Copper supplies should drop by year 2000, study predicts

Supplies of copper are expected to tighten through the 1990s despite intense activity in development of new mine projects, a study by London-based Commodities Research Unit says. The tonnage from known projects that could be brought on stream by the turn of the century will be nowhere near enough to offset closures and match expected growth in demand for copper, CRU says.

The study, entitled “Copper Greenfield Projects for the 1990s,” surveys the 27 most significant copper greenfield developments actively being considered at this moment — equivalent to 1,615,000 ton-per-year of copper mine capacity — and provides a detailed technical and financial assessment of each one.

Of that amount, some 770,000 ton-per-year would be viable at a copper price of 90 cents per lb. and could be in production by 1995, with a further 510,000 ton-per-year by the year 2,000.

The net outcome, after allowing for expansions and closures of existing capacity, is growth in mine production of 2.6% a year to 1995. That would imply continuing under supply of the market if consumption were to continue growing at 3.4% annually, as it has since 1985. This situation could worsen after 1995 when the pace of scheduled closures brings calculated net production growth down to 0.4%.

Even if copper consumption through the 1990s falls to 2.5%, Commodities Research Unit estimates that 850-900,000 tons per year of capacity will still be needed by the year 2,000, over and above the 1,615,000 tonnes of “greenfield” capacity already under construction or actively being considered. While such an outcome is not impossible, it will take an extended period of high prices, reminiscent of 1964-74, to bring it about.

Of the 27 projects surveyed in the study, four emerge as outstanding, all of them in Chile and 12 others as good or medium quality, seven in Chile, two in the U.S. and three elsewhere. Attractive geology and a favorable investment climate are key factors favoring Chile and the U.S.

The increasingly dominant position of these two countries and the dependence that implies on political developments in the former and environmental regulations in the latter may stimulate greater interest in some of the Canadian projects, if investors are inclined to favor security of supply considerations over economics.

Another key factor is the rapid progress in heap leaching, solvent extraction and electrowinning technology which has transformed the economics of a number of known copper resources that had not been considered viable before. Well over 40% of the production from the new capacity will come in the form of electrowon cathode.

This will have significant consequences for the custom concentrate and blister markets because about half of the mines in operation today will close because of reserve exhaustion over the next 15 years. The great majority produce sulphide concentrates.

Surprisingly, the investment needed to start a new copper production facility is considerably less than 10-15 years ago. The average capital cost per annual tonne of installed copper capacity (to refined product) for the projects surveyed is less than US$5,000. This falls to less than US$3,000 per annual tonne for the heap leaching operations.

The new generation of mines will also have low cash operating costs. Over 75% will see their cash costs covered by the copper price of 60 cents per lb. Producers of electrowon cathode will have costs of less than 50 cents per lb.