From LME Copper To Copper ETF's PDF

From
LME Copper to Copper ETFs
Understanding Todays Copper Price for Investing in Copper
From LME
Copper to
Copper ETFs
Understanding
Todays Copper
Price for Investing
in Copper
A collection of articles from Copper Investing News looking at

the Copper price forecast for 2015
By Teresa Matich
2015
Copper Investing News
From LME Copper to Copper ETFs
Table of Contents
Contents
Commerzbank: Unexpectedly Tight Market Should Help Copper Recover ................................................. 3
Ian Parkinson of GMP Securities: Copper Prices Need to Move Higher ...................................................... 5
Dont Get Hung Up on Short-term Copper Prices: Lawrence Roulston ....................................................... 7
Copper to Shift into Deficit by 2016, 2017: Stefan Ioannou ........................................................................ 9
A Look at Historical Copper Prices ............................................................................................................. 14
Calling for a Copper Surplus? Not So Fast ................................................................................................. 17
Robert Friedland Bullish on Platinum and Copper .................................................................................... 20
LME Copper Stockpiles Down, Deficit on the Horizon ............................................................................... 22
Peak Copper ............................................................................................................................................... 25
Have No Fear, Peak Copper Isnt Near ....................................................................................................... 27
Copper as a Critical Metal .......................................................................................................................... 29
Investing in Copper: Copper ETPs .............................................................................................................. 31

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2015
Commerzbank: Unexpectedly Tight

Market Should Help Copper Recover
Despite falling copper prices and rising
inventories, Commerzbank (ETR:CBK) is
suggesting that the market for the red metal may
not be as oversupplied as many believe.
In a commodity research note put out on Friday, the
firm admits that copper prices fell at the end of last
month to five-and-a-half-year lows on the back of
pressure from falling oil prices, concern over an
economic slowdown in China, rising inventories and
pressure from speculative financial investors.
But despite all that, Commerzbank is predicting that
an unexpectedly tight market could help copper
recover perhaps fairly strongly given the latest price slide.
To be sure, since the end of last year inventories on the Shanghai Futures Exchange have gone up
by 55 percent, to 137,000 tonnes, while inventories on the London Metal Exchange (LME) have
risen over 70 percent, to 285,000 tonnes.
On top of that, Commerzbank suggests that the red metal has been facing headwind from
financial investors, with money managers betting on copper prices to fall on the COMEX for almost
the past five months, and net long positions at their lowest since last July on the LME.
However, Commerzbank believes that the situation might not be as dire as it seems.
In our opinion, copper has now been oversold and many risks are already priced in, the firm
states in its report. Any shift in sentiment among speculative financial investors would no doubt
contribute to significantly rising copper prices.
Commerzbank identifies several points to support its case:
Market tighter than it looks According to data from the International Copper Study Group
(ICSG), the global copper market was in a seasonally adjusted deficit of 532,000 [tonnes] for
the first 10 months of last year. The organization also reported tight supplies of high-grade
copper scrap.
Surplus predictions optimistic While the ICSG is predicting a surplus, Commerzbank isnt so
sure. It notes in its report that wage negotiations are set to take place for mineworkers in Chile,
the worlds largest copper producer, and that production could be curbed if strikes occur.
Furthermore, the firm points out that Codelco and Freeport-McMoRan (NYSE:FCX) have cut
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investments due to low prices for the red metal, and suggests that hardly any new projects are
likely to be pushed forward at the current low prices.
Is Chinese demand really falling? Despite slower economic growth, Commerzbank sees
market watchers anticipating stimulus measures from Chinas government. For example, as
others have previously pointed out, the country recently announced an investment of roughly
$70 billion in electrical infrastructure, and that will require plenty of copper. Beyond that,
Commerzbank believes that current low prices could spur demand as Chinas State Reserve
Bureau could take advantage of the situation to buy up copper.
Of course, Commerzbank isnt the only entity to be making such arguments as of late. Ian
Parkinson of GMP Securities has also said that projections for a surplus could be optimistic, and
that current prices are not high enough to incentivize new production. Certainly, that could be
problematic down the road.
Similarly, Lawrence Roulston of Resource Opportunities has admonished investors not to get hung
up on short-term copper prices, and has suggested that worries of a slowdown in China could be
overstated.
All in all, Commerzbank sees the current pessimism as exaggerated for copper, and anticipates
copper rising to $6,500 per tonne by the end of 2015.
2015
Ian Parkinson of GMP Securities: Copper

Prices Need to Move Higher
At the 2015 AME BC Mineral Exploration
Roundup, Ian Parkinson, an equity research
analyst at GMP Securities, shared his views
on the copper market. He made several
interesting points regarding whats been
bringing the red metal down and identified a
few factors he sees affecting prices going
forward.
To start, the analyst led with his conclusion. I
believe copper is going higher, he said. He
admitted that there are others who dont agree
with him on that front, but noted that there are fair arguments against predictions for copper to go
lower.
For example, looking at technical analysis that sees copper going the way of oil, Parkinson sees a
couple of problems. Case in point: some technical charts have called for copper to hit $1.40 per
pound, but Parkinson believes that while such analyses can be valuable, they do not look at the
fundamentals of the underlying business.
While oil producers used to enjoy huge margins, theres still plenty of room for prices to come
down. Not so for copper, which costs more to produce. My view is, there is more downside in the
near term for copper, but its going to be underpinned by this marginal cost, said Parkinson,
stating that while the red metal could fall another 20 cents in the near term, he sees the bottom
coming either this quarter or early next quarter.
Dipping into the demand side of things, he stated that emerging markets in China and India are
still very, very strong in our view and are still going to be major drivers in the near term. While he
noted that the emerging markets have underperformed the broader market in recent years, he sees
renewed optimism on the horizon and suggested that long-term potential growth in emerging
markets will help drive long-term demand for copper.
Parkinson also anticipates the oil price helping out, since less money spent on oil means more
money for other items. Hopefully its lots and lots of copper, he said.
Still, in the near term, Parkinson believes a surplus is on the horizon. Copper is going to be in a
modest to moderate oversupply situation for the next two years, he stated.
That said, he also noted that whats forecasted is a 200,000- to 250,000-tonne surplus for a 20million-tonne-per-year market in an industry that has a tendency to over promise and under deliver
2015
when it comes to production. In that light, he added that its important to take the forecasted
surplus with a grain of salt.
To give a few examples, he pointed out that Barrick Golds (TSX:ABX,NYSE:ABX) Lumwana mine in
Zambia is set to close on the back of a new 20-percent royalty, adding that the longer-term
impacts of that will be negative for copper production in the country. There have also been talks of
a strike at KGHMs (WSE:KGH) Sierra Gorda mine in Chile.
Furthermore, as others have noted, exploration spending has all but dried up, meaning that
quality projects still are not getting the financing they need to come into production.
Medium term, we see a return to a deficit in the copper market in 2017, 2018, said Parkinson,
and unless theres a window to finance a lot of these projects, that deficit will remain intact for
quite a while. Beyond that, looking at real sustaining capital costs to pay back construction costs
for building a mine, he concluded that the current spot price does not build a mine. It does not
keep current mines operating, and that longer term, [the] industry still needs a massive recovery
in the copper price to develop projects.
In closing, Parkinson stated that GMPs long-term copper price forecast $2.85 a bit lower than
what most market watchers would like. However, there is a caveat: with that, we looked at existing
projects we have in our project database, [and] 43 percent of those projects are underwater at
$2.85 long-term copper, he said. Certainly, it doesnt look like $2.85 copper would be sustainable
in that light.
So again, the copper price, in my view, definitely needs to move higher, said Parkinson.
2015
Dont Get Hung Up on Short-term Copper

