Published on November 30 2017

Investors Need to “Wake up and Realize That We’re Out of Copper”…

By Justin Spittler, editor, Casey Daily Dispatch

“The handwriting is on the wall…

“For those of you who deny this phenomenon, you’re going to miss this massive disruption opening soon at a theatre near you.”

Robert Friedland said this at the Sprott Natural Resource Symposium in Vancouver in July.

He was talking about electric vehicles (EVs)… and how they’ll spark the next great commodity bull market.

If you read yesterday’s Dispatch, you know that it pays to listen to Friedland. He’s a living legend in the resource sector.

Over the years, he’s founded several successful mining companies…and made billions for himself and his investors.

And like me, Friedland thinks EVs are about to change the auto industry forever…and send copper prices through the roof.

That’s because the EV revolution will require enormous amounts of copper. There’s just one problem.

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• The world doesn’t have that much copper…

You see, many experts believe that global copper production will need to double in the years ahead to supply the EV revolution.

But Friedland says that “ain’t gonna happen” unless the price of copper soars. In other words, he sees a major supply crunch on the horizon.

He had this to say in August:

We don’t have enough copper being discovered to meet future copper demand. We need much higher copper prices to stimulate the painful enterprise of exploration, development and production. We’re just getting on the edge of a very steep ski slope and looking down over the edge.

By 2021, Friedland says the world will “wake up and realize that we’re out of copper at a reasonable price.”

Most investors haven’t considered this possibility. And why would they?

It’s not like copper’s a rare earth metal. It’s used in everything from plumbing, to wiring, to electric motors.

How could we possibly be running out of it?

Simple.

• There haven’t been any major copper discoveries in two decades…

Since then, miners have been bleeding the best deposits dry.

This has been especially true lately. And that’s because the price of copper fell off a cliff a few years ago.

Just look at this chart of copper. You can see that it fell more than 50% between 2011 and 2016.

Low prices forced many miners to “high grade” their deposits.

This is when companies mine their high-grade ore first. It’s a way for companies to survive periods of low prices…but it comes at a cost.

Miners are left with low-grade ore that’s difficult and expensive to mine. Because of this, the average annual reserve grade of the world’s biggest copper producers is now 60% lower than it was in 2003.

The low-hanging fruit has been picked.

As Friedland said in April, “most copper mines today are like little old ladies waiting in bed to die.”

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• Weak copper prices also led to industry-wide budget cuts…

Companies stopped looking for new copper. They drilled fewer new holes. Some even stopped developing existing mines.

This is a problem.

It will make it extremely difficult for the industry to supply the coming surge in copper demand.

Of course, when demand for a commodity soars, the market normally adjusts. Supply catches up with demand.

But with copper, it’s going to take years to get new mines up and running.

• So, it could be a long time before the supply of copper catches up with demand…

I’m not the only one who thinks so, either.

Bloomberg projects that the copper market will be in a deficit for four of the next five years. By 2022, it expects the annual copper supply to fall 395,000 tons short of demand.

This is a recipe for much, much higher copper prices.

It’s why Friedland keeps telling investors to load up on copper.

But Friedland isn’t just calling for higher copper prices.

• He’s bet his personal fortune on it…

Ivanhoe Mines, one of his companies, is developing the world’s largest copper mine in the Democratic Republic of the Congo.

This tells us Friedland has a ton of conviction in this call. And he’s not someone you want to bet against.

Regards,

Justin Spittler
Tulum, Mexico
November 30, 2017


Chart of the Day: Student and Auto Loan Debt Hit All-Time Highs

By Joe Withrow, analyst, Casey Research

Student and auto loan debt has exploded higher over the past seven years.

As you can see from the chart below, student loan debt is now nearly $1.4 trillion. And auto loan debt just hit $1.2 trillion. These are both all-time highs.

Data from the U.S. Department of Education shows that half of all student loans are not being paid on time. Of those, one in six loans are more than 30 days past due.

And the picture is even worse with auto loans.

Subprime debt now makes up 25% of all auto loans outstanding… and 10% of those subprime loans are more than 90 days past due. That is the same level reported at the peak in 2008.

This debt binge may go on for a little longer… but the bust is coming.

—Joe Withrow


Reader Mailbag

Today, a reader responds to Tuesday’s Mailbag

I found the thoughts offered by fellow subscribers Tony and Peter were both interesting.

In regards to Tony’s question about sending money offshore when the laws here have been constructed to protect the rich, I think the answer is found in the demographic trends in the U.S. In particular, the percent of voters who are dependent on the government to survive – it would appear that such voters are either in the majority now or soon will be and the pressure to appease that voting block by taking ever-increasing amounts of money from “the rich” to give to “the poor” will dramatically increase the risks of keeping money here. International diversification is one of the few strategies available to mitigate political jurisdiction risk and I cannot imagine any person of wealth not using it. Even if wealth is nominally safer here in the U.S. now, the trend is not encouraging.

Peter’s assertion is basically that other people’s bad behavior requires that we lower our standards as well. So if some people are using their right of privacy to shield bad behavior, we should eliminate privacy for everyone and if someone’s gains are ill-begotten, it is then permissible to be envious of their gains. Each person has to parse this out in terms of their own values and beliefs, but I won’t be changing my views of right and wrong based on the behavior of others. Would Peter suggest that because of how pervasive the bad behavior of prominent men has become that we should now counsel women to stop thinking of their private parts as private and declare that grabbing a handful of butt cheek is the current incarnation of the handshake of years past?

If a moral compass is going to provide direction, it has to point to something other than the lowest common denominator of observed behavior.

—Paul