Big Tech's Secret Commodity Demand

Written by Gerardo Del Real
Posted May 6, 2019

I’ve written to you several times — and highlighted an opportunity recently — about the clear mega-trend that is the electrification of everything.

I’ve also written to you several times about how metals like copper, lithium, and graphite, which are critical to this mega-trend, are going to see higher prices as under-investment and a lack of meaningful discoveries exacerbate the problem of providing the metals to the end users that need them to make your favorite phones, cars, personal assistants, etc.

Now the market’s favorite company it loves to hate, Tesla, is sounding the alarm as it recently warned that it is preparing for global shortages of these metals.

According to Reuters, Sarah Maryssael, Tesla’s global supply manager for battery metals, told a closed-door Washington conference of miners, regulators, and lawmakers that the automaker sees a shortage of key EV minerals coming.

While everyone generally understands that electric cars use twice as much copper as internal combustion engines, the consumption from smart-home systems may surprise you.

Alphabet Inc.’s Nest thermostat and Amazon.com Inc’s Alexa personal assistant will consume about 1.5 million tonnes of copper by 2030, up from 38,000 tonnes today, according to data from consultancy BSRIA. That’s a massive spike in demand.

Maryssael told the conference, hosted by commodity pricing tracker Benchmark Minerals Intelligence, that there is “huge potential” to partner with mines in Australia or the United States, according to the sources.

It’s not just me, and more importantly, companies like Tesla, that are warning of higher prices.

Codelco, the world’s largest copper miner, is joining the chorus.

Despite the recent pullback in copper prices due to tantrum tweets from the twitter-in-chief and soft economic data from China, the fundamentals support Codelco’s thesis.

The company forecasts 2.3% growth in consumption this year as mine production is expected to fall 0.5%, while smelter output remains flat.

The market has been in deficit despite softer demand in the first part of this year largely due to supply disruptions from the rainy season in Chile and protests in Peru.

Codelco expects shortages to worsen in the second half of the year, with less copper concentrate in the market and more smelting capacity available.

While junior resource speculators chase the latest crypto or cannabis play, the mid-tiers and majors are doing what every good capitalist should be doing — taking advantage of the soft markets to pick up shares of quality companies for pennies on the dollar.

They’re doing so at significant premiums.

I recently brought you an interview with Millrock Resources (TSX-V: MRO) (OTC: MLRKF) CEO Greg Beischer, who just received a C$1 million investment from EMX Royalties. That investment was made at a premium of nearly 100%.

Despite the premium, shares moved just a half penny following the announcement. Shares have since moved up another 30% but are still trading over 50% less than the price EMX paid for the shares.

That’s not the only deal being executed at a premium that the market shrugged off.

Chakana Copper (TSX-V: PERU) (OTC: CHKKF) just received an C$8 million endorsement from Gold Fields at a 40% premium to its share price. Shares remain at the 30% discount.

This is a tough market. The kind of market where you can make a fortune if you are able to do some quality due diligence, weather the volatility, and are able to hold positions through the noise.

It’s taken longer than I expected, which is not fun, but it means the bull market that’s coming will last longer than anticipated as well.

To your wealth,

gerardo-sig

Gerardo Del Real
Editor, Junior Mining Monthly and Junior Mining Trader.

For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.

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