Prices: Lawrence Roulston
At Cambridge House Internationals 2015
Vancouver Resource Investment Conference,
Scott Gibson of Kitco Gibson discussed the
uranium, copper and gold markets in a panel
with Lawrence Roulston of Resource
Opportunities and Eric Coffin of HRA Advisories.
The panel kicked off with a look at the copper
market. While theres no doubt that copper prices
have been lower than most would like lately,
Roulston advised investors not to get hung up on
the short term.
Whats happened recently in the copper market is some aggressive selling by some speculators
and theres no question its going to come back, he said.
Explaining further, Roulston talked about the consensus regarding a small surplus in the copper
market a few months back. While the projected oversupply of a few hundred thousand pounds
relative to the multi-billion-pound annual copper market could have been enough to push down
the price by a few nickels, Roulston stated that recent cutbacks and reductions in guidance from
producers suggest that the small surplus might actually turn into a deficit during this calendar
year.
In any event, the market for copper is fairly well balanced, he said. And theres going to be short
turn ups and downs in the market, but longer term weve got 2-percent annual average growth in
copper consumption going back a decade or so.
In terms of demand growth, he pointed to Chinas growing population and said that those looking
at headlines calling for slower economic growth from the country might want to look again.
They forget the fact that its going to grow 7 percent instead of 7.5 percent, but 7 percent growth
on a much larger base is a lot more copper consumed in China this year than last year, he said.
And weve got growth happening around the world. Growth in terms of supply, however, is a little
more constrained, according to Roulston.
Coffin also thinks that the market will be fairly balanced. However, he isnt bullish on copper, and
hasnt been surprised at the metals performance as of late.
I like copper, but I havent expected to see the copper price rise for the last year. Ive been
expecting it to pretty much do what its done, he said.
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Overall, Roulston suggested that with copper prices as low as they are, there could actually be
some opportunity in the market. [Y]oure going to make the most money out of buying the thing
that is most out of favor, he said. Right now, the resource industry overall is out of favor. The
junior sector is even more out of favor.
As far as specific companies go, Roulston mentioned Mindoro Resources (TSXV:MIO) as an early
stage exploration play and Copper Mountain Mining (TSX:CUM) as a company producing copper
and doing quite well at it. Furthermore, he added that Morien Resources (TSXV:MOX) has a
concept worth noting.
Theyre in the process of accumulating copper assets at a time when copper assets are out of
favor, he said.
For his part, Coffin favors Nevsun Resources (TSX:NSU) and Excelsior Mining (TSXV:MIN). To be
sure, Nevsuns Bisha mine in Eritrea has been controversial from time to time, and Coffin admitted,
Im not crazy about Eritrea. That said, he still sees Bisha as one of the best base metal [mines] in
the world. He likes Excelsior due to the very low projected cash cost for its Gunnison in-situ
recovery copper project in Arizona.
In closing, Roulston cautioned that an investment in copper companies is not going to bounce
next week. However, things might be a bit more bright for those who are able to wait.
[I]f you accumulate the good-quality companies in this sector over the next few months and
look back in a couple years time, you are going to be very, very happy as an investor, he
suggested.
2015
Copper to Shift into Deficit by 2016, 2017:

