By John Kemp
LONDON Feb 28 Copper producers have struggled
to raise production even though prices for the metal have
quadrupled since the turn of the century, an embarrassingly poor
performance for the industry.
Producers tend to blame falling ore grades at ageing mines
for the industry's failure to produce more of a supply response
in the face of soaring prices.
But the real barriers to expansion of copper production, as
with crude oil, live above rather than below ground.
There is no shortage of potential copper deposits, even if
output from some of the older worked ore bodies is starting to
New estimates from the influential U.S. Geological Survey
(USGS) put undiscovered copper resources at 3.5 billion tonnes,
more than double the already-identified resource base of 2.1
The potential resource base is enough to last 300 years, at
current consumption rates of 20 million tonnes per year, and
recycling could extend that many more centuries into the future
The challenge is getting the copper out of the ground in the
face of an often hostile political environment.
Between 2000 and 2012, prices for the red metal rose at a
compound average rate of 13 percent per year but output was up
by just 2.6 percent a year (and just 2.0 percent if the impact
of increased recycling is excluded).
By contrast, primary aluminium prices rose just 2.4 percent
per year over the same period while output increased 5.6
Copper was more like oil, for which prices increased by 12
percent per year on average while production rose by an anaemic
At present, just five countries (Chile, China, the United
States, Peru and Australia) produce 60 percent of the world's
Chile alone accounts for around a third of world mine
output, according to USGS and the International Copper Study
Africa's copper belt, which has some of the world's most
attractive ore bodies, remains largely off limits because of
political and economic instability.
NEW COPPER FRONTIERS
Traditional producers have struggled to sustain, let alone
increase, output as ore grades fell and costs increased.
But undiscovered resources are thought to be more widely
distributed than today's reported reserves.
Based on a careful assessment of geological conditions, USGS
estimates there could be major copper-bearing ore bodies near
the surface in the Russian far east and eastern Siberia;
Mongolia; Kazakhstan; China; and down through Indochina and
There are also likely to be substantial undiscovered
resources in North and South America, according to USGS, even
though the areas have been well surveyed and worked over
Asia could contain anywhere between 770 million and 2.4
billion tonnes of undiscovered copper resources, USGS assesses,
in a giant arc stretching from the Arctic coast and Kamchatka
down through eastern Siberia and China into Southeast Asia and
the Indonesian archipelago.
The region's current identified resources are modest when
compared with Africa and the Americas, but much of it is
USGS notes that four giant copper deposits have already been
discovered on the Tibetan plateau.
Even in areas that have been comparatively well-explored,
such as Indonesia, undiscovered resources are likely to exceed
those that have already been identified, according to USGS.
Copper production uses enormous quantities of energy. Every
tonne of refined metal consumes the energy equivalent of 22
barrels of crude oil in its production, according to Ajay Gupta
and Charles Hall of the State University of New York ("Energy
cost of materials" in "Fundamentals of Materials for Energy and
Environmental Sustainability", 2012).
In comparison, producing a tonne of steel uses the energy
equivalent of 4.75 barrels of oil, while lead takes around 5
barrels and zinc around 12. Only aluminium, at almost 31
barrels, is more energy-intensive.
Copper smelting and electrolytic refining are obviously
energy-hungry processes, requiring enormous amounts of
But the most energy-intensive parts of the process are
actually the earlier mining, milling and concentrating stages
because of the much larger quantities of material handled at
this point (including the value-less overburden and gangue).
Electricity is used for ventilation, water pumping, crushing
and grinding, while diesel is used mostly for hauling and other
Two-thirds of the energy used at the mining stage is due to
crushing and grinding, according to Gupta and Hall, because of
the enormous amounts of material handled at this point.
The availability of sufficient quantities of reliable and
affordable electricity and diesel have therefore been a major
headache for copper producers.
OBSTACLES ABOVE GROUND
Energy costs, together with falling ore grades at more
mature mines, are highlighted by the ICSG as among the financial
and operational constraints on copper mine supply.
But ICSG identifies a host of others, including financial
(the cost of project finance and wages); fiscal (tax and royalty
issues); operational (water availability, environmental
regulation and labour relations); and political (resource
nationalism and political unrest).
Given that aluminium production is even more
energy-intensive, yet output has grown almost three times as
fast, energy is clearly not the major constraint. Nor is the
capital cost of projects, according to ICSG.
Instead the constraints appear to be mostly a host of
problems industry insiders describe as "above ground" to
distinguish them from geological issues "below ground".
These include taxes and royalties, relations with workers,
local communities and environmental groups, resource
nationalism, and political and legal instability.
In that respect, the problems in the copper industry are
like those that have held back oil production outside North
Much of the world's identified and yet-to-be-discovered
copper resources lie in middle-income and poor countries where
there is little political, contractual or financial stability.
Rio Tinto's recurrent problems developing its giant
Oyu Tolgoi mine in southern Mongolia, a world-class
copper-gold-silver high-grade ore body, are emblematic of the
above-ground issues that have bedevilled attempts to expand
copper production into new frontier areas.
The world is not running out of high-grade copper resources.
There is enough copper out there to last hundreds of years. The
challenge is to extract it from complex political environments.