Don’t Get Hung Up on Short-term Copper Prices: Lawrence Roulston

- January 22nd, 2015

At VRIC, Scott Gibson of Kitco Gibson discussed the uranium, copper and gold markets in a panel with Lawrence Roulston and Eric Coffin. While there’s no doubt that copper prices have been lower than most would like lately, Roulston advised investors not to get hung up on the short term.

Don’t Get Hung Up on Short-term Copper Prices: Lawrence Roulston

At Cambridge House International’s 2015 Vancouver Resource Investment Conference, Scott Gibson of Kitco Gibson discussed the uranium, copper and gold markets in a panel with Lawrence Roulston of Resource Opportunities and Eric Coffin of HRA Advisories. 

The panel kicked off with a look at the copper market. While there’s no doubt that copper prices have been lower than most would like lately, Roulston advised investors not to get hung up on the short term.

“What’s happened recently in the copper market is some aggressive selling by some speculators and … there’s no question it’s going to come back,” he said.

Explaining further, Roulston talked about the consensus regarding a small surplus in the copper market a few months back. While the projected oversupply of a few hundred thousand pounds relative to the multi-billion-pound annual copper market could have been enough to “push down the price by a few nickels,” Roulston stated that recent cutbacks and reductions in guidance from producers suggest that the small surplus “might actually turn into a deficit during this calendar year.”

“In any event, the market for copper is fairly well balanced,” he said. “And there’s going to be short turn ups and downs in the market, but longer term we’ve got 2-percent annual average growth in copper consumption going back a decade or so.”

In terms of demand growth, he pointed to China’s growing population and said that those looking at headlines calling for slower economic growth from the country might want to look again.

“They forget the fact that it’s going to grow 7 percent instead of 7.5 percent, but 7 percent growth on a much larger base is a lot more copper consumed in China this year than last year,” he said. “And we’ve got growth happening around the world.” Growth in terms of supply, however, is a little more constrained, according to Roulston.

Coffin also thinks that the market will be “fairly balanced.” However, he isn’t bullish on copper, and hasn’t been surprised at the metal’s performance as of late.

“I like copper, but I haven’t expected to see the copper price rise for the last year. I’ve been expecting it to pretty much do what it’s done,” he said.

Overall, Roulston suggested that with copper prices as low as they are, there could actually be some opportunity in the market. “[Y]ou’re going to make the most money out of buying the thing that is most out of favor,” he said. “Right now, the resource industry overall is out of favor. The junior sector is even more out of favor.”

As far as specific companies go, Roulston mentioned Mindoro Resources (TSXV:MIO) as an early stage exploration play and Copper Mountain Mining (TSX:CUM) as a “company producing copper and doing quite well at it.” Furthermore, he added that Morien Resources (TSXV:MOX) has a concept worth noting.

“They’re in the process of accumulating copper assets at a time when copper assets are out of favor,” he said.

For his part, Coffin favors Nevsun Resources (TSX:NSU) and Excelsior Mining (TSXV:MIN). To be sure, Nevsun’s Bisha mine in Eritrea has been controversial from time to time, and Coffin admitted, “I’m not crazy about Eritrea.” That said, he still sees Bisha as “one of the best base metal [mines] in the world.” He likes Excelsior due to the very low projected cash cost for its Gunnison in-situ recovery copper project in Arizona.

In closing, Roulston cautioned that an investment in copper companies is “not going to bounce next week.” However, things might be a bit more bright for those who are able to wait.

“… [I]f you … accumulate the good-quality companies in this sector over the next few months and look back in a couple years’ time, you are going to be very, very happy as an investor,” he suggested.

 

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. 

For more information and disclosures from Roulston and Coffin regarding the companies mentioned here, please contact the newsletter writers via their websites — Resource Opportunities and HRA Advisories, respectively. 

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