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Gold will shine in 2023 but copper is the long-term play to watch - American Pacific Mining Corp

Kitco News

Welcome to Kitco News' 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.

(Kitco News) - Gold will always play an essential role in a portfolio as a safe-haven asset; however, investors need to pay attention to copper as it could have more potential in 2023, according to one junior mining executive.

In a recent interview with Kitco News, Warwick Smith, chief executive officer of American Pacific Mining (CSE: USGD), said that although copper prices have been a lot more volatile than gold this past year, its fundamental outlook makes it a slightly more attractive investment compared to the yellow metal.

In early 2022 copper prices briefly rallied to an all-time high above $5 per pound; however, rising recession fears due to the Federal Reserve aggressive monetary policy stance have significantly weighed on the industrial metal. Copper prices are looking to end the year down 12%, last trading at $3.891 per pound.

By comparison, gold prices have held up relatively better than copper as it prepares to end the year in neutral territory, with prices trading around $1,825 an ounce.

Although gold prices remain an attractive asset as the world teeters on the brink of a recession, Smith said that copper is also well-positioned to weather the oncoming storm.

"With this electrification revolution going on, there is going to be a major supply deficit for copper," he said. "Whether you're looking towards a rough economic environment or not, the West is pushing hard on this electrification, and they're going to need copper."

Smith noted that an electric vehicle (EV) uses about 85 pounds of copper and there are expectations that there will be 7 million EVs on the road by 2025.

Although copper prices could fall lower through 2023, Smith said any price drop should be considered a long-term investment opportunity.

"Copper prices can go lower, but the global economy is at a tipping point, and it is going to be more base metals," he said.

Smith's outlook on copper comes as American Pacific continues to develop, in partnership with Rio Tinto, its flagship Madison Mine project, a past-producing copper and gold mine in Montana.

In 2020, the company partnered with Rio Tinto as part of an earn-in agreement. The senior producer agreed to spend up to $30 million in exploration in the next 11 years for a 70% stake in the project.

"Rio Tinto's, the second largest mining company in the world, is not viewing this project through the lens of, what's gonna happen in the next three to six months,' said Smith. "They see the long-term need for more copper."

Looking at the gold market, Smith said that along with recession fears, the ongoing volatility in crypto markets should also continue to support the precious metal.  

Copper prices to find their groove in the second half of 2023

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.