Stefan Ioannou
With the scandal surrounding Chinese shadow
lending earlier this year and a flurry of mergers
and acquisitions (M&A) this summer, the
copper space has certainly seen some
excitement this year. But now that calls for a
surplus have been replaced with cries for a
shortage, it can be difficult for investors to
figure out whats really going on with the red
metal.
To get a little more insight into the copper market,
Copper Investing News (CIN) caught up with Stefan Ioannou, mining analyst at Haywood Securities.
In the interview below, Ioannou breaks down the effects of Chinese shadow lending, talks about
what the current state of the market means for mining companies and gives his outlook for copper
prices.
Overall, Ioannou sees copper sitting around $3.25 for the rest of the year, with a deficit pushing
prices higher later in 2016 and into 2017.
CIN: In your view, how have copper prices performed so far this year? Were there any
surprises for you?
SI: Year-to-date, the copper price has been in line with what weve been expecting. The average is
$3.15, and its about $3.20 right now, so no major surprises.
I think the one thing that caught everyone a little off guard was the impact of Chinese shadow
lending. It caused some volatility, especially early in the year when we saw copper drop below $3. It
has since recovered, but that did cause a lot of uncertainty.
CIN: With that in mind, could you give our readers a bit of an overview of what happened in
terms of Chinese shadow lending?
SI: Essentially what happened was that the Chinese were buying copper and keeping it in nonbonded warehouses, then using it as collateral to get low-cost loans to slip into higher-yielding
investment vehicles. However, it became pretty apparent that there was some fraudulent activity
going on basically these guys were using the same block of physical copper as collateral on
multiple loans.
A big concern was that with the fraudulent activity and the government tightening down on the
whole situation, we were going to see those Chinese investors look for other means or other forms
of collateral to do their financings with. That meant that all that copper in these non-bonded
warehouses was potentially going to hit the market and flood it, at least for the short term.
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CIN: That happened in the first half of the year is it still affecting the copper market?
SI: Since then there have been a lot more stringent regulations put into place, but there is still some
uncertainty lingering in the market. I think were through the worst of it, but the issue did cause
copper to dip down to the $3 level earlier this year.
CIN: Thanks for clearing that up. Are there any other things investors should be watching to
get cues on the copper market?
SI: In terms of things to watch in the copper space, the most transparent inventory is the London
Metal Exchange (LME). Information on LME volumes is readily available, but keep in mind, the
inventory is only one piece of about a six- or seven-piece pie. It does give a bit of an indication, but
theres also the COMEX, theres the Shanghai, there are mine inventories, theres recycling and
then there are all the non-bonded stockpiles as well. Also, remember that LME inventories were
falling notably as Chinese shadow lenders moved the metal into non-bonded warehouses.
However, as noted earlier, this metal was not being physically consumed to make computers and
refrigerators, but rather was being stored as collateral on other investments.
All that said, over the last couple of months weve been seeing that total exchanges such as the
LME, Shanghai and COMEX are on the down. They are decreasing. Year-to-date, all three
combined are actually down 49 percent, and that includes the LME being down year-to-date almost
60 percent. It was quite high to start the year off, but were getting down to levels that are relatively
low. Were talking five to six weeks of consumption versus much bigger numbers previously.
CIN: What about real demand from China? Theres been a lot of talk surrounding China
buying copper to build cities that dont seem to be inhabited. Is that a good thing for the
copper market?
SI: The one issue with China, and not just for copper, but for anything, is that its a bit of a black
box. That means getting reliable, consistent data is difficult from the outside, and that is a concern.
China is consuming all these metals and commodities, and they have these massive growth plans,
but is that a paper bag thats going to fall apart at some point? Is there a glass ceiling? Time will
tell, obviously.
If you start breaking it down to the population of the country, if even a small fraction of those
people want to move into a western lifestyle they want to live in cities and have iPhones and all
that sort of thing theres a massive amount of consumption coming down the pipeline to support
that.
Its a big paradigm shift for China. Its obviously a manufacturing center of the world, and right now
with a lot of that manufacturing things get made there and sent elsewhere. At some point though, a
greater proportion of Chinas manufacturing will be consumed internally. The population figures
underpinning this anticipated internal demand are obviously very significant and will in turn drive the
countrys demand for copper and other commodities.
CIN: Just to talk a bit about copper supply and demand predictions overall this year, there
have been calls for a surplus and lower overall prices. However, Ive also seen predictions of
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the biggest deficit in seven years. How do investors navigate through that conflicting
information? Who is right?
SI: A lot of it is global demand for the metal and of course, when we say global, one of the
biggest pieces of that global demand picture is China and the encouraging thing there is Chinas
Purchasing Managers Index. Its one small piece of data, but what weve seen over the past couple
of months is that it is rising steadily. Assuming that trend keeps going, we are in a current surplus
situation, and that will slowly get eroded away. The question is just how fast.
Realistically, I think were going to see copper probably trade in the range that its at right now for
the next year or two. I think it will be early or mid-2016 before we really start to see the demand
side take over the supply side on the curve.
CIN: What will be driving that shift?
SI: Well, there are a couple big things in the background driving that longer-term outlook. In the last
few years weve seen a lot of major miners, the guys with the big, big projects, really shift focus to
cost cutting at their existing operations as opposed to sinking capital into new development
operations. Thats great for the bottom line today, but in terms of future supply, it definitely sets that
back.
These are copper projects that still need to come online at some point and, if anything, theyve all
been delayed by a year or two if not more going forward. Its like a self-fulfilling prophecy for
the majors, because obviously cutting costs today increases their bottom line in the short term, and
the effect of that is to drive up copper prices in the future because there just isnt as much physical
copper available.
CIN: So youve been seeing a lot of copper companies having difficulty getting their projects
going?
SI: Yes. The mines that have been shelved are the ones that were still in the feasibility stage, where
ground hasnt actually been broken yet. Weve seen a number of those projects get pushed back.
With the ones that are in construction, a common theme in the mining space is cost overrun on the
CAPEX side. Its an unfortunate reality of the mining business and continues to cause grief for a lot
of guys who are in the process of trying to build mines today.
CIN: How about with the junior or mid-tier companies? Theres been some M&A activity in
those arenas recently.
SI: Weve definitely seen companies position themselves opportunistically to take advantage of
some of the larger or better development assets that are out there. For example, if you look at
Rosemont, Augusta Resources (TSX:AZC) project, its a big copper mine and its quite robust in
terms of what the feasibility study delivers. Obviously theres a permitting challenge there, so Id
say Hudbay Minerals (TSX:HBM) is going into it with a very long-term view. Its something they can
acquire today for relatively cheap, and then as long as theyre not too aggressive on the timeline, I
think they can make it dovetail with their existing operations.
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The same can probably be said for First Quantum Minerals (TSX:FM) and its recent acquisition of
Lumina Copper (TSXV:LCC). Its a matter of getting your ducks in a row so that when copper prices
are higher youve already got the project. Youre not paying a massive premium for them when
copper is at $4. Youre getting them at a discount when copper is $3 or less. Theyre taking
advantage of sale prices right now.
Those are just a few examples. Keep in mind, there are also a number of big projects out there right
now that are held by junior companies, and while theyve done a lot of good exploration work and
development work in terms of the engineering of these things, the next step is to finance. For a
junior with a sub-$100-million market cap, trying to get over the hurdle of raising project financing
to build a $1-, $2 or even $3-billion base metals project is next to impossible in these markets. And
with the majors taking their own focus off some of these larger-scale development assets, it leaves
a lot of these juniors high and dry.
CIN: That being said, whats your overall prediction for the copper price?
SI: Again, realistically I see copper in that $3.25-a-pound range for this year, next year and into at
least the first half of 2016, but as we hit that second half of 2016 and more so into 2017, 2018 there
are some indications that we could start to see the market slip from surplus into deficit on the
supply side. Thats going to obviously support copper prices higher. I dont think seeing a four in
front of the copper price is an unrealistic expectation from a medium-term perspective.
CIN: Are there any other factors we havent talked about that you see affecting the copper
price?
SI: The one wildcard in the background is always unanticipated shutdowns at some of the big
operations. We always see strikes pop out of nowhere, and with something like an Escondida
having strike action, you turn off a couple percent of world production overnight; that can definitely
cause short-term fluctuations in the copper price. It also isnt common for analysts to add
consideration for that type of event, so its something thats not usually forecasted into a lot of
numbers.
Not that Mount Polley is the worlds biggest copper mine, but if what happened with Imperial
Metals (TSX:III) happened at a bigger mine, that could actually impact significant production. For
example, the open-pit wall failure we saw at Bingham Canyon a couple of years ago comes to
mind.
Unforeseen events aside, there is arguably room for the copper price to come down given that even
the higher-cost producers are still generating profits at $3 copper. The copper price would probably
have to drop below the $2.50 range before impacting existing production associated with the upper
end of the copper cash cost curve.
CIN: Well, it sounds like things are looking up for copper for the most part. Thanks for your
insight into the copper market and for taking the time to speak with us today.
SI: Thank you.
2015
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A Look at Historical Copper Prices

