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China Copper Play

Metal Kingdom

By Sam Hopkins
Wednesday, August 30th, 2006

Editor's Note: Most international market researchers are content with flipping through the pink pages of the Financial Times or turning on CNBC Asia for their next international investment idea.

Not Sam Hopkins.

Sam is rolling up his sleeves and is taking his search abroad, scouring everywhere outside the U.S., attending conferences and talking to common folk to find his readers those tiny and sensitive companies you would otherwise only hear about after they explode.

Today he wants to tell you about one of my favorite commodities - copper - and a small $78 million company that he believes is poised for superstar type gains.

- Luke Burgess
Managing Editor, Gold World

Metal Kingdom

By Sam Hopkins

The headline had the effect of a sewing needle in a Macy's parade balloon:

"CHINA'S COPPER IMPORTS DOWN 24%"

To the untrained eye, this could be seen as a commodity disaster. And if you didn't know better, you could be selling your copper stocks in a red-hot, rising market.

But the headline isn't the whole story for savvy traders who follow international markets like a hawk. As a Gold World reader, you know very well what commodities can do for your portfolio when managed closely and with the willingness to pounce on every opportunity.

Here's the real deal...

China's burgeoning construction and property economy currently consumes a full 20% of the world's copper. And this penny material brings in a lot more than chump change on the world market.

As China's growth continues, it has to recalibrate the Shanghai futures price to the London Metal Exchange, copper's biggest worldwide mercantile.

So China's government initiated a sell-off of domestic reserves this year, to bring supplies and prices down to balance with worldwide numbers.

So does China's drop in copper imports mean the Waking Dragon is done ravaging the world's construction commodities?

NO WAY!!!

As the local selling program draws to a close, imports will become attractive again, and we will see another bull run on copper driven not only by China's hunger but also supply volatility in Chile, Zambia, and elsewhere.

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Bull vs. Bull...Lincoln wins!

Every gold bug knows that history's metal of fortune has assumed a stellar 150% price-per-ounce increase in the past five years.

But we have seen an almost 400% increase in copper prices on the spot market over the same time period!

The reasons for copper's utility read like a list of the industrial age's most significant innovations: household electricity, computers, mobile phones, indoor plumbing...

THESE ARE THE MARKERS OF MODERNITY - AND COPPER IS KEY.

And while the world's newly rich and consumption-oriented countries like China and India make up ground for previous economic stagnation, their race for status is driving the copper surge to new highs every day.

All the while, not enough new copper is being found or produced.

Copper consumption has clawed its way above production in the past three years, making stockpiles dwindle as countries dip into reserves. All the while, the surging markets in China, India, Brazil, Russia, and elsewhere are consuming just a fraction of average per capita consumption in developed countries like the US and Japan.

There is plenty of room for copper prices to move higher.

In recent weeks, the cradle of the world's copper production - Chile's Escondida mine - has become embroiled in a labor dispute that succeeded in shutting down the nearly 9% of global copper production Escondida is responsible for.

This means less production, more price pressure, and of course we can assume that consumption is on a tear and won't slow down any time soon.

It is not too late to get in on the copper conga line to profit.

That's why I'm telling my Orbus Intel readers about a company poised to combine US-based management with the very voracious and deep-pocketed Chinese businessmen who are racing around the world securing supplies of steel, oil, and of course copper required by China's 10% GDP growth.

I am keeping my eye on every development in the commodities world as emerging markets set the pace as the Hungry Hungry Hippos of the 21st century.

- Sam Hopkins






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