They Called It Worthless In 1980

Why is the inflation you actually pay running a full point hotter than the inflation the models report?

Let me tell you a quick story.

In 1980, a consulting geologist went out to a hill in Chile’s Atacama Desert, read the burnt-looking cap of leached rock that sits over a lot of copper systems, and told the team financing him to save their money.

If the hill hid anything at all, his report said, it would be poor sulphide a kilometer down running near 0.8% copper, which was a polite way of saying worthless.

They drilled it anyway.

Hole six went down on March 14, 1981. The program had already burned 16,200 meters across four other targets and found nothing, the whole budget was about $3 million, and the decision to test that hill came down to one geologist's read of the ground.

That particular hole passed through 241 meters of barren leached rock and hit 52 meters of ore grading better than 1.3% copper.

Two years earlier, they had registered the claim block as “La Escondida,” which means The Hidden One. Turned out to be a very accurate name.

Escondida became the largest copper mine on the planet and still produces around 5% of world supply.

While the initial reserves graded 1.59%, BHP now runs the concentrators on roughly 0.85%, and in the company's own language, start-up grade was "2.5 times where it is today."

The number a specialist once used to write the deposit off is nearly the number the world's best copper mine operates on today.

But it gets even worse.

Keeping that ore moving takes water the Atacama never had.

Escondida lifts desalinated seawater 10,000 vertical feet through 170 kilometers of pipe, a system BHP has sunk more than $4 billion into, and a peer-reviewed study found the lift alone eats four times the energy of the desalination.

That pit is a microcosm of the whole industry, and the cost lands on your money, your grocery bill, and an inflation number Wall Street hasn't priced correctly.

The World Will Need 42 Million Tonnes. It Will Get 32.

S&P Global published a study in January that has copper demand reaching 42 million tonnes by 2040, half what the world uses now, against a deficit of 10 million.

A quarter of what civilization needs will simply not be there.

S&P has primary mine supply falling to 22 million tonnes by 2040, roughly a million below today, after a peak around 2030. Every tonne of supply growth in the model comes from recycled scrap while the mining part of the equation shrinks.

For 30 years Wall Street's capital chased sexy technology like software, apps and cloud platforms.

Nobody funded the raw materials that make it all possible, and now the bill is coming due.

The demand behind this is structural, which separates it from every commodity squeeze you've lived through.

AI data centers, electric grids, defense infrastructure, renewables, EVs: none of it gets quietly shelved when the economy softens, because the capital sits in budgets already running a decade out.

One 1-gigawatt AI data center can require up to 50,000 tons of copper, against 5,000 to 15,000 for the previous generation of facilities, and Goldman Sachs expects grid infrastructure alone to drive more than 60% of all copper demand growth between now and 2030.

Robert Friedland, who built Ivanhoe Mines, says the world needs to mine as much copper in the next 18 years as it did in the last 10,000 just to hold 3% GDP growth, before anybody electrifies anything.

Friedland sells copper, so let’s discount him, but notice that S&P Global, which sells research to both sides of every trade, lands on roughly the same number.

A Quarter of the World's Copper Cable Goes to China, and the Grid Is Still Behind

State Grid, the state-owned monopoly that runs the power network for more than 80% of China, is the single biggest buyer of copper on earth, and the country runs through about 7.5 million tonnes a year in electrical cable alone, better than a quarter of global supply.

They're behind on their own buildout.

A Global Energy Monitor study published in July found grid construction no longer keeps pace with the generating capacity China keeps adding, with roughly 315 gigawatts waiting on transmission lines that don't exist yet.

The world's largest copper buyer has to build all of that at the exact moment mine supply is going backwards.

The International Copper Study Group reported world mine production down 1.1% in the first half of this year, with the sector tracking toward its first annual decline since 2017, and Chile's copper commission cut the country's full-year forecast in August to 5.27 million tonnes.

Global copper production is down this year, even though prices are up. Higher prices should incentivize miners to pull metal out of the ground, but that’s not happening.

Diesel Is Up 68%. Core Inflation Says 2.4%.

Copper is in your home's wiring, in the transformer on your street, in the power lines feeding the hospital and your kid's school and the data center streaming your Netflix, which means that when copper reprices, those costs don't just stay inside the mining sector.

Four economists out of the IMF and the Dallas Fed published work on this through the Centre for Economic Policy Research, and the finding is specific: in countries heavily exposed to metals through their production networks, a 1% rise in copper adds about 0.05 percentage points to headline inflation inside twelve months.

Copper lands softer than oil but stays in the system far longer, which is what makes central bankers misjudge it.