2014 wasnt a great year for copper. The
metal touched a four-and-a-half-year low
near the end of December, and things are
not set to pick up much in 2015.
That said, its worth noting that copper prices
have actually gained $2 over the past 14
years. Although that figure doesnt account for
inflation, its still a sizable 243-percent
increase. Prices were more or less on the rise
during the latter half of the century as well,
indicating that the state of the red metal might not be so bad after all.
Speaking to some of the factors affecting copper prices historically, Stefan Ioannou of Haywood
Securities suggested that its most pragmatic to look at copper since the 1970s or 80s, when one
key factor brought major changes to the industry: the rise of modern heap leach technology.
Leaching has long been used in mining operations, but according to this paper, the method in its
modern form started gaining popularity around 1980.
That fundamentally changed the way we mine copper, Ioannou said. Up until then, a lot of
copper mining was for the most part focused on sulfide mineralization producing a copper
concentrate that youd send to a smelter. With heap leach technology, all of a sudden the giant
porphyries [and] the oxidized caps associated with large porphyries down in South America
became viable.
That sounds like good news for increasing copper supply, but as Ioannou noted, large-scale
deposits are often low grade, meaning that theyre more costly to mine despite relatively cheap
heap leaching methods. Thats no doubt had an affect on copper prices.
The change weve seen in the industry is that the price of copper has gone up because the cost
to produce a pound of copper has gone up. They sort of go hand in hand, he said.
While the analyst stated that supply and demand dynamics are the main driver behind prices, he
also noted that grades and production costs are factors as well. Demand is for copper keeps
growing, and Ioannou suggested that since the low-hanging fruit has been mined, miners must
increasingly go after more difficult, large, low-grade and costly deposits to meet that need.
The price of copper dictates how low you can go on the grade, he said, Back pre-1970s, Im
guessing a lot of copper was coming from a lot higher-grade mines as weve been mining more
and more of these large-scale deposits that are low grade, the cost on a per-pound basis has gone
up.
What else is driving copper?
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A number of supply and demand factors have affected copper prices over the years. For example,
a report from the US Geological Survey (USGS) notes that the Vietnam War meant strong demand
in the mid-60s and early 70s, leading to price controls to limit rising domestic copper prices.
More recently, those following the resource market will no doubt remember a giant spike in demand
from China that sent many global commodities prices soaring in recent years. As the top copper
consumer worldwide, accounting for 40 percent of global demand, theres no doubt that China has
a big impact on copper prices.
Of course, there have been a number of downturns as well. The USGS states that in 1998, [t]he
constant dollar copper price in 1998 fell to the lowest level since the Great Depression of the
1930s, while an earlier production boom in the 1980s led prices to fall.
Copper (LME), grade A, minimum 99.9935 percent purity, cathodes and wire bar shapes, settlement price from 1965.
Source: Knoema
Interestingly, some take another view on the historical performance of the copper price. Richard
Schodde, managing director at MinEx Consulting, gave a presentation on the subject back in 2010
that looks at a longer time frame. He came to a different conclusion than Ioannou.
Schodde told Copper Investing News by email that real copper prices have dropped 50 percent
over the past 100 years, and that production costs have dipped lower in tandem due to economies
of scale and advances in mining and processing technologies. Still, he views that as a good thing
overall, and predicts that the industry will continue to innovate in order to exploit lower-grade
deposits and meet growing global demand for copper.
For his part, Ioannou has noted previously that copper prices havent yet dropped low enough to
cut production out of the market. Hes also suggested that a supply crunch is coming for copper
around 2017 to 2018 that could set prices on a rise. Looking at the longer term, given that copper is
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so widely used, he has no doubt that the world will continue to need more and more of the red
metal.
If anything, I think the general consensus would be that the overall global demand for copper is
definitely going to grow [over the next 25 years or so], he said.
2015
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Calling for a Copper Surplus? Not So Fast

