LMEWEEK-BHP turns to drill bit to meet electric car copper consumption

(For Reuters coverage of LME Week, click on)

* Branching out into relatively under-explored territory

* Electric vehicles could eventually need 105 kg copper each

* Could add 12 million tonnes to copper demand over time

By Barbara Lewis

LONDON, Nov 1 (Reuters) - Exploration not acquisition is the best way for BHP to meet any rise in copper demand from electric vehicles, a top official at the world’s biggest miner said.

The copper sector faces huge challenges as the ore quality in existing mines deteriorates, while electric vehicles will require high volumes of the metal, Danny Malchuk, president of operations at BHP’s Minerals Americas, said.

“We want more copper resources in our portfolio. And we believe the most valuable pathway to achieving this is through exploration, the drill bit,” Malchuk said in the text of a speech delivered at a Bloomberg forum on Wednesday.

Exploration budgets collapsed during the commodity crash which ended in early 2016. They have been slow to recover as adventurous small mining companies, which have traditionally provided a pipeline of new finds, have not attracted investment while increasingly cash-rich majors have questioned the wisdom of sinking money into high-risk exploration.

BHP has kept its copper exploration budget steady at an average of $60 million annually over the last four-to-five years out of its overall budget for exploration of around $1 billion.

The mining group’s aim is to find large, long-life deposits through alliances with junior explorers, data analysis, partnerships with universities and diversification into less mature copper territory, such as Ecuador, where BHP acquired two exploration licences this year.

As ore quality dwindles in the world’s biggest copper-producing nation Chile and other challenges, such as power and water supply become pressing, growth in the global electric vehicle (EV) fleet to an estimated 140 million by 2035 from about one million today, should spur demand, Malchuk said.

He said electric vehicles could require even more copper as they evolve – up to 105 kilograms per vehicle, meaning EV copper demand would reach 12 million tonnes, or more than half of the current global market for refined copper.

So far this year, the price of traded copper has climbed by well over 20 percent, although some analysts say the rally is vulnerable as it has risen on expectation rather than an actual increase in demand.

Consumption of other minerals, such as lithium, cobalt and nickel, will also increase because of the EV trend, but volumes will be much smaller, Malchuk said.

Glencore by contrast has pushed nickel and cobalt as well as copper as “enabling commodities” for the EV trend.

For Reuters coverage of LME Week, click on (Editing by Alexander Smith)