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TheStreet Open House

Cheap Copper Stocks With Golden Opportunities

NEW YORK (TheStreet) -- The uses for copper are many and the demand is as strong as ever. It's a key component in home building, from the wiring in houses to ornamental exterior functions like rainspouts and roofing.

Because copper can absorb a great deal of heat, it is used for piping hot water, as infrastructure for refrigerators and as a vital component for air conditioners. It is used in electrical switches and magnetrons for microwave ovens.

Looking at the other uses for copper, one can see many applications that aren't well known but are essential to a wide range of products and services.

Most copper is mined near the surface of the earth in open pits. These surface-style mines are being depleted while the worldwide demand for copper keeps increasing.

In an article on June 12, in the Wall Street Journal, "Meet at the Center of the Earth," copper miners like Rio Tinto (RIO), a copper producer that has mainly relied on surface mining, is in the process of drilling quite deep to discover more copper.

RIO, according to the article, is investing $165 million in just one area alone to unlock a potential $5 billion copper cache buried 4,000 feet below the surface, in Bingham Canyon, Utah.

There are a lot of risks to drilling for copper and other minerals at deep levels. It's also very expensive. Miners have to create complex underground tunnels and invest in robotic digging equipment because digging deeper puts the human miners at increased levels of danger.

The point of all this is that copper is so valuable and so important to many industries that the big producers are literally "going out of their way" to get more of it out of the ground.

This strongly indicates the copper prices are at, or near (if you'll excuse the pun), the bottom. The price has been incredibly volatile over the last 13 years. Copper prices have quintupled from the 60-year low of 60 cents/lb ($1.32/kg) in June 1999, to $3.75 per pound ($8.27/kg), in May 2006. As of June 12, 2012, it closed at $3.35, or around 11% below its May 2006 high.

Economic incentives, population growth, labor unrest and monetary stimulus programs from wealthy nations suggest that the price of copper is most likely to go higher in the months and years ahead.

One of the most cost-effective ways for an investor to benefit from a rising copper price is to invest in the companies that are most successful in mining and distributing it.

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