The New Frontier in Mining Is … Europe?

by Jeff Reeves | May 25, 2012 9:17 am

Rio Tinto (NYSE:RIO[1]) is one of the biggest names in mining, digging up a variety of ores in a variety of locations worldwide. But the company gets its name from the company’s very first mines, which excavated copper along the Rio Tinto river in Spain.

Though RIO has since moved on from its namesake locations, up-and-comer EMED Mining is looking to reopen the locations and tap into the copper there.

“We bought the original Rio Tinto mine where the company Rio Tinto was born, and we’re preparing it for its restart,” EMED Mining’s Managing Director Harry Adams said in a phone interview Thursday.

The mine is scheduled to start producing by the end of next year.

The presence of a copper mine in Europe might seem odd to many investors. After all, all investors seem to hear about are the opportunities in South America for mining — whether it be from multinational giants like Rio Tinto or Freeport McMoRan (NYSE:FCX[2]) or home-grown miners like Brazil’s Vale (NYSE:VALE[3]). And conventional wisdom is that the eurozone isn’t exactly a treasure trove of minerals.

But just because Europe has “fallen out of love with mining,” as Adams puts it, doesn’t mean there isn’t opportunity.

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Consider that while Europe regularly ranks at the bottom for mining investment, it still is neck-and-neck with Asia. That’s a surprise to many investors.

And what’s more, that lack of investment also is a big opportunity considering the looming bottleneck for copper as worldwide demand picks up.

“Essentially, Europe went to sleep for mining about a generation ago, and there’s a lot of untapped potential for development in Europe — either for restarting or for new development,” EMED’s managing director told me. “It’s always been the case, but it’s only really the last few years that Europe started to reawaken at a policy level and the current economic troubles in Europe have sort of sped it all up.”

Admittedly, some commodity investors are losing interest in copper. Copper prices have lurched downward in the last several weeks — and longer-term, copper prices have slumped almost 25% since mid-2011. What’s more, amid the slower growth in China and recession in parts of the European Union dragging on demand, there are fears the metal has more declines ahead.

EMED’s Adams doesn’t like to speculate on short-term movements, but to him, it’s clear the long-term demand picture for copper is strong and that supply simply can’t keep up with the “structural deficits” that are playing out right now and will boost copper in the long term.

Meaning the time is right for copper — particularly mining investments in Europe.

That’s because trading in a dollar-denominated commodity while input costs are in a slumping euro means development is cheaper. And while Adams says EMED always tries to be sensitive in the dialogue with local municipalities and residents, it surely has made things easier that Spain’s economy is desperate for any investments and there are a lot of eager workers willing to help on the project.

“Our bet seven years ago in establishing EMED was copper and gold to be our focus as our commodity bets, and geographically we were betting that Europe would open the doors to mining again, and now that’s happening in earnest.” Adams said.

Another plus: Unlike areas of Asia or Africa that can suffer geopolitical unrest or antiquated infrastructure that hinders development, Europe is one of the most stable markets in the world.

“If as a representative of investors I was asked to place my money in Africa vs. Europe, I’d always place it in Europe. The sovereign risk is far, far lower.”

Before you race to get into EMED, however, you should know that right now it only trades in Toronto (Ticker:EMD) and the AIM market of the London Stock Exchange (Ticker:EMED).

And even if you have access to these foreign exchanges, know that EMED is very much a startup. It’s only a few years old, and the Rio Tinto location in Europe actually will be the first operational mine for the company among its prospective sites. And even that won’t be up and running until the end of 2013. The company has yet to turn a profit as it continues to spend on exploration and development.

It’s also thinly traded in Toronto, though share turnover in London is robust.

But whether you want to take an aggressive position on this up-and-coming copper miner, you have to admit the idea of tapping into the mines of Europe amid the eurozone debt crisis is a heck of a story.

Jeff Reeves is the editor of and the author of “The Frugal Investor’s Guide to Finding Great Stocks.”[4] Write him at editor@investorplace??.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves did not own a position in any of the aforementioned securities.

  1. RIO:
  2. FCX:
  3. VALE:
  4. “The Frugal Investor’s Guide to Finding Great Stocks.”:

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