Summary
  • Ivanhoe’s high-grade Kamoa-Kakula copper mine to come online soon.
  • Once again, bitcoin won’t replace gold.
  • Peak gold is closer than you think.

Ivanhoe Mines' high-grade Kamoa-Kakula copper project in the Democratic Republic of Congo

The world is on a path to vast shortages in copper, nickel, lithium and other important minerals that are necessary to build the batteries in electric vehicles. So says Tesla’s global supply manager, according to Reuters.

The comment comes as the electric car maker broke ground in Shanghai for its first overseas “Gigafactory.” Tesla’s first battery factory, in Reno, Nevada—the largest in the world—is still in expansion mode and aims to produce as many as 105 gigawatt hours (GWh) of battery cells and 150 GWh of battery packs by next year.

All combined, that’s a lot of copper that will need to come down the pipeline very soon.

But some analysts now say that capacity isn’t quite there yet to feed global demand, and the industry could be running in deficit by 2021. Commodities analyst firm CRU Group expects copper supply to be short some 41,000 tons that year and 270,000 tons a couple of years later.

Meaning: We could be looking at another commodities super-cycle, with the red metal leading the way.

Global Copper Market is Expected to Go into deficit in 2021
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“You’re going to need a telescope to see copper prices in 2021,” my friend Robert Friedland, billionaire founder and executive chairman of Ivanhoe Mines, told us last year during a visit to our office.

This week I had the opportunity to hear Robert speak at the Royal Bank of Canada (RBC), where he explained that investment in metals and mining must increase to meet the unique demands of the future. I also caught up with Ivanhoe executive vice chair Egizio Bianchini, who previously served as vice chair and co-head of metals and mining at BMO Capital Markets.

visiting with ivanhoe mines executive co-chairman robert friedland (left) and executive vice chairman egizio bianchini

Robert and I are in agreement: The trend toward mass electrification—of everything from vehicles to renewable energy—favors copper, and investors might want to consider getting in now.

Ivanhoe remains my favorite. I own the stock personally. The Vancouver-based miner is nearing the start of production at its long-awaited, high-grade Kamoa-Kakula project in the Democratic Republic of Congo, which has recently gone through leadership change. Ore grades are off the charts. The Kamoa-Kakula deposit—“unquestionably the best copper development project in the world,” as Robert describes it—was fast-tracked after China’s CITIC Metal invested more than $450 million, or nearly $3 a share, late last month.

If fears of a bear market or economic recession are keeping you up at night, I think high-quality resource stocks like Ivanhoe are where you want to be because they’ve historically held up very well.

Ivanhoe Mines is testing its 52-week high
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I’m also heartened to hear that infrastructure might soon be moved to the top of the U.S. government’s priorities, which would be a boon to copper and other base metals. President Donald Trump recently met with Democratic congressional leaders and agreed to a $2 trillion infrastructure package to overhaul U.S. roads, highways, bridges, railroads and waterways. Where this money will come from, I don’t know, but it’s a start.

India’s prime minister, Narendra Modi, made a similar pledge in April, promising as much as $1.44 trillion in infrastructure spending should he win reelection next month.