Ditch Lithium and Invest in This Rock Instead — Copper Market
There are some perks to my job.
Without a doubt the highlights are being able to work in slippers and the weird night owl-like hours I keep. I do my best work during the witching hours.
I worked from home alone in a dark room long before COVID forced many of you to do the same.
A close second to all this, is the ability to speak with experts around the world. Sometimes that’s geopolitical experts like Jim Rickards. Other times it’s precious metal experts from Australia and overseas.
Of course, if you’re into commodities and what they’re going to do next, then that’s when you go to the big hitters.
See, for this gold bull turned rock nerd, there are very few commodity investors that have enjoyed the same success as Rick Rule, formerly of Sprott Group.
Normally the commodities sector will send even the hardiest participants out to pasture. Sometimes the booms and busts are just too hard on the nerves.
Of the few that survive the cyclical industry with their sanity intact, even fewer are willing to share their multidecade experience with the audience.
And that’s where Rick and I found ourselves this morning.
Talking all things gold, commodities, and the problems with silver…
Lessons from the past
‘I’m just an old man with a good memory,’ Rick told me on a crisp April morning almost two years ago.
Way back in 2019 when I spoke to Rick for the very first time, I honestly thought I was going to puke. The three coffees I had before 8:00 am weren’t the good idea I thought they were.
But before I knew it, the guy that had been behind the successful investment of hundreds of commodity companies was sitting on the other end of my Skype connection.
I didn’t know that one interview would be the first of a near dozen more. A couple of those in person. And a then a couple more chats over drinks — all of which we can’t record.
I re-watched our original chat late last night while all the good boys and girls slept. Rick’s comments on gold back then are a now must-watch to understand the underlying factors that are driving gold.
So, while today’s digital chat is getting a spit and polish, head over here to see how it all started. And why this ‘old man with a good memory’ still knows what’s up with the markets.
My takeaway I want to share with you today, is about the battery metals sector. As I pointed out to Rick, lithium is up 82% so far for the year. Surely the story is done…
It’s had a heck of a run, ‘but that doesn’t mean it can’t go further,’ says Rick. Though just because the price may go higher than investors expect, doesn’t mean that’s where you should be sticking your money.
Adding that he remembers a time when people paid money to get rid of the stuff. Further adding that lithium — in spite of what the ore-hungry explorers would have you believe — isn’t all that rare.
Explorers in the battery sector may be hoping to capitalise on finding lithium, but already there are four major producers adequately able to meet demand. In fact, one company in Chile has an 85-year supply. They’ve amassed so much lithium they’ve shelved their exploration plans of the stuff.
Investors wanting to dip their toes in the lithium market would be better off looking at the companies who process it. Technology leaps in how to extract lithium from current ore bodies would probably give investors a greater return on their money spent.
Don’t forget, battery tech is more than lithium.
Atomic number three is hogging all the headlines, but if you shuffle further to the right on the periodic table, cobalt is the next battery metal most likely to really stretch its legs.
Manufactures say they are prepared to pay twice the price if someone could guarantee tripling the supply of cobalt, something Rick says he’s never heard before.
That’s a signal to the market that higher prices may be on the cards for the obscure metal.
And then we covered the most boring metal you can think of…
Reddish-brown rocks are the key to the future
It doesn’t make for sexy headlines like lithium, cobalt, or molybdenum, but investors would do well to dip their toes in the water of the copper market.
The reddish-brown ductile copper rocks are the absolute backbone of this commodity cycle. Battery metals may sound like the promise of the future, but none of that battery tech is possible with the conductivity of copper cabling.
Furthermore, copper in battery tech is only a small part of the global electrification story. We aren’t just decking out our cars and homes with devices that talk to each other and us. Major countries like China or large continents like Africa are working towards electrifying their lands.
These people aren’t getting a smart home or a Tesla. Rather they are getting the much simpler — and far more consumption intensive matter — electricity running to their homes. Hundreds of millions of people will be shifted out of shanty housing and connected to a major electrical grid.
And all of these electrical plans are based on copper mines that are 50 years old. Yet these old mines don’t have the multidecade future ahead of them to meet this coming demand.
Major copper mining giants know this. It’s why Rio Tinto kept their Winu project under wraps for so long. It’s also why companies are sniffing around in porphyry country in the Lachlan Fold Belt in NSW.
And it’s why you should keep your eyes on copper. Multibillion giants don’t like spending money on unproven ground…
Lithium might make for good reading about future tech. But copper — a metal as old as civilisation itself — is crucial for any future tech.
Editor, The Daily Reckoning Australia
PS: Rick and I did talk about the recent commotion in the silver market. I’ve run out of room to include it here today. Come back next week and we’ll talk about silver…and those out to break COMEX.