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  • Exposure To Copper Mining ETF 0 comments
    Nov 8, 2012 1:12 AM

    Investing in commodities is not a passing fad. Along with a portfolio variation, Commodities have provided good year on year returns steadily since 2004. The price of Copper itself has tripled since then and same has been the case with other industrial materials spelling out stout profits for the Copper mining companies too.

    Copper as an Industrial metal is the main component of Energy. The demands for energy consumption along with Information technology & Transportation is inexhaustible

    Unique attributes of Copper- anti corrosive, superb conductivity & recyclability makes it an indispensible need for all the said sectors. Rightly so, production & consumption figures of Copper are often considered by investors as a mean to check the overall health of an economy.

    Investment flows in Copper & its mining companies are driven due to supply & demand ratios as well. Consumption of Copper per person is almost ten times less in the developing world as compared to the industrial economies & this gap will be narrowed. An estimated 1200 + millions tons of Copper is needed per year to match the current production figures of cell phones & computer manufacturing companies alone. Modest figures when compared to the copper demand in Industries like Automobile & Energy Transmission.

    Although the current demands have slowed down & Copper Mining Corporations too are struggling to develop newer technologies to economically process an end Consumable Copper product, the over-mining has depleted the ore resources & environmental issues are also prominent. Still not a concern for a long term investor, as these scenarios will rapidly reverse. The Australian group BHP Billiton is among the top three copper producing companies of the world and has already announced a five year plan [2010-2015] to invest US$80 billion in cash spending on future opportunities, a majority of the sum may be used in new & cheap methods of Copper production. What is noteworthy is that the same company has a 50+% stake in Chile's Escondida Mines [the largest copper producing mine in the world].

    Interestingly enough, a whole new lobby of investors is long on Copper in anticipation of new applications of the metal that are bound to exist for Global development.

    Why Invest in Copper Mining ETF?

    A very valid investment case for the Copper mining fund like Global X Copper Miners ETF [COPX] may offer a probable freedom from the spot prices & the market speculation. Though every copper miner's profits are affected by the spot index prices of the metal but the performance of the said asset class does not strictly track the spot prices. Why so? Because as mentioned earlier, these ETF are directly investing in the companies with a very visible Net Asset Bank, also the cash flows & inventories of these miners are not following the index prices or the trading activities of the markets.

    An investment in Copper commodity futures is preferred by the traders for near term profits but no body can deny that the returns are affected due to constant spot price changes & roll overs due to monthly expirations and moreover investment in copper future markets offer quick money, only because of their extremely volatile nature, which does not go well with investor class with Buy and Hold policy.

    A direct investment in a Copper mining companies also come with their share of risk, as the miner will not restrict earnings purely on the spot prices matrix, rather they will always hedge on their exposure for increased yield.

    The Global X Copper Miners Fund [COPX] may be an apt investment primarily due to its pure play nature & investments fairly spread in Copper ETF mining companies across the Globe. Top three holdings include KGHM Polska Miedz [6.69%], Southern Copper Corporation [5.82%], and Antofagasta PLC [5.71%].

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