving their take on why the metal was set to hit new highs.

Headlines were suddenly hit with copper supply tightness and soaring demand outlooks.

But as rapidly as these stories emerged, just as quickly, they evaporated from the mainstream press.

The copper hype was short lived.

Revised growth forecasts in China to just 5% GDP, the lowest in a quarter of a century, meant copper interest faded to the background.

No doubt, a banking collapse in the US didn’t help either!

But lack of mainstream interest should not dissuade you from the potential opportunity.

In fact, it’s a key reason you should be looking at this critical metal.

As readers of my Diggers and Drillers publication would know, copper has been a longstanding theme.

We remain on the hunt for quality opportunities and rare buying opportunities.

The reason?

It all boils down to future SUPPLY.

As the Canadian billionaire mining magnate and CEO of the Ivanhoe Mines [TSE:IVN] puts it, the outlook for copper rests on one-third demand and two-thirds supply.

Supply (or lack of it) will be the primary driving force behind what I believe will be a new copper boom, one that could rival perhaps the largest ever recorded…

That was way back during the US Civil War, more than 160 years ago, when copper reached a staggering $8 a pound!

So, what could drive copper past its all-time high?

South America is the backbone for global production.

However, threats continue to emerge, which are dampening the production outlook for key mines across the region.

Neglect to invest in new projects, including exploration, means ageing mines are being pushed past their use-by date.

Large miners have focused more on shoving low grade marginal ore and waste material through processing plants, rather than spend capital on finding new high-grade deposits.

The effects of the last commodity cycle — from extreme peak to low — continue to play on the minds of mining executives who remain averse to risk.

But that will come at a major cost…mines are a depleting asset.

As commodity prices rise and decade old mines finally expire, mining giants will be forced into a fierce bidding war to secure the next generation of deposits.

Except these deposits are yet to be discovered.

Given there is a 15–20-year time lag from discovery to production, a critical supply gap looms.

The coming crisis has been fuelled by LACK of investment in new discovery.

This is a global problem.

Yet Chilean based producers are also being hit with another major issue…nationalisation.

The country’s left-wing government recently reformed its constitution, paving the way for its major copper mines to come under State control.

The constitutional groundwork has been put in place…major multinational miners fear what could come next.

It presents as a major problem for the world’s biggest copper miners…including Australia’s BHP Group [ASX:BHP].

The company co-owns the world’s largest copper mine Escondida.

With these threats looming large, future development projects will be shelved indefinitely.

That poses enormous challenges for future global copper supplies.

But Chile’s copper producing neighbour, Peru, has big problems of its own.

Following a controversial election late last year, riots and violent protests erupted across the world’s SECOND-largest copper producing nation.

It caused a shutdown of some of the world’s largest copper mines…including Glencore’s Antapaccay project and MMG’s Las Bambas mine.

Las Bambas alone accounts for around 2% of global supply.

While the geopolitical situation has faded from the headlines, riots continue to erupt.

On 6 March 2023, the UN issued a statement calling an end to the widespread violence.

But the situation here will have long lasting effects…mining giants are not nimble.

Operators are being forced to pull the pin on future development, including exploration.

Investment is trickling away from these important copper regions.

Together, Peru and Chile account for a staggering 40% of global supply.

There’s enormous, concentrated risk for this critically important metal…just as the world demands more of it as it attempts to build out the renewable energy infrastructure.

Finding alternative supplies won’t come quickly…new mine development takes anywhere from 15–20 years.

As an investor, the looming copper shortage is an opportunity you should be paying attention to

But there are very few quality ‘pure copper plays’ listed on the ASX.

Now, you could venture overseas and add a North American producer to your portfolio.

There’s Southern Copper [NYSE:SCCO], which is strongly leveraged to copper production.

However, its major operations are situated in Southern Peru…

With the prospect of mine closures amid heightened civil unrest, owning this stock means potentially missing out on the copper story altogether.

Another major North American copper player that has little in the way of commodity diversification (good if you want strong leverage to the metal) is First Quantum Minerals [TSE:FM].

But, again, big geopolitical challenges lie ahead for the company…

Panama shut down the company’s key copper operation known as ‘Cobre’ in December 2022 after First Quantum refused to accept the governments punitive tax demands.

While a deal has since been brokered between the government and the company, the threat of nationalisation looms large.

But analysts have raised a possible solution to the geopolitical challenges in South and Central America…

A new copper frontier that holds some of the most exciting high-grade deposits in the world…the Democratic Republic of the Congo (DRC).

The DRC is seen as the solution that will pick up the slack from falling production in South America.

But having worked in Central Africa as a geologist…I can only say those predictions are based on false hopes.

The DRC is one of the poorest nations on the planet and riskiest locations to invest.

The nation has been plagued by decades of war, political dictatorship, corruption, and civil unrest.

For miners looking to sustain their ESG obligations, the DRC is virtually uninvestable.

The risk of mine nationalisation is also disturbingly high…

Back in 2010, while I was working in the region, the Congolese Government nationalised one of the country’s largest copper deposits.

So, who owned it?

First Quantum!

