Gerardo Del Real,
Editor
May 22, 2024
New month but very similar themes in the copper space. Worries over supply deficits have forced the most bearish of analysts to warn that tailwinds are accelerating and the M&A I anticipated has officially commenced.
BHP, which is known as a giant iron ore and energy producer, has made it clear that it is willing to bet big on the renewable energy transition. The company has launched a massive takeover bid for Anglo American. Though Anglo has global operations, it is the South American copper mines that BHP is targeting.
The company clearly believes that the future will be driven by a massive global effort to wean ourselves off of fossil fuels. That will require massive amounts of copper.
The Financial Review reported that large funds are supportive of the bid and pivot as they understand that copper is critical and as Airlie Funds Management portfolio manager Emma Fisher said, BHP is betting that it’s cheaper to buy a multinational diversified mining company that contains three desirable copper mines than to find and build them from scratch.
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That theme will continue to prove itself out whether it’s in the gold, uranium, lithium or copper space.
Tier 1 assets will always command a premium and are becoming harder and harder to find. Anglo has rejected the initial bid and I suspect that BHP will significantly increase its bid.
A recent report estimated that more than $150 billion is needed to fill the copper supply gap.
Bloomberg Green recently published its analysis of adoption rates around the world. By the end of last year it said 31 countries had surpassed what’s become a pivotal EV tipping point: when 5% of new car sales are purely electric. This threshold signals the start of mass adoption.
Here in the U.S. we reached that tipping point at the end of 2021.
The red metal touched the $4.62 level recently, a new 52-week high. Expect that upward price pressure to continue and expect the copper portion of the portfolio to continue to do well.
Ditto for lithium. Ditto for uranium. Ditto for gold. Make sure you are positioned now.
Let's get it,
Gerardo Del Real
Editor, Daily Profit Cycle