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Weight in Copper Prices

All That Glitters is Not Only Gold

Written by Luke Burgess
Posted May 12, 2006

With current copper prices in a near vertical climb, copper may become the next precious metal.

Rappers and hip hop artists may soon be trading in their gold and platinum teeth for a copper set. Or perhaps copper will become the preferred metal for wedding bands. Well, maybe not yet.

But the brown metal could soon be seen as a precious metal in its own right...at least in some sense, given the brisk movement in prices recently.

Copper prices have ballooned by more than 170% in the past year. Gold pales in comparison, having climbed 69% in the same period.

Yesterday copper prices broke $4 per pound, topping off at $4.04 per pound, the highest price ever recorded on the NYMEX.

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How to Profit from Current Copper Prices

Just like any other metal pulled from the ground, copper is dependent on miners to provide supply. And to keep up with today and tomorrow's growing demand, mine production continually needs to increase.

Sounds simple, right. Not really. As with all metals, ramping up production and opening up new mines requires massive lead time and huge amounts of capital.

The fact is, general speaking, it can take up to 10 years for a company to push a new discovery through the exploration phase...to financing...then to development...to permitting...to construction and finally into production.

But it's during this time that investors have the opportunity to really take advantage of rising prices. And it here's where you're going to find your 10 to 1 returns.

The real play right now is in the emerging producers and exploration companies.

That's because today's high prices are already factored into the share price of seasoned producers. Buying those companies now is largely a play on higher metal prices.

Of course there is risk associated with any exploration company. But opportunities for 10 to 1 return never come without risk.

As it happens, the mining industry desperately needs to develop new deposits in order to boost supply.

Demand for the penny metal has topped the mining industry's ability to deliver the metal pushing the market to a near frenzy.

With demand simply outstripping supply and no short-term fix in sight, the trend is clearly higher for copper prices.

Bottom line: The writing's on the wall — the copper bull market is well underway.

Current copper prices are making the metal the first choice for thieves over the more traditional precious metals.

With the demand and value of copper rising, the metal, commonly used for household plumbing, is being looted from vacant city homes and construction sites and then being sold to scrap yards for a hefty profit.

People in countries such as Mexico, Congo and China are scavenging for copper wire, motors, sheets, anything made of copper.

And it's also happening right here in the United States. This week, The Daily Item, a Sunbury, PA newspaper reported the theft of copper wire from a railroad signal because of the rising price of the metal.

In Waushara County, WI, police are offering a reward for information to help identify the individuals responsible for removing copper wires from power poles. And in the Buffalo, NY area, more that 80 reports of copper theft have been received by local police in the past year.

These are all symptoms of the sustained bull market.

For our part, it's also a clear indication that current copper prices provide profit opportunities in select companies that will be with us for quite a while.

Good Investing,

Luke Burgess
Managing Editor, Gold World
Investment Manager, Secret Stock Files


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