Campbell Resources Inc (CBLRF)

[NYBob]

COMMODITIES CORNER Copper Cu:
Cu - the new precious metal?
Last Update: May 12, 2006

Copper wedding bands may soon become all
the rage -- or not.
But the industrial metal could be seen as
a precious metal in its own right at least
in some sense, given that prices have inflated
by more than 170% in the past year.

Gold's 69% climb in the same period pales in
comparison.
Copper futures climbed past $4 per pound
Thursday -- the highest price ever recorded
on the New York Mercantile Exchange.

See Metals Stocks columns.
"At $3 a pound and above, one can make the argument that
copper is certainly precious," said Jim Wyckoff, an
analyst at TradingEducation.com.
Of course, no matter what size climb copper prices make,
it won't ever truly be more valuable than its gold
counterpart, which Brent Cook, an independent exploration
analyst, sees
as "the only metal that has served as a currency and store
of value for centuries."
'At $3 a pound and above, one can make the argument that
copper is certainly precious.'Jim Wyckoff,
TradingEducation.com
Still, "all that glitters is not only gold.
It's copper, steel, aluminum -- you name it," said
commodities trader Kevin Kerr, who edits Global Resources Trader.

"Surging metals prices of all kinds are making some of
the nonferrous metals the first choice for thieves over
the more traditional 'precious metals'," he said.
Indeed, Cook said he's witnessed people in countries such
as Mexico, Congo and China "actually scavenging for copper
wire, motors etc. and heard of electric wiring being
stolen, much to the chagrin of the owners."
And it happens here in the United States.
This week, Pennsylvania newspaper The Daily Item reported the
theft of copper wire from a railroad signal because of the
rising price of the metal. See the story. In Waushara County,
Wisconsin, police are offering a reward for information to
help identify the individuals responsible for removing copper
wires from power poles, according to a report from The
Northwestern.
"Thieves are taking everything that's not locked down and some
things that are ... stealing wire, pipes -- even rusty old
cars to sell to scrap metal recycling businesses," said Kerr.
"Copper is quickly falling into the asset class of precious,"
he said.
Cherished treasure
The biggest fundamental reason for copper's climb: "copper has
surpassed the ability of the mining industry to deliver [the]
metal," said Lawrence Roulston, editor of Resource
Opportunities, an independent investment newsletter.
"Economic growth around the world has pushed the market to a
near frenzy," he said, and China is frequently credited with
driving demand.
For now, China is looking to meet its copper needs by creating
physical reserves in various areas of the country and by ]
securing reliable sources of copper overseas, said Thomas
Hartmann, an analyst at Altavest Worldwide Trading.
So really, the Asian country has to decide whether to pay high
prices for copper or slow down the pace of construction in its
growing economy, he said.
n"Paying high prices is the easy decision."
Overall, the market is simply facing a "supply crunch," and
although increased production generally follows an increase in
prices, the sector has yet to see any material rise in mining
capacity," Hartmann said. See related archived story.
That's because it takes 8-10 years for a new discovery to
"evolve through the
exploration/development/permitting/financing/construction
cycle," said Roulston.
At the same time, "strikes in South America and a complete
shutdown of a Grupo Mexico copper mine exacerbates this
[supply] crunch," said Hartmann.
Concerns about the nationalization of natural resources in
Latin America are also a likely contributor to the broad climb
among metals. See full story.
"The trend is clearly higher for copper prices," said
Hartmann. "Demand is simply outstripping supply with no
short-term fix in sight."
Not quite precious
Still, whether that allows copper to fit into the category of
"precious," is certainly up for debate.
'Copper will never become a precious metal. Valuable? Yes."
— Brent Cook, independent exploration analyst
"Copper will never become a precious metal. Valuable? Yes,"
said Cook.

Taking a look at the broader picture, Resource Opportunities'
Roulston points out that platinum prices are around $1,250
an ounce and rhodium has passed $5,000 an ounce.
Given that, "it is a stretch to call copper a 'precious'
metal in any sort of serious way," he said.
In fact, John Stafford, editor of Stafford's Investment
Strategy Letter, said copper is "not precious yet because
[it's] still abundant."
"It's abundant throughout the crest of the earth and probably
at the bottom of the sea," so the current situation with
copper is a supply deficit of "a temporary nature, coupled
with an exponential increase in demand," he said.
And although consumption of the metal remains strong, "there
is undoubtedly suppressed demand," Roulston said, pointing out
that growth in India "may be stifled by the high metal
prices."
"There is no certainty that copper prices will continue to
rise," he said.
Best play
High copper prices are also already factored into the share
prices of the copper producers, so buying those companies now
is "largely a play on higher metal prices, which is highly
speculative," said Roulston.
'The real play in the copper market is the emerging producers
and the explorers.'

"Mining companies that got by selling copper at less than
[70 cents] are now making more money than they know what to do
with," and "companies that not so long ago had big bank loans,
are now sitting on countless billions of dollars of cash," he
said.

But since the market is so speculative, the "safer" way
to play the metal markets is "to focus on the underlying
issue:
the mining industry needs to develop new deposits in order
to boost supply," he said.
Therefore, "the real play in the copper market is the
emerging producers and the explorers," Roulston said.

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