Nasdaq Investment News: Copper and its Role in the Transition to Cleaner Energy

March 12, 2024 | 4 mins 

Ed Coyne stops by Nasdaq Investment News to discuss copper’s role in the energy transition, its current status in the market and how Sprott is capturing the potential opportunity with the Sprott Copper Miners ETF (COPP) and the Sprott Junior Copper Miners ETF (COPJ).

Video Transcript

Gregg Greenberg: Ed, Sprott has expanded its ETF footprint across the periodic table if you will. Which mineral are you focusing on now?

Edward Coyne: There are two areas we're focused on. One is the creation of energy, and that's through uranium, and the other is the movement of energy or electricity, which is copper. Those are the two that we're focused on right now: uranium and copper.

Gregg Greenberg: Can you talk about copper and its role in the transition to cleaner energy?

Edward Coyne: If you think about copper today, it's used everywhere. From energy creation to the movement of energy, copper is involved. If you think about what's going on now, though, with clean energy, wind, and solar, in many cases, those are in more remote areas. Particularly when you're talking about solar, which is offshore. The amount of copper needed for solar and wind, particularly those offshore turbines, is substantial: 3, 4, or 5X amount of copper. Then, if you look at cars, for example, you need two or three times more copper in an electric car than you do in a gasoline car. Everything that's happening in the cleaner energy movement needs more copper.

Gregg Greenberg: Can you dig a little bit deeper? Once again, forgive the pun and talk more about how the need for copper is being met in the marketplace and how that reflects back in the ETF and the price.

Edward Coyne: Sure. The need for copper, as I mentioned, is substantial. As we go into this cleaner energy, trying to get to a neutral carbon footprint and so forth, more copper is going to be needed. How that looks in the marketplace and its supply-demand dynamics are substantial. You're seeing more demand coming out for copper across the globe, and supply is trying to meet that. The problem is, as you get new discoveries, from discovery to extraction to production, it could be a decade or a decade and a half. We think that price discovery is going to continue to elevate over a full market cycle.

Gregg Greenberg: Well, the price has not shot up like we've seen gold shoot up recently because, I guess, it's not a monetary issue when it comes to copper. It's more of an economic issue.

Edward Coyne: That's right.

Gregg Greenberg: I want you to focus specifically on China's economy because, for a long time, that was the driver of copper prices.

Edward Coyne: That's right. I mean, people have heard the term “Doctor Copper.” People have looked at copper as really the bellwether of the strength or weakness of an economy. A lot of news is coming out about China. China is a huge consumer of copper. There are some concerns about that short term. It's worth reminding people that over the last two-plus decades, copper has gone from 2,000 a ton to over 8,000 a ton. The directional move has been substantial over the last few decades.

Even if the economy slows in China, China will be at the head of the curve on cleaner alternative energy, which will require a lot more copper. You could find yourself in an environment where the economy is slowing, but copper demand is continuing to rise. I think the historical view of copper as being a bellwether of a global strength economy may disrupt it in the short term price wise. But we think the long-term direction of copper looks very attractive, given the current landscape.

Gregg Greenberg: Then, finally, you have a number of ways that you can play copper prices and mineral prices in general in your suite of ETFs. What's the best way to do it?

Edward Coyne: Sure. We have a couple of ways to allocate capital to copper. We have a large cap or what we call a senior copper ETF [Sprott Copper Miners ETF]. COPP is the ticker symbol, which gives you exposure to the more established copper mines out there. They've been functioning, they've been running, they've been productive, they've been profitable.

Then, you have the more opportunistic side of the copper allocation with the ticker symbol COPJ, the junior or small cap [Sprott Junior Copper Miners ETF]. These are early-stage development and stage production types of copper mines. What's unique about that space is they also have a higher potential for M&A activity. As larger copper mines start to run out of runway, they look to acquire other copper mines, typically in the junior space. Depending on how you want to allocate to the space, you want a more liquid, more seasoned allocation. COPP would be where I would recommend potentially people going. If you want to be more opportunistic about that allocation, COPJ could be interesting for you as well.

Gregg Greenberg: All right. Well, thanks, Ed, for coming on and talking about it.

Edward Coyne: Thank you for having me.