The copper mining landscape - V1

The copper mining landscape - V1

The role of copper in modern society

Copper is one of the world’s most versatile and useful metals, playing a prominent role necessary for modernisation. It enjoys both uniqueness and versatility in its end use, based on inherent physical and chemical properties. Best known for its conductive efficiency, copper is tough, malleable and ductile, corrosion-resistant, and recyclable.1

In 2018 global annual copper mine production was 20.674 million tonnes, 2 and as the world continues to modernise, copper use is projected to grow 5% to 21.701 million tonnes in 2021 from 2018 levels as shown below in Figure 2 3.

Use indicators suggest that the global demand for copper is expected to generally outpace supply in the foreseeable future.

The highly conductive properties of copper make it favourable for power generation, electricity transmission, and heat exchange. Both flexible and recyclable, copper is widely used in a variety of end use products including electronic devices, electrical wiring, plumbing, building construction, infrastructure, manufacturing, transport, consumer and health products.

Copper is a metal at the forefront of green innovation, used by industries seeking to reduce environmental impact. Hybrid and electric vehicles rely on copper, as do renewable energy sources such as solar photovoltaic, wind farms, solar thermal, hydroelectricity and associated grid infrastructure. Constructing a renewable energy system demands significantly more copper than traditional systems. 4

As the world transitions to low-carbon technologies it is recognised that these technologies require large amounts of minerals, including copper to meet the growing demand 5, as shown in Figure 3 below. For example, the copper intensity required to produce a wind turbine can range from 2.54 - 6.75 tonnes per MW of installed capacity.6 It is predicted by the World Bank (2019) that while 550mt of copper has been produced over the past 5,000 years, the same amount will be required in the next 25 years to meet global demand for the metal.

Copper also plays an essential role to modern life as an integral component in household goods, construction and infrastructure, smartphones, and electronics, refer Figure 4 (right).7 Copper upholds a unique position as an important factor to modernisation but also plays an important role in the transition of society to a zero-carbon future.

Around half of the world’s refined copper is used in China, with remaining key markets in the US, Europe, Japan and South Korea. Major copper use markets are outlined in Figure 5 below:8

While copper use is sensitive to general world economic growth, international trade factors, and industrial activity dynamics, it is not surprising that copper demand is affected by short-term factors. However, the important and broad role that copper plays in modern society including the transition to a lower carbon future indicates ongoing demand growth well beyond the short-term. 9

Overview of Copper mining landscape - future demand and supply

Demand

The world used more than 23.5 million tonnes of copper in 2018. As the world’s leading economies continue to urbanise and industrialise, copper use is expected to increase to more than 25 million tonnes in 2021.

There is an increasing number of foundational demand side drivers, including:

  • country urbanisation – China up from 19.4% in 1980 to 59.2% in 201810

  • onset of mobile laptop computers and smart phone units per capita since iPhone release in 2007

  • low cost electrical goods and appliances – televisions, white goods

  • roll out and expansion of copper-based data infrastructure networks

  • technology drivers facilitating automation, data recording and storage shift to electrical vehicle (EV) production and supporting infrastructure

  • a structural change towards renewable energy generation

These demand drivers are in part offset in the short term by:

  • Sino – USA trade disputes

  • impacts to copper end use supply chains through global ‘black swan’ events

  • gross copper stockpile inventory and movements, and

  • real changes in manufacturing use vs apparent use (goods warehouse stockpile) in China

Base metals including copper, silver, aluminium (bauxite), nickel, zinc, and possibly platinum, among others, are expected to benefit from these drivers, particularly the evolution to a low carbon energy transition. It is clear that meeting the long-term Paris Agreement goal of keeping global temperature increases to well below 2oC will require:

  • a change in the supply energy matrix,

  • a sustained supply of the metals required to enable the clean energy shift

  • increased efficiency in the mineral intensity to manufacture clean energy infrastructure

  • supply side industry advancements to decrease reliance on fossil-fuel-based energy supply systems to facilitate the extraction and production of these key base metals.11

Supply

Australia is one of the world’s major copper mining countries, behind Chile, Peru, China, the Democratic Republic of Congo and the United States. Chile alone represents more than one-quarter of global mined copper output as indicated in Figure 6.12

Copper is primarily produced as either an intermediary product known as a ‘concentrate’ or as finished plated product known as a ‘cathode’ from a combined solvent extraction and electrowinning (“SX-EW”) process, or via electrorefining. Copper concentrates comprise the largest form of copper production, with the relative amount of copper produced via these two methods shown in Figure 7.13

To meet future demand drivers, an ageing copper producing industry needs to consider a number of factors including ore grade decline (as indicated in Figure 8), resource depletion, fixed and variable input costs, cost of capital (debt and equity), availability of energy and water, permitting requirements, social support, and the availability of high–quality future development opportunities. 14

These factors are likely to require higher copper prices to attract the necessary investment in new projects to balance the market. These diverse considerations will also be contributing factors toward identifying the most feasible prospective pipeline of new projects, where the next marginal tonne of primary copper will originate, and at what production cost.

