Ahead of The Herd, Telling you things everyone else doesn't already know.
Copper Talk

Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

Copper’s talking up a storm.

Sumitomo Metal Mining Co. said copper ore mined from Chile, and shipped to Indonesia, will be in short supply for at least the next five years.

Antofagasta Plc, which owns three Chilean mines, said a scarcity will persist for “the foreseeable future.”

BHP Billiton Ltd. said production from Escondida in Chile, the world’s biggest copper mine, will drop as much as 10 percent in 2011because of lower ore grades.

Freeport-McMoRan Copper & Gold Inc. said it plans to defer some output at its Grasberg mine (the world’s second largest mine) in Indonesia. Citing safety reasons Freeport will forego the mining of about 130 million pounds of copper through 2014.

Global treatment fees have tumbled as smelting capacity has outpaced mine supply.

The Metal Economics Research Institute of Japan said the shortage of copper to process has pushed processing fees to the lowest level in almost 40 years. The cost of turning ore into metal - $39 a ton and 3.9 cents a pound - is the lowest since 1973.

Jiangxi Copper Co., China’s biggest copper producer, said treatment and refining charges have dropped to a level that doesn’t cover the costs of smelting in China.

Sumitomo Metal said it plans to produce only 404,000 tons of copper cathode in 2010 - 10 percent less than the 450,000 ton capacity at its Toyo smelter, and the company says it’s likely to keep output at that reduced rate until at least 2014.

"We don’t want to increase output with raw material sourced from the spot market where fees are even lower.” Said Nobumasa Kemori, president Sumitomo Metal.

Rio Tinto Limited - at a recent industry conference in London - said that planned copper mining projects will be unable to support demand growth at current rates and we could see the market for mined copper in deficit for most of the next decade.

Rio sees production from probable copper mining projects as only able to support annual demand growth of 3% per year by 2020. Rio also said less than half of the world's copper supply, by 2020, will come from low risk regions compared to nearly two thirds in 2000, ore grades will continue to decline and major new copper discoveries are increasingly deep below the surface.

CRU International said copper consumption in China is forecast to rise by 14 percent this year.

Icra said India’s copper consumption is forecast to climb 15 percent this year.

The annual per capita consumption of copper in India is 0.47 kg, China’s 5.4 kg and the world average is 2.7 kg. China’s urbanization plans and forecast GDP growth of 9.6 percent a year is expected to drive Chinese copper consumption from the current 5.4 kg/capita to an astounding 10 kg/capita by the end of the decade.

Copper has risen to its highest levels since July 2008.

The International Copper Study Group just said global demand for copper will rise by 4.49% in 2011.

BMO said it anticipates a global supply deficit of some 280,000 metric tons - with a price forecast of $3.70 a pound - for 2011.

Australian equity research firm Resource Capital Research (RCR) said it expects the copper market to move from a small surplus in 2010 to a deficit of around 400,000 tonnes by 2011. They also expect global yearly demand growth to be between 3 and 5 percent which would represent an incremental annual consumption increase of 600,000 to 900,000 tonnes.

Swiss Bank UBS had the following to say about a second round of quantitative easing (QE2) by the US. "Strong international capital flows will reinforce already powerful domestic credit creation in emerging markets (EM). That should flow through to robust, commodity-intensive growth in EM, while the developed world struggles in the face of higher commodity prices. We believe that QE2 will prolong the bull market in commodities."

"The positive copper price outlook is buoyed by demand from strong economic growth in China and constrained global supply. Other than for the period around the global financial crisis, this has been the central theme of the copper market since the early 2000s and is likely to remain the theme throughout this decade." Said RCR MD John Wilson

Managing Director of the Metal Bulletin, Raju Daswani said "Copper prices will remain on a broad upward trend. For 2011 our price forecast is $7,900/tonne compared to our 2010 forecast of $7,375"

Conclusion

As I’ve said many times – mining is the story of depleting assets. New mines are needed to replace those that are being depleted. The deposits that are going to be the new mines of our future are almost all owned by junior companies. These junior companies - the very same juniors that own those future mines - are currently trading, in this author’s opinion, at deep discounts.

Copper’s talking, are you listening? Are Copper, and a few quality copper juniors, on your radar screen?

If not, maybe they should be.

Richard (Rick) Mills

rick@aheadoftheherd.com

www.aheadoftheherd.com

If you're interested in learning more about the junior resource market and specific copper junior companies please come and visit us at www.aheadoftheherd.com.

Membership is free, no credit card or personal information is asked for.

***

Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified; Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Richard Mills does not own shares of any company mentioned in this report
No company mentioned in this report is an advertiser on his website aheadoftheherd.com.

Ahead of the Herd.com Media Group Inc.a division of Ahead of the Herd Holdings Inc. All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Ahead of the Herd.com does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment. The publisher, editors and consultants of Ahead of the Herd.com may actively trade in the investments discussed in this website and newsletter. They may have substantial positions in the securities recommended and may increase or decrease such positions without notice. Neither the publisher nor the editors are registered investment advisors. Subscribers should not view this publication as offering personalized legal or investment counseling. Investments recommended in this website and publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question. Unauthorized reproduction of this newsletter or its contents by Xerography, facsimile, or any other means is illegal and punishable by law.