August headline CPI printed 3.4% against core at 2.4%, and a gap that size is almost always energy. Retail diesel hit $6.285 a gallon in mid-September, up 68% on the year. Copper is up 45% over twelve months.

The GDP implicit price deflator, the broadest measure of prices anyone publishes, has gone from around 2.5% eighteen months ago to 4.37%.

Jeff Currie ran commodities research at Goldman Sachs and now sits at Carlyle. He wrote in August that "the bond market will spend the next six months discovering what product markets already know."

Weeks later the Fed raised rates a quarter point to between 3.75% and 4.00%, its first hike in three years, and the 10-year closed last week at 5.00%.

Your grocery store doesn't care what the breakeven rate says. It cares what a pallet of food costs to move from a warehouse to a shelf, and that cost is going up.

Nobody Is Looking For New Copper Anymore

If you've read Moonshot Minute for any length of time you know the thesis.

When the financial world ignores the physical world long enough, the physical world eventually demands payment.

That payment is coming due in copper.

Falling grades mean more energy, more water and more money spent to produce less metal, which you saw at Escondida.

Sprott puts the average copper project at 17.5 years from discovery to production, so a deposit somebody finds this morning doesn't deliver a pound of metal until the mid-2040s.

Copper budgets hit a 12-year high of $3.27 billion last year, which sounds bullish until you dig in… grassroots work, the kind that finds deposits nobody knew were there, has collapsed to a record-low 22% of global budgets from nearly 50% in the early 2000s, while minesite exploration took a record 45%.

Record money, spent scraping around the edges of orebodies the industry already owns.

S&P titled its September research "Expansion over addition as new discoveries lag," which is analyst for we have stopped finding things.

The market is repricing faster than the analysts can update their spreadsheets.

Goldman Sachs forecast copper averaging $10,000 to $11,000 a tonne in 2026, and it settled Friday at $14,529 on the LME, better than 30% ahead of what the experts said.

This all follows a similar path. Gold led this cycle, silver followed, and copper is moving now, with miners up 13.4% in the third quarter versus the S&P's 2.0%.

What You Can Do Right Now

Audit your portfolio for copper exposure.

Most people have no direct exposure whatsoever to the metal modern civilization physically depends on. Pull up your 401(k).

If you're sitting in an S&P 500 index fund, energy is 3.5% of your money and materials is 1.7%, so everything that digs, refines and moves the physical inputs to the entire economy comes to about a nickel on the dollar. Technology is 38.9%.

Owning no copper miners is a bet that the world electrifies itself, builds out AI infrastructure, expands the grids across Asia and Africa and rearms every Western military, all without the one metal each of those things requires.

I don’t know about you, but I'm not taking the other side of that.

Copper closed Friday about 3% below the highest price it's ever traded and the miners are up 21.6% on the year.

Scale in, hold cash back for the drawdown copper will hand you somewhere in the next couple of years.

What Premium Members Already Own

In our Moonshot Minute Portfolio, 13 positions have closed since we started and all thirteen closed green, averaging 78%, with seven more than doubling.

When a position doubles, Premium members get the same instruction every time. Sell shares equal to your original stake, take your money off the table, let the rest ride.

We call it a Moonshot Ride.

Six open positions are up triple digits as I write this, and on five of them members pulled their original capital out months ago, which means those gains are running on the house.

The supply math, the grade collapse, the inflation mechanism, you just got all of it for nothing. The part that pays is the part you didn't get.

Premium members have held copper since last October and three of those positions are open today. They were bought before copper went to $6.62, before Chile cut its forecast, before the Fed hiked into a 4.4% deflator.

Average gain on the three is 31% and I'm nowhere near finished buying.

When we’re ready for the next copper recommendation, it goes to Premium members only.

I grew up in a house where money was tight and nobody could explain how any of the system actually worked, so I had to go figure it out the hard way, and one of the hardest lessons in the whole education was this: the biggest opportunities never look like opportunities when they show up. They look like problems nobody wants to deal with.

Copper's supply crisis is that problem. The miners solving it are the opportunity.

Don't sleep on this one.

Double D

P.S. Today’s essay was about what gets pulled out of the ground. Starting tomorrow, you'll hear from someone who covers what gets built with it.

He started programming as a kid, he's built and backed companies, and he was early in Amazon, Nvidia, bitcoin and ethereum. From now on, he’ll be writing to you on Tuesdays and Thursdays. Tomorrow he introduces himself and lays out what he's hunting, and I'd read him with the same skepticism you read me.

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