When it comes to the copper market, analysts are always
looking at whether there will be a surplus or a deficit. Of late,
many have been calling for a continued surplus, including
Thomson Reuters GFMS, which in October released an update
to its 2014 copper survey, suggesting that it is unlikely the
market will shift into deficit in 2015. Likewise, though the
International Copper Study Group (ICSG) has revised its copper
supply-usage forecast down substantially, the group is still
definitely calling for a surplus.
But as with most things, there is always a flip side. Indeed, there are
analysts who argue that the copper market will face a deficit sooner
than many think.
Lower LME stocks
The Financial Times reported on October 28 that copper stocks at
London Metal Exchange (LME) warehouses have fallen by 55
percent this year, hitting 161,050 tonnes, or about three days worth of global consumption.
To be fair, that figure alone does not signify a copper deficit. As Haywood Securities analyst Stefan
Ioannou has pointed out, the LME may be the most transparent inventory, but its just one piece of
the much larger copper market pie.
However, the exchange is still a valuable indicator when looking at the copper market, especially
when one buyer (rumored to be Londons Red Kite Group) appears to be holding 50 to 80 percent
of LME copper. In other words, it looks as if there are important players making strategic decisions
to purchase copper of late, and its worth considering whether a prediction for a tight market is
driving those decisions.
China (still) stockpiling
Furthermore, it appears that Chinas State Reserves Bureau (SRB) is still stockpiling copper. After
buying 200,000 tonnes of copper in March and April, when copper was at its weakest price in
years, the Bureau recently placed orders for 150,000 to 200,000 tonnes of copper cathode, Reuters
reported. The copper is set to be delivered in the final quarter of 2014 and at the start of 2015.
Reuters columnist Andy Home notes that its difficult to pin down exactly how much copper the
SRB buys, and that the Bureaus practice of rotating out older copper stocks could put a dent in
this years estimated purchases of 700,000 tonnes. However, despite concerns about slowing
economic growth from China, the writer suggests that SRB activity could mean the country has no
intention to stop importing copper.
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What well-stocked SRB warehouses might mean for the copper price is another consideration,
since stockpiled copper cant be consumed by industry in the traditional sense. Still, the Bureaus
buying is an important indicator of demand.
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Supply delays
Furthermore, expected ramp ups at some copper mines have seen delays this year, and exports
from Freeport-McMoRan Copper & Gold (NYSE:FCX) and Newmont Minings (NYSE:NEM)
Indonesia operations were briefly stopped due to changes in concentrate export rules. While an
October GFMS update points to producers regaining some of the momentum they lost in the first
half of the year, the Times notes that increased mine supply has not led to a refined copper surplus.
Thats due to raw material bottlenecks caused partly by the situation in Indonesia and partly by a
lack of smelting capacity in China.
Rising impurities such as arsenic are also causing problems, since its difficult for smelters to
process the material. To solve the problem, producers often blend those concentrates with purer
material, creating even more demand for the right kind of copper.
Whats next?
The ICSG has brought its prediction for a 595,000-tonne copper surplus in 2014 down to 393,000
tonnes on the back of higher apparent copper usage in China. Echoing that sentiment, the team at
Thomson Reuters predicts that LME copper will average $6,500 per tonne for the fourth quarter,
declining to $6,200 per tonne in 2015.
However, not all in the copper space are in agreement on that front: while Ioannou also does not
see a copper deficit next year, he sees copper prices holding higher in comparison to GFMS
predictions, and Andy Home has suggested that a deficit could come even sooner.
To be sure, copper investors will be keeping an eye out to see whether Home is right. Although the
writer admits that his bullish thoughts might seem premature, he points out that others including
Chinas SRB appear to be looking at a tighter market, and thats certainly worth taking note of.
2015
19
Robert Friedland Bullish on Platinum and

Copper
Theres been no shortage of great
presentations at this weeks Sprott
Vancouver Natural Resource Symposium,
but for many, the standout was
Wednesdays talk from Robert Friedland,
executive chairman and director of Ivanhoe
Mines (TSX:IVN).
While Friedland spent much of his allotted time
talking about his past successes and Ivanhoes
future plans for the Africa-based Platreef,
Kamoa and Kipushi projects, he also dedicated some time to discussing his outlook for two of the
metals those projects will produce: platinum and copper.
Heres an overview of what he had to say.
Platinum is the new gold
Friedland set the stage for his platinum prediction by explaining that the most important
fundamental economic and social transformation currently taking place is the process of
urbanization, which is changing how most of us live. The main drivers of that urbanization are
Africa and Asia, in which gigacities cities that contain more than 10 million people are being
constructed.
But while urbanization means more people can live in cities, it also has a negative side: terrible
urban pollution, largely the result of vehicle emissions. And, said Friedland, while everybody loves
to read about how bad it is in China, the fact is air pollution is a global problem. Indeed, he added,
the World Health Organization (WHO) has now declared that air pollution is the worlds single
largest environmental health risk.
What does all that have to do with platinum? Well, Friedland said, platinum-group metals are
absolutely critical to having cleaner air. Thats no surprise to those who know that catalytic
converters, which are used to control vehicle emissions, use platinum, palladium and rhodium.
However, some changes are in the works that are likely to make platinum even more prevalent in
preventing pollution from vehicles.
For one thing, China is imposing standards to remove sulfur from diesel and gasoline. According
to Friedland, thats a good thing because right now theres so much sulfur in the diesel and
gasoline that it destroys catalytic converters. The new standards will thus allow the 90 million cars
clogging the roads in China to be retrofitted with catalytic converters. That, of course, will require a
lot of platinum.
2015
20
Further, a current survey KPMG did of all the worlds senior automobile executives shows that
69 percent of respondents rank fuel cell technology as critical to the future growth of the
automobile industry. And no wonder fuel cells, said Friedland, promise electrical energy that is
completely free of harmful emissions the only thing that will come out of the tail pipe of a fuel cell
automobile is water vapor. Of course, whats more relevant for investors is the fact that they
require platinum as a catalyst to split hydrogen fuel cells into ions and electrons.
Essentially, platinum, which is already key to mitigating pollution from vehicles, is set to become
even more instrumental in that arena. And thats going to happen as urbanization leads to
increased vehicle demand. I hope by now Ive convinced you that platinum is the new gold,
Friedland quipped.
but the copper story is equally compelling
That said, Friedland was quick to emphasize that the copper story is equally compelling.
Thats partially because of supply issues. We have a gradual decline in copper grade globally as
the requirement level keeps going up, Friedland noted, adding, we are going to have an incredible
shortage of copper by the end of this decade where were headed is going to be psychedelic.
Demand for copper is also growing. One reason is that the metal is a bactericide, it kills all germs
and all bacteria very efficaciously. Thats in contrast to stainless steel, which bacteria just love.
As a result, said Friedland, the world is discovering from the WHO and US military that all hospital
surfaces that were made out of stainless steel are going to have to be replaced by copper.
On a different note, Friedland reminded the audience that copper is also valued for its conductivity.
Google (NASDAQ:GOOGL) is building these huge server farms that cover several city blocks with
huge copper cables, he said. Similarly, Friedland pointed out that lithium-ion batteries in the
news lately due to Tesla Motors (NASDAQ:TSLA) gigafactory announcement require a fair
amount of copper. Indeed, he said, the red metal accounts for 75 percent of the weight of such
batteries.
You just think about what we need, Friedland concluded. We need copper and we need
platinum.
2015
21
LME Copper Stockpiles Down, Deficit on

