Copper Miners ETF

The index is designed to track the performance of companies that have, or are expected to have, significant exposure to the copper mining industry. Companies are only eligible for inclusion if:

•A significant part of the company’s revenue is generated in copper mining and/or closely related activities (e.g. exploration or refining of copper) and/or
•A company is expected to generate a significant part of its revenue in copper mining and/or closely related activities in the future.

The minimum number of constituents is 20 and the maximum number of constituents is 40.

To be remain eligible, companies included in the index must maintain a minimum market capitalisation of US$100 million and average daily turnover of $0.25 million over the last three months. To become eligible, new companies must have a market capitalisation of $US200 million and a minimum average daily turnover of $0.5 million.

Index components are weighted according to their free float market capitalization. Each component is subject to maximum weight of 4.75%, in order to ensure diversification.

The aggregate weight of companies that fall short of the liquidity criterion cannot exceed 10% of the index weight.

WIRE is built as a feeder fund that invests directly in the NYSE Arca-listed Global X Copper Miners ETF (COPX), which is managed by the Global X team in New York. Listed in 2010, COPX is the largest copper miners ETF in the world with more than US$1.6 billion in assets under management as of November 2022.

Like other commodities, the value of copper is driven by fundamentals and the availability of substitutes.

Most copper demand comes from Asia, especially China and India, where it is used to create electric wires for machines, buildings, and expand the grid. This means industrial production in these two countries is an important variable determining the copper price. Copper is also a key metal in the energy transition, as it is needed in great quantities to build solar arrays, wind turbines and electric cars. Global energy policy is therefore another variable.

The main substitute metal for copper is aluminium, which can replace copper in several applications. Aluminium prices can therefore also determine copper prices.

1. de Salles, A. , Magrath, R. and Malheiros, M. (2019) Determination of Copper Price Expectations in the International Market: Some Important Variables. Open Journal of Business and Management, 7, 348-373. doi: 10.4236/ojbm.2019.72024.

Like other mining companies, copper miners’ share prices are heavily impacted by the price of what they mine (copper). One risk of investing in copper miners therefore is that the copper price deteriorates, which would – all things being equal – negatively impact revenues and profits.

Political risk is another risk. As copper miners can operate in higher risk jurisdictions, there is a possibility of unfavourable political environments.

It is important to note that risks associated with investing in copper miners are not limited to the above.

Investors can use WIRE in three main ways. First, it can be used as a portfolio satellite for those wishing to access growth themes like the rise of Asia and clean energy technology—as demand for copper is heavily underpinned by both.

Second it can be used as a way to express a tactical view on the copper price. Copper miners typically underperform when copper prices fall. However when copper prices rise, copper miners can outperform the metal itself.

Third, it can be used as a hedge against inflation. Every major sector of the global economy uses copper. As a result, copper prices tend to rise with general consumer prices rise and the copper price and major inflation benchmarks are highly correlated.