Once China’s economy is back online, it will inevitably need tons of copper.  Before coronavirus, the government had planned to give a boost to economic growth:China Construction

  • The People’s Bank of China said it planned to slash how much capital banks were required to hold as reserves to its lowest level since 2007 in an effort to shore up economic growth. 
  • The move is expected to free up as much as $126 billion for loans, with the first round of reserve cuts taking effect September 16. (Business Insider)

No doubt there’ll be plenty of activity once the dust settles and China’s share of global copper consumption has grown tremendously over the years.  Although global growth has slowed, the rebound in China is bound to have a disproportionate positive impact on copper demand and prices.  I mentioned that copper seems ready to follow gold’s lead in a previous blog.

China share of Global Copper Consumption

The question I promised to address was which stocks I’d consider the best way to play the pending increase in demand and trudging higher copper price.  Some might play commodity futures, but that game is too highly leveraged for the likes of me.

I would generally pick a large cap leading copper miner, as well as a small (for more upside) exploration company to invest in.  Why not go with the biggest publicly traded company to be sure? Freeport-McMoRan  (FCX) is a leading international mining company with headquarters in Phoenix, Arizona.

FCX produced 1.9 million metric tonnes of refined copper in 2018, about 11% of the world’s total, making it one of the world’s largest copper suppliers. Freeport-McMoRan posted revenues of $18.7 billion in 2018.  (thebalance.com)

The company generates lots of cash flow and enjoys one of the better debt/equity ratios (1.08 at end of December 2019) in the mining industry.  Although it lost money last year – remember that you buy cyclicals when they’re losing money, and sell them when they’re making money.

On the smaller exploration and development front, I like Western Copper and Gold Corporation – the company announced the below in a December, 2019 News Release:

VANCOUVER, B.C. Western Copper and Gold Corporation (“Western” or the “Company”) (TSX: WRN; NYSE American: WRN) is pleased to announce the assay results from this summer’s exploration diamond drilling program at its wholly owned Casino Project in the Yukon Territory, Canada.

Of course being an exploration company, don’t expect revenues or earnings for some time – more probably the company will be swallowed up in due course by a major.

About the Author

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.

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