the Horizon
The copper market may be looking at a
surplus this year and next, but with a lack of
new supply coming online, the market is
headed to deficit territory. And, according to
Jim Lennon, a consultant for Macquarie
Securities, Chinese demand is the key to it
all.
China has accounted for over 100 percent of
demand grown [for copper] over the past
decade, Lennon told Copper Investing News,
adding, up until 2010, Chinese copper
demand averaged 17 percent per annum. And while that number might have come down slightly,
demand for copper from China is still a driving force behind the market.
Even if copper demand in China grows by 4 percent on a base of 9 million tonnes, thats 360,000
to 400,000 tonnes per year, Lennon explained.
What about the LME?
At a glance there may not seem to be a problem with growing demand, especially for producers, as
a scarcity of supply means higher prices. However, looking at the bigger picture, China has been
busy scooping up as much currently available supply as it can, as is evidenced by its recent
purchase of the Las Bambas project in Chile and of London Metal Exchange (LME) stockpiles.
The London Metal Exchange is one of the most transparent indicators of the copper market. Of
late, investors may have noticed that stockpiles in LME warehouses have been on a steady decline.
As Stefan Ioannou, mining analyst at Haywood Securities, recently told Copper Investing News,
[e]arlier this year, we saw a lot of horse trading as copper inventories appeared to be moving
from the LME to Chinese warehouses. In this case, it is important to recognize that with the
shifting of the red metal from warehouse to warehouse, there was no actual consumption of
copper.
Lennon noted that the Chinese government is coming in and buying physical copper for their
strategic stockpiles in addition to Las Bambas, which was purchased by Chinese corporations.
Lennon went on to state that the Chinese are reportedly looking to take delivery of 20,000 tonnes of
refined copper per month in 2014 alone, which is bringing the market, along with other disruptions
to supply, to a balanced position between supply and demand.
2015
22
All that is to say that LME copper stockpiles are indeed getting lower. On June 20, they stood at
159,425 tonnes, which isnt very much.
To give a little perspective, LME copper stockpiles were roughly 166,000 tonnes just a week and a
half ago, which Ioannou explained is actually less than three days consumption.
Ioannou explained that the LME is down roughly 70 percent from last year. However, it is not the
only exchange in a decline. It is merely the most transparent.
Similarly, the Shanghai Metal Exchange, which was climbing earlier this year, is actually down
about 56 percent over the last three months, Ioannou said, pointing to the fact that this is due in
large part to Chinas tightening financial rules and skepticism spurred on from the countrys
domestic bond failure in March.
Copper prices and new production
With stockpiles in major warehouses dwindling, and a surplus still conceivably in the cards for the
next year or two, where does that leave copper prices?
Currently, around $6,730 per tonne or $3.05 per pound.
Depressed copper prices and weak investor sentiment arent driving new production. Development
companies with larger deposits which is what the market needs need higher prices before
they can move forward with their projects to fill the gap that is rapidly approaching.
As Ioannou explained, before we seen higher prices for the red metal, it is likely that the market
needs to see the continued decline of inventories.
The red metal will gain some strength from economic data from China, and also from Europe, but it
is his view that copper prices will remain range bound between $3 and $3.25 per pound. For the
next year and a half, pricing is probably is going to be relatively flat.
Meanwhile, exploration and development of copper projects will continue, though until the pricing
environment, global economy and investor sentiment truly improve, that development will likely be
at a slower pace.
And with the lack of new supply, copper prices will be on the rise the question is when, not if.
[A]s the margins get squeezed, the copper price has to go up, Ioannou said, adding, we are
already talking about a longer-term supply deficit, and this impact of lower copper prices would
likely contribute to it even more.
These days, the median copper price is on the order of close to $1.50 a pound, and copper
producers and higher-cost producers are producing at $2 to $2.50 a pound. If copper were to drop
down to $2.75 or $2.50 a pound you are actually going to start knocking copper production off the
map.
And as we all know, copper production and use is integral to the global economy. So eventually
things will pick up.
2015
23

