Copper: How Tesla’s Biggest Ingredient Could Make You Rich in 2020
Tesla Inc. (NASDAQ:TSLA)’s performance of late suggests the company will have no problem achieving its ambition to sell 500,000 cars per year beginning this year. Whereas most of the ingredients necessary for that many vehicles are not subject to any serious long term supply constraints, one is, and its not lithium. Its copper.
There are roughly 180 pounds of copper in every electric vehicle. That’s 45,000 tons just for Tesla. Each year.
Never mind all the electric Volkswagen Golfs, Chevy Bolts and Leafs, Toyota, Nissan Ford Peugeot Daimler Benz BMW and Audi electric vehicles preparing to ramp up sales globally.
This chart shows forecasts going out to 2025, and the full impact of the electric vehicle revolution becomes apparent. By 2025, there will be over 5,000,000 electric cars produced each month from these three automakers alone. Never mind all of the other car makers around the world, or bus makers, or equipment manufacturers.
The fact is, if you look at the future demand for copper from just transportation, the additional load on copper supply adds significantly to the roughly 25 million tonnes per year that is baseline global consumption.
The opportunity for investors in copper comes in the form of junior copper companies who already have major copper deposits in inventory that are well understood from a geological perspective and economic view. That’s because just as these companies are the biggest performers when the trend turns bullish, so too are they the hated non-performers when copper prices stagnate.
And stagnant they have been since the financial crisis for the most part.
As the chart above clearly shows, there’s been no reason whatsoever to get excited about copper. In fact, even just in October of last year, the International Copper Study Group revised their copper demand growth scenario down from 2 percent to 1 percent. The have actually reported there will be a surplus of copper in 2020 by like 280,000 tonnes.
But more importantly, the supply picture was also revised to the downside for 2020.
What the International Copper Study Group does not do is forecast copper demand beyond one year out.
But the real story is the deteriorating head grades of mines in operation around the world. This chart demonstrates in no uncertain terms just how dismal that picture is.
As existing mine head grades deteriorate, the projections for copper skews lower. With the number of quality juniors with established 43-101 deposits trending toward all time lows, investors who are not in a hurry might consider picking away at some of the more quality juniors out there.
By way of disclosure, I am invested in Crown Mining Corp trading on the TSX Venture under the symbol CWM.
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