Matt Badiali

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Don’t Buy Oil, Buy this Critical Commodity Instead

All eyes are on oil thanks to the war in Iran. It gets all the headlines.

Talking heads debate shortages and supplies. But out of the spotlight, copper is ripping higher. It’s near an all-time high now:

image 1

This isn’t a new story. It’s the reason I jumped at the chance to run a junior copper explorer back in 2022. I knew that a copper bull market was coming. I was too early. But as an investor, the timing is perfect.

Some folks look at the chart and thing, “I missed it.” But here’s an example of what happened during the last copper bull market:

image 2

We used Freeport McMoRan (FCX) as a proxy for the major copper producers at the time. Coming out of the crash, Freeport’s shares ran 400% from January 2009 to January 2011. The price of copper exploded 225% higher.

Now compare that to the last two years:

image 3

As we can see here, Freeport’s shares didn’t start to rally until April 2025. Since then, they rose about 130%…well below the performance from 2009. And copper prices are only up about 45%…

That leaves us plenty of room for bigger gains.

And even if the copper prices stop rising for now, copper producers are about to generate massive cash flows. This will be the start of a massive round of consolidation, exploration, and development.

And it won’t be enough.

It takes nearly two decades to take a copper discovery to production. And thanks to nearly a decade of under investment from 2012 to 2023, there have been far too few new discoveries.

According to the analysts at S&P Global, new discoveries fell 90% since 1990. Since 2021, only six discoveries meet the “major discovery” criteria. And all the new production scheduled to come online between now and 2030 will only cover about 80% of expected demand.

That math is impossible to argue. We need copper to live a modern life. If you want the lights to come on when you flip the switch…you need copper. If you want to use ChatGPT or any other AI for that matter, you need more copper.

It doesn’t all have to be new, though. Recycling will add some back into the system. But you can’t recycle enough to meet the projected demand.

That means the price of copper must go up. And as we saw from the chart above, that’s already underway. However, the earnings growth hasn’t been priced in yet.

That’s why we want to buy now, even though these stock prices appreciated significantly. There are a couple of ways to own these stocks. For generalists who want some exposure to quality miners, the Sprott Copper Miners ETF (Nasdaq: COPP) is perfect.

COPP holds a basket of the world’s largest miners (percentages are estimates):

  • Freeport McMoRan (26%)
  • Teck Resources (11%)
  • Antofogasta (9%)
  • Hudbay Minerals (5.5%)
  • KGHM Polska Miedz (5.5%)
  • Lunding Mining (5.3%)
  • Southern Copper (4.7%)

These are giant copper producers that will absolutely benefit from the rising copper price. However, for investors with more risk tolerance, there’s the Sprott Junior Copper Miners ETF (Nasdaq: COPJ). This holds the smaller, “up and coming” copper companies:

  • Arizona Sonoran (6.3%)
  • Faraday Copper (5.9%)
  • Taseko Mines (5.2%)
  • Firefly Metals (4.8%)
  • Solaris Resources (4.7%)
  • Minsur (4.6%)
  • Osisko Metals (4.4%)
  • ERO Copper (4.3%)

As you can see, there are much smaller portfolio memberships, which gives them more members. The exposure to these smaller companies gives them more opportunities to benefit from both production and discovery. Higher risk, but potentially higher reward as well.

These funds did well over the past year, but they have room to move. So, if you don’t have exposure to copper yet, you should get some now. Because, while oil gets all the headlines, copper is about to explode.

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