2015
24
Peak Copper
Copper surprised everyone with its rapid ascent
from the recession, propelled by Chinas
stockpiling program to hit record-high prices.
Prices were buoyed by underlying changes to the
supply chain, with analysts closely watching
eroding stockpiles of copper in warehouses, and
predicting that sooner, rather than later, we will
run out of copper.
We all have heard the hysteria surrounding peak,
however, supporters of peak copper claim that
there would be more dire consequences to peak
copper compared to peak oil. Advances in oil field technology since the 1980s have greatly
extended the ultimate date for peak oil, according to Yu-Dee Chang, Chief Trader at ACE
Investment Strategies. Green technology has also provided new means to extract energy, more
affordably, from renewable resources. Now for copper, the frightening fact is, with todays current
technology, there are no viable substitutes.
How did we get here?
In the past few years, stronger than expected growth from China has resulted in accelerated
copper demand. With a market already known to operate on thin margins, Chinese demand has
quickly created a copper supply deficit. The potential that other emerging markets are also entering
a period of rapid growth is fueling speculation that the increased demand for copper has just
begun.
The tightening balance of copper supply/demand has resulted in a rapid rise in the red metals
prices. Furthermore, there has also been a piqued interest in copper as an asset class. Copper
prices are now being impacted by investment demand, in addition to the traditional, physical
demand. Copper is deemed a strategic asset in China and provides a way to diversify from the US
dollar and US treasuries.
While copper demand has risen, supplies have not kept pace. This is resulting in speculation that
we are on the path to peak copper. While there are many of supporters of this peak copper
phenomenon, date predictions as to when this reality will be upon us are all over the map, and
range from 2020 to 2100.
Lagging supplies
The million dollar question is: Why are supplies lagging? Though exploration for copper is moving
ahead at a rapid pace, the market is faced with a supply deficit. The copper supply deficit,
however, is not due to a lack of available copper to mine it is caused by complications in bringing
copper to the market.
2015
25
One of the major factors impacting the copper market is capital investment. Exploration and mining
require a great deal of cash. The last major investment cycle was in the 1970s and while, currently,
we are in a cycle of increased spending in exploration, new discoveries are few, and have not been
enough to compensate for the decline in ore grades from the larger, older mines. Analysts estimate
that in order to keep up with the current demand, and compensate for aging mines, three new
world class copper mines need to be discovered, every year.
The other big factor impacting new supplies to the market is the time it takes to get a new mine into
production. First, an economically viable reserve has to be discovered, and then this discovery has
to be developed. Many projects dont even make it past this point. Often, by the time a mine is
about to be constructed, the metals price collapses and the project is abandoned. However,
miners who make it past the point of exploration and into construction and mining are faced with a
multitude of potentially time consuming delays, including everything from equipment shortages to
permitting problems.
Juniors supplying future copper
Keeping all this in mind, there are a still a great deal of copper projects opening up in the coming
years, especially from junior miners. It seems that junior miners are the ones bringing on-line most
of the new projects. It is important to consider, that these junior miners are a necessity, and they
face unique challenges compared to their larger counterparts. Most significantly is the new credit
environment, which may preclude some juniors from gaining the financing necessary to fund their
exploration and mining endeavours. These junior miners are very important to the future supply of
copper, and many other metals. The large miners, who can easily overcome the financing hurdle,
seem more interested in spending money on acquisitions than exploration for new targets.
The future
Analysts claim that the current fundamentals supporting the copper market are here to stay for the
long-term. In an interview with Copper Investing News, when asked if peak copper is a current
reality, Yu-Dee Chang commented Although the day will ultimately get here, the answer for now is
probably- not yet. According to the projections, based on current technology, we can expect tight
fundamentals over the long term. However, advances in extraction technology, unseen at this time,
may greatly extend the ultimate date for peak copper.
2015
26
Have No Fear, Peak Copper Isnt Near

With a mining history that spans thousands of
years, it is hard to believe that copper
resources could be at their end. But the
looming threat that the end is out there
somewhere is an uncomfortable truth when
dealing with finite resources. The only question
is when.
Whats peak copper?
Peak copper will mark the beginning of the end for
the red metal. It is the point at which copper will
have reached its maximum global production, starting its steady decline to depletion. In 2011,
concerns that peak copper was on the horizon were exacerbated by the rapid industrialization seen
in China. As the Asian powerhouses copper demand skyrocketed, copper stockpiles had a tough
time meeting the increased demand. That raised the question of what will happen to copper
supplies if sharp increases to demand continue.
Are we headed for peak copper?
All this worry about peak copper is currently about as useful as sitting in a rocking chair; it gives
market watchers something to do, but it isnt getting them anywhere. At least not any time soon.
Debunking previous predictions that there are only about 30 years of remaining copper supply, a
study conducted at Australias Monash University shows that copper is golden for at least another
100 years. The study is being called the most systematic and robust compilation and analysis of
worldwide copper resources to date, and is based on mineral resource estimates from mining
companies and information vital for carbon and energy use modelling (like ore grades of known
deposits). The conclusion: using current technologies, there is still plenty of copper left to sustain
global consumption for at least another century.
The database of information was compiled by Dr. Gavin Mudd and Zhehan Weng from Monashs
Environmental Engineering department and Dr. Simon Jowitt from the School of Geosciences. It
has the potential to change the copper industrys understanding of the availability of the red metal.
Although our estimates are much larger than any previously available, theyre a minimum. In fact,
figures for resources at some mining projects have already doubled or more since we completed
the database, Jowitt said in the universitys press release.
Coppers potential roadblock
Since the university started compiling its information, some companies have already increased their
resource figures. That means it is accurate enough to surmise that there is no end in sight for the
red metal; according the team, the only potential roadblock for copper is non-economic.
2015
27
Workers rights, mining impacts on cultural lands, issues of benefit sharing and the potential for
environmental degradation are already affecting the viability of copper production and will
increasingly come into play, explained Mudd.
The research looks at two mines, including Anglo American (LSE:AAL) and Northern Dynasty
Minerals (TSX:NDM) Pebble, a copper-gold project located in Alaska that has been struggling with
environmental approval for over a decade.
Mudd said what is important is to acknowledge that with existing copper resources were not just
going to be dealing with the production of a few million tons of tailings from mining a century ago;
we are now dealing with a few billion tons or tens of billions of tons of mine waste produced during
modern mining.
Copper prices cant keep it up
Red metal prices have been down in the dumps for the last several weeks. But on Wednesday, the
base metal climbed to a two-week high before snapping back under the pressure of a stronger US
dollar. Three-month copper in London closed 0.6 percent lower, at $6,950 per tonne, shedding the
previous sessions gains of 1.1 percent.
I think copper will struggle to go above $7,000. We might have seen the best of the rebound and if
there are more shenanigans on the spread you will see it on the cash premia rather than on the
three-month price, Robin Bhar, an analyst at Societe Generale, told Reuters.
US markets were closed on Thursday for Independence Day.
2015
28
Copper as a Critical Metal

