On average, an EV requires 5-6x more copper than an internal combustion vehicle. Every year, 95,000,000 new vehicles are produced and in 2020, 3,900,000 million EVs were sold with a 39% year over year increase. Today, Tesla has the largest market cap of any vehicle manufacturer, signaling a strong shift from combustion to EV.
As the EV market and electrification of India and China grows at a quick pace, we can expect demand for copper to increase quickly. Unlike lumber, mining a new copper deposit takes decades from identifying a deposit to gaining environmental and political approval to building the mining infrastructure. In 2020, most copper mines were shut due to COVID, creating a decrease in supply. This combination of steady but tough to increase supply and mine shut downs is brewing a supply issue that should hit Q3-Q4, meanwhile the demand is increasing at the fastest rate seen in decades.
Copper prices have already risen from $2.60 per pound to $4.50 per pound year over year and we haven't experience supply turbulence yet. Large cap stocks such Freeport MacMoran have seen a 3x valuation increase as copper prices have risen within the past year, while other Arizona small cap stocks such as Hudbay and Excelsior have seen more moderate increases. Hudbay has recently identified a new copper rich deposit north of the Santa Ritas and Excelsior is drilling towards a copper rich deposit in Cochise county. In Q1 the Resolution copper mine near Globe Arizona was approved and then put on hold the following day, held up in the courts. Because Arizona has many copper rich deposits and Chile is contemplating adding a 40% copper mining tax, Arizona may see new mines opening up and/or old copper mines re-opening.
We have seen many mining exploration firms active in the industrial market and increasing their core sample storage facilities. This most likely means that copper mining companies are bullish on the future of copper prices and see lots of demand in the future.
Those who got rich in the California gold rush got rich selling picks and shovels. Copper is the pick and shovel of the EV revolution.
Max Fisher, Industrial Properties Broker