Neither the SX-EW nor concentrate source of copper production is likely to come cheaply.

Copper Mining – A brief summary of the process

Copper production is a capital-intensive process, and the industry is facing increasing operating costs due to declining grades. As the industry faces tighter margins, the challenge to existing mine site operations is to maximise efficiencies in the extraction, comminution and metallurgical processes so as to remain profitable and sustainable. 15

Mining

The two primarily methods of copper mining are open pit (surface mining) and underground mining. Copper ore is extracted from either oxide or sulphide orebodies, and each type of orebody requires different processing methods.

Open pit mining refers to the development of a large excavation through the use of blasting and large earthmoving equipment. Surface vegetation and waste rock are removed to reach the location of the metal ore body. Benches are carved into the walls of the excavation to provide geophysical stability as the excavation progressively deepens.

Mining is sequenced to maximise the recovery of metal ore in the orebody, with the excavation progressing deeper as the upper levels of the orebody become depleted. The metal ore is then hauled and transported elsewhere for processing and refining. Open pit mining has been criticised due to the volume of ore and waste rock removal and environmental impact. Extensive remediation processes are required to return the mining operation back to its original greenfield state. 16

Underground mining involves the construction of a shaft or tunnel that declines under the surface and leads to the metal ore deposit. Passages are then required to be cut from the shaft at different levels to access different parts of the metal ore body. Once the ore is recovered and undergoes primary crushing, it is then hoisted or hauled to the surface for beneficiation. Underground mining leaves a lesser environmental impact on the surface compared to open pit methods, and some waste rock must still be brought to the surface for separation. 17

Beneficiation

The copper beneficiation process is determined by the chemistry or nature of the host rock, be it derived from a copper oxide orebody or a copper sulphide orebody, as shown in Figure 9.18

The copper beneficiation process requires a high level of energy input as the ore is crushed and ground into particle sizes small enough to maximise the recovery of copper. Lago (2015) identified that 87% of the electric energy consumption in Chilean copper mining in 2015 occurred in mill plant concentrators and Leach/SX/ EW processes.19

Future Copper Supply Scenarios

Mudd and Jowitt (2018) assessed 2,301 copper deposits globally collating resources and reserves (as stated in 2015). The findings to delineate likely global copper supply are contained and align relative to “Copper Production by Country” geographies as outlined in Figure 6 and indicate that the major copper resources are primarily located in the current major copper producing regions.

Mudd identified that approximately 75% of the contained copper in the resource database were reported in copper porphyry deposits.20

Both Mudd and Lagos agree that the average ore grade in copper production has been declining over time, albeit Mudd has considered the global copper trends whereas Lagos only considered Chile.21

Drawing from these findings, a likely outcome is that, in the absence of new high-grade discoveries, new projects will need to contend with lower grade deposits in current extractive jurisdictions.

Of note these deposits will also need to contend with the cost of mine site inputs such as water and power. In the absence of innovation and technological development, these cost inputs will likely drive up the unit cost of production and hence the price of copper in a demand driven copper market.

The Copper Mining Cost Structure Composition

New copper supply needs to consider costs beyond immediate site based operating costs. The investment attraction for the development of new operations takes into account where an operation is most likely placed within the global cost curve. Chile currently produces greater than 25% of the global copper supply and hence has a large influence on the current and future cost structure of the copper industry. Any new supply would need to demonstrate a favourable position against the world’s largest supply region. The cost structure of new copper supply needs to consider factors including but not limited to:

  • Regulation and permitting requirements at a local, national and global level

  • Health, safety and environmental considerations

  • Deposit grade

  • Proportion of fixed and variable input costs

  • Cost of capital (debt and equity)

  • Availability of energy and water

  • Energy consumption and emissions

  • Social licence to operate

  • Technology adoption

  • Skills and training

Australia’s contribution to current and future supply

Australia is likely to play an important role in the future global copper mining landscape and is ranked second in the world for economic resource potential.22 It is currently is the seventh largest producer of copper globally, and the second largest exporter in primarily copper ores and concentrates.

A number of new projects and expansions are underway, which are expected to underpin export growth in line with production output from 932kt in 2018-19 to 1.0Mt in 2020-21.23

Figure 11 shows Australia’s major copper deposits and mines indicating the breadth of distribution in deposit size.24