After FM spent upward of $600 million developing the project, the government stepped in (via military intervention) and took full control of the mine.

Workers were escorted offsite under military guard.

It had an enormous impact on the company and its shareholders.

It’s why nationalisation is a dirty word among FM ranks!

But before all this went down, FM was hailed as a pioneer. It looked set to benefit from its high-risk bet being amongst the first big multinational to tap into this mineral rich frontier.

It ended in disaster.

Nationalisation remains an ever-present danger for all international mining companies operating in the DRC.

As an investor looking to capitalise on copper’s supply bottleneck, you can’t afford to have precious capital tied up in a project that watches the boom pass by thanks to these types of risks.

But the options for investors looking to gain ‘pure’ exposure to copper is exceedingly difficult.

Paradoxically, that’s exactly why you should be investing in copper.

But ONLY if you can tap into the right opportunity.

Positioning your portfolio for higher copper prices

Now, there is ONE quality company in Australia that offers ‘pure’ exposure to copper production…Oz Minerals [ASX:OZL].

This producer holds a world class asset in a geological terrain called the Gawler Craton of South Australia.

The area hosts major high grade deposits including BHP’s Olympic Dam and OZL’s Prominent Hill and Carrapateena projects.

Yet, as I’m sure you are aware, OZL is now off the table for investors now that BHP’s offer to purchase the company looks destined to take place.

But this is not a done deal yet!

OZL is incredibly attractive for investors looking to gain maximum upside from rising copper prices without taking on geopolitical risk.

If you’re on the hunt for quality pure play copper producers, you’ll understand how rare that opportunity is.

As one of the world’s lowest cost copper producers, operating in a tier one jurisdiction there is perhaps no other producer set to gain as much as OZL in the coming years.

Yet the OZL board has unanimously accepted BHP’s offer.

So now the decision rests with shareholders…will they sell-out just before a boom in copper emerges?

In my mind, that would be an enormous mistake.

But even if investors lose the opportunity to invest in OZL, there could be another strategy…

Focusing on company’s developing the next generation of high-quality copper deposits.

This is a key focus at my publication Diggers and Drillers.

But understanding what makes an asset stand out comes through years of working as an exploration geologist, focused on copper specifically.

For around three years I worked in and around the copper belt of Zambia with one of the darlings in the industry at the time…Equinox Minerals.

The company held the flagship Lumwana deposit, that was eventually acquired by the giant Canadian miner Barrick in 2011.

I’ve drawn on these experiences to select high quality copper plays within Australia. You can access those stocks here.

I believe this will be the ultimate strategy for playing the coming boom in copper.

Regards,

James Cooper Signature

James Cooper,
Editor, The Daily Reckoning Australia

PS: Due to the Easter weekend, there will be a modified publishing schedule for The Daily Reckoning Australia. We will return to our usual publishing schedule on Tuesday, 11 April.

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Comments

Subscribe
Notify of
guest
guest
0 Comments
Inline Feedbacks
View all comments
James Cooper

James Cooper has been a working geologist in mines across Australia, Canada, and Africa since the early 2000s. He’s led the operations of tiny explorers through to huge producer outfits. He’s seen booms and busts firsthand and he also understands the cyclical nature of individual commodities. For example, James was right there when Barrick Gold launched an enormous $7.5 billion takeover bid for Equinox. That was the peak of the last cycle.

With his background as a geo and finance professional, he brings a unique insight and experience to Fat Tail Investment Research. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Phase One.

James’s Premium Subscriptions

Publication logo
Diggers and Drillers
Publication logo
Mining: Phase One

Latest Articles

  • Copper traders: gettin’ jiggy with it
    By Callum Newman

    Copper has now broken into an all time high after threatening to do so for some time. There’s no reason to think it’s going to go down, either, if the market views Trump as serious. The race is on to buy up what you can before the tariff goes into effect.

  • Australia ain’t the USA…and that’s great!
    By Callum Newman

    The outlook for Australia and the ASX are very different to the US and US shares. Here’s why…

  • The biggest infrastructure spending boom in history just kicked off
    By Nick Hubble

    Did governments screw up our gas supply? According to some sources in the industry, a rather similar thing happened to our electricity and water industry.

Primary Sidebar

Latest Articles

  • Copper traders: gettin’ jiggy with it
  • Australia ain’t the USA…and that’s great!
  • The biggest infrastructure spending boom in history just kicked off
  • You Read it Here First: Great Asset Rotation Underway
  • The sector primed to fly into 2026

Footer

Fat Tail Daily Logo
YouTube
Facebook
x (formally twitter)
LinkedIn

About

Investment ideas from the edge of the bell curve.

Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.

Quick Links

Subscribe

About

FAQ

Terms and Conditions

Financial Services Guide

Privacy Policy

Get in Touch

Contact Us

Email: support@fattail.com.au

Phone: 1300 667 481

All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

Fat Tail Logo

Fat Tail Daily is brought to you by the team at Fat Tail Investment Research

Copyright © 2025 Fat Tail Daily | ACN: 117 765 009 / ABN: 33 117 765 009 / ASFL: 323 988