Chile's Aging Mines Could Keep Copper Prices Surging

Chile maintains its status as the top copper-producing country globally. But it’s facing the challenge of aging copper mines. Yet demand is high and there aren’t enough production from these mines. So copper prices could continue surging.

A drop in production was already seen during the month of May. That’s because Chile registered its lowest production month in over a year. The country is en route to witness its first annual decline in almost 20 years. And the current production trend is heading lower.

“Mines in Chile produced 6.7% less of the wiring metal in April than in March and 1.5% less than the same month last year,” reported Bloomberg.

As mentioned, another factor that could crimp future supply is aging mines. On the long-term horizon, Chile’s copper production is expected to grow. And that’s despite the headwinds facing the mining industry.

“In Chile, copper production is slowing because of operational challenges, declining ore grades, the ageing of the mines and a decreased water supply,” a Credendo report noted. The report said that despite the problems, Chile’s copper production is still primed for long-term growth.

Capital investment in Chile’s mines will be a key driver in sustaining production. Investment capital will help fund new mining operations. But even more is necessary to keep aging mines running.

“These investments are expected to yield returns in the near future as new projects are scheduled to commence operations,” the report added. “However, in the coming years, Chile will have to attract even more investment to offset the diminishing returns caused by the ageing mines.”

2 ETFs for Copper’s Momentum

On the retail end of the spectrum, there are funds from Sprott that can provide investors with copper exposure to ride the current momentum via miners. One fund is the Sprott Copper Miners ETF (COPP). It seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Copper Miners Index (NSCOPP). The ETF aims to track the performance of a selection of global securities in the industry. These include producers, developers, and explorers.

Investors wanting to focus on even more aggressive growth prospects will want to consider the Sprott Junior Copper Miners ETF (COPJ). The fund seeks to provide investment results that track the total return performance of the Nasdaq Sprott Junior Copper Miners Index. The index incorporates mid-, small-, and micro-cap companies entrenched in copper-mining-related businesses.

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