Horizons ETFs has announced the upcoming launch of Canada’s first ETF to provide targeted exposure to the copper mining industry.
Copper consumption is often used to gauge the health of the global economy.
The Horizons Copper Producers Index ETF (COPP CN) will list on the Toronto Stock Exchange on 17 May and will come with a management fee of 0.65%.
Copper is one of the world’s oldest industrial metals and an important input in the manufacture of infrastructure such as urban buildings as well as numerous electronic technologies.
Copper’s wide range of applications has earned it the nickname “Dr. Copper” given that its consumption is often used to gauge the health of the global economy – increasing copper usage typically corresponds with periods of worldwide economic expansion.
Demand for copper is also being driven by the climate transition as the metal is an essential component of technologies helping to usher in a low-carbon future. Renewable energy systems, including wind, solar, and hydropower, require copper to generate, transmit, and store electricity, while electric vehicles can use more than double the copper of an internal combustion engine vehicle.
Commenting on copper’s ubiquitous use, Steve Hawkins, President and CEO of Horizons ETFs, said: “More than any other metal today, copper is arguably the most important for fuelling the future of global growth. A key metal for electrical conduction, for decades, copper consumption has steadily increased as countries – particularly in Asia – have undergone massive economic expansion. Now, with the demand driven by the green energy and electric vehicle boom, copper could continue to benefit from its usage in the cutting-edge technologies of tomorrow.”
Methodology
The ETF targets the copper mining industry by tracking the Solactive North American Listed Copper Producers Index.
The index selects its constituents from a universe of US and Canada-listed stocks of companies with market capitalizations above $2 billion and average daily trading volumes greater than $2 million. Companies domiciled outside of North America are eligible for inclusion.
The methodology harnesses FactSet’s Revere Business Industry Classification System (RBICS) to screen for companies classified under the ‘Base Metal Mining’ industry group. The process identifies two types of firms: pure-play companies, which are firms classified under the ‘Copper Ore Mining’ RBICS sub-industry; and diversified companies, which are firms that are classified to other subindustries but have the keyword ‘copper’ in their business descriptions.
From this screened universe, the index selects the largest 20 companies and weights them by float-adjusted market capitalization subject to caps of 10% and 5% on any pure-play and diversified company, respectively.
The index is reconstituted and rebalanced on a semi-annual basis.
As of 13 May, Canadian companies accounted for more than two-thirds (70.4%) of the total index weight with the next-largest country exposures being the US (18.2%), Australia (6.0%), and the UK (5.4%).
Notable index positions included Turquoise Hill Resources (19.5%), First Quantum Minerals (11.5%), Southern Copper (9.2%), Lundin Mining (9.0%), Freeport-McMoran (9.0%), Capstone Copper (6.9%), Teck Resources (6.8%), and HudBay Minerals (6.4%).