Horizons launches copper index fund
ETF leverages growing demand for green metal
Copper is central to electrification and therefore the energy transition, and Canadian investors now have a new way to gain exposure: This week, Toronto-based Horizons ETFS Management (Canada) Inc. launched the country’s first exchange-traded fund indexed to a bundle of copper miners.
Prices of the versatile base metal have nearly doubled since March 2020, rising to about US$4.20 per pound from US$2.20 per pound, according to market research site Kitco.
“Copper is the one metal that’s really allowed humankind to advance from the Stone Age to the Bronze Age and it’s now the metal that is allowing us to advance into a greener future,” Steve Hawkins, chief executive of Horizons ETFS, said in an interview. “It’s in almost everything and so it gives you exposure to all major investment themes.”
The metal has so many uses that it has been described as a bellwether for global economic expansion.
As the energy transition unfolds, and some of the world’s largest economies set targets to reduce the use of fossil fuels, demand for copper, one of the main metals used in wires, is expected to surge.
The International Energy Agency, the Paris-based organization created in 1974 to protect against oil disruptions, ranked it as one of the most important critical minerals for clean energy technology, essential to solar photovoltaic panels, wind turbines, bioenergy, electricity networks, and electric vehicles and battery storage. The agency said in its Sustainable Development Scenario, an estimate of what it would take for the world to meet some of its climate targets, demand for copper multiplies by 28 times.
The Horizons Copper Producers ETF, which started trading on the Toronto Stock Exchange this week under the COPP symbol, has a management fee of 0.65 per cent. It is indexed to 15 North American mining companies, including big diversified producers such as BHP Group Ltd. and Rio Tinto Ltd. and companies that focus on copper, including Freeport-mcmoran Inc.
Hawkins is marketing the ETF as a bet on the energy transition, since the “greening of the planet cannot occur without copper.”
Of course, some of the miners in its basket come with hefty exposure to fossil fuels. Vancouver-based Teck Resources, for example, counts on steelmaking coal and oil represent about 60 per cent of its revenue, while copper and zinc each accounted for about 19 per cent.
At the same time, other companies in the basket have been embroiled in controversies linked to allegedly destructive impacts on the environment. Miningwatch, a corporate watchdog, has been critical of The Metals Company Inc., which hopes to be the first company to mine the sea floor at scale. Another company in the Horizons copper basket, Northern Dynasty Minerals Ltd., aims to build its Pebble mine project in Bristol Bay, Alaska, in a spot that critics have said is the headwaters for the world’s sockeye salmon, drawing criticism from both Miningwatch and Donald Trump Jr. Neither company even produces copper yet.
Hawkins acknowledged that some of the miners have a mixed record on the environment, but emphasized that copper was nonetheless critical to the energy transition.
“Investors are asking for exposure to copper,” Hawkins said. “There were really no other options out there other than buying the individual companies themselves.”