The world needs copper, and lots of it. Output of
the red metal has already doubled in the last 16
years, however, according to Jack Lifton, founder
of Technology Metals Research, this output
needs to double again; a feat that is going to be a
very big challenging.
This comment was just one of many bullish
statements made about the state of the copper
market at the recent Critical Metals Symposium
in Vancouver. When a board of panelists,
including Lifton, was asked which, of all the
critical metals, is the most crucial the answer was- copper.
The definition of a critical metal is not precise; however, simply put, a critical metal is a metal that is
vital for the world to function in its current state. Critical metals are dynamic and the definition
of a critical metal depends on many factors. These factors include location, the period of time, and
the current economic and political environment.
Copper deserves its title of critical metal for a several reasons. The copper market is currently
faced with a supply deficit. Currently, there is not enough of the red metal being produced to satisfy
its near-term demand. As such, we are going to have to drastically increase the amount of copper
being mined and refined before we will have enough supply. The second factor contributing to
coppers criticality is the subject of substitution. If we run out of copper, what can we use? The
answer is, unfortunately, with todays technology: nothing.
At the Critical Metals Symposium, all the panelists agreed that the definition of a critical metal is not
concrete. When defining a critical material, it is important to consider what are you trying to do with
it; what is the material needed for. In various applications, for instance, hybrid cards, producers will
say that if they no longer had the availability of certain metals, such as a rare earth, they would
model their technologies around the missing component. However, if you tell them they have no
copper- then they would not know how to produce any vehicle, let alone a hybrid.
Yu-Dee Chang, Principal and Chief Trader at ACE Investment Strategies weighed in on the
perspective that copper is the most crucial of the critical metals. Chang agreed that the definition
as the most critical metal is a subjective, and dynamic one, and it is difficult to compare metals
with very varied applications. In terms of the industrial metals, Chang agreed that copper should be
called the most crucial. When asked if there was any known substitutes for copper, at this time
Chang added that in terms of coppers applications such as wiring- there are no viable substitutes.
Pricing is always an important topic when discussing critical metals. Copper rose to a record highs,
this February, however, has since sustained a bit of a correction. Chang sees the recent supply
situation, with a market deficit, already largely factored into coppers current prices. When asked if
2015
29
prices were being controlled by sentiment, or fundamentals, Changs answer was, a little bit of
both. Over the short-run prices are controlled by sentiment, and over the long-term fundamentals
will rule, commented Chang. The recent volatility in prices is also a very important topic to
address, in terms of a critical metal. Chang addressed the recent volatility in prices with the
following observation: most of the smaller speculators are no longer playing the copper market, and
instead trading is controlled by larger hedge funds, and of course end-users. The significance of
this development is more volatile prices. When larger hedge funds move money into and out-of the
market, prices are subjected to steeper swings.
There is no question that in North America and developed Europe power-supply is absolutely
critical for the functioning of the local economies. This power is supplied by wire and copper is a
necessity in manufacturing wiring. Add North Americas and Europes need for electricity to a
developing need for power and infrastructure, like in the BRIC countries, and it is easy to see how
copper is becoming more critical, around the world. Near record-high prices, price volatility, and
shrinking supplies are factors that dont work in favour for the end-users of copper, and as the
BRIC countries continue to grow, there will be more incentive for the strategic stockpiling of
copper.
2015
30
Investing in Copper: Copper ETPs

For investors looking to bet on copper
prices, exchange-traded products (ETPs) are
an excellent way to gain wider exposure to
the red metal compared to picking up one or
two copper stocks. A handful of copperfocused ETPs offer investors unique ways to
invest in the red metal.
Copper ETPs attracted attention during
coppers bull run in 2010 resulting in new
products being offered. The most recent
addition to the list of copper ETPs is the United
States Copper ETF (CPER) that launched mid-November and iPath Pure Beta Copper ETN (CUPM)
that launched in April.
In September, BlackRock (NYSE:BLK) and JPMorgan (NYSE:JPM) filed applications with the
Securities and Exchange Commission to offer ETFs that will buy copper and store it for investors.
The ETFs are to be the first physically-backed copper ETFs in the US.
The United States Copper ETF (CPER)
CPER was developed by SummerHaven Investment Management and the United States
Commodities Fund LLC. In response to the high storage cost of backing a fund with physical
copper, the fund deals only with futures contracts. CPERs buying strategy was designed to
minimize the ill-effects of contango, which occurs when the soonest-to-expire contract is less
expensive than contracts that expire in later months. When a contract is in contango, a fund loses
some money because fund managers are forced into paying a premium to the price of the expiring
contract when buying a new contract. CPER minimizes the effects of contango by shifting buying
activities on a monthly basis to the lowest-cost contracts over an 18-month expiration cycle. CPER
also protects against the opposite scenario of backwardation (when the nearest contract is the
most expensive) by taking positions in the two eligible copper contracts with the highest annualized
percentage price difference, each weighted at 50 percent of the portfolio.
CPER comes with a 0.95 percent annual expense ratio, compared with 0.70 percent for the iPath
ETN, CUPM.
iPath Pure Beta Copper ETN (CUPM)
CUPM provides investors with exposure to copper futures contracts. The note is linked to the
Barclays Capital Copper Pure Beta TR Index that gives the fund flexibility to roll exposure into a
number of different contract months. This is different than many commodity indexes which roll their
exposure into the corresponding futures contract on a monthly basis in accordance with a
predetermined roll schedule. Barclays Capital Pure Beta Series 2 Methodology bases its roll
2015
31
decisions on observable price signals and the slope of the copper futures curve. The index is
comprised of a single exchange-traded futures contract, except during the roll period when the
index may be comprised of two futures contracts.
2015
32
iPath Dow Jones-UBS Total Return ETN (JJC)

JJC is a sub-index of the Dow Jones-UBS Commodity Index Total Return and reflects the returns
that are potentially available through an unleveraged investment in the futures contracts on copper
(currently the Copper High Grade Futures Contract Traded on the COMEX) plus the rate of interest
that could be earned on cash collateral invested in specified Treasury Bills.
To deal with contango, JJC has an index that allows for rolling exposure to an eligible contract, and
selects the one that minimizes contango.
Global X Copper Miners ETF (COPX)
COPX seeks to replicate the Solactive Global Copper Miners Index. The Solactive Global Copper
Miners Index is designed to reflect the performance of the copper mining industry. It is comprised
of selected companies globally that are actively engaged in some aspect of the copper mining
industry, such as copper mining, refining, or exploration. The fund tends to invest in pure play
copper miners that focused exclusively on copper.
First Trust ISE Global Copper Index Fund (CU)
CU is an ETF that seeks investment results that correspond to the ISE Global Copper Index. CU
takes an indirect approach to copper by investing in stocks of companies that are active in the
copper mining industry. Companies in CUs portfolio include broad-based miners with exposure to
metals other than copper, such as gold and silver.
Other options
There are plenty of funds that offer limited exposure to copper. Another way to indirectly invest in
the copper market is by investing in funds that have a regional focus. Examples of these regional
funds include the MSCI Chile Index Fund (ECH), which offers exposure to the Chilean equity
market, and the EGShares Emerging Markets Metals & Mining Exchange Traded Fund(EMT). EMT
invests in companies whose revenues are generated in the areas of diversified metals and mining.
2015
33

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