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The next generation of copper mines will not only have less copper but sharply declining grades, according to a study by Mining Intelligence.
Operating mines currently have an average grade of 0.53% while copper projects under development have an average grade of 0.39%.
The estimated total resource of copper projects in the pipeline are 106B tonnes, half the current resource total of existing mines.
Jennifer Leinart, Mining Intelligence analyst and vice president of CostMine, warns that copper prices will rise.
“Miners are struggling with both lower grades and increasing operating costs,” says Leinart.
“Lower grades mean moving more rocks which in turn will require more diesel fuel and explosives, making the metal more expensive to produce.”
Jennifer estimates that fuel, lubricants and explosives can make up 25% of operating costs, based on today’s prices and using a 40,000 tonne per day open pit copper mine as an example.
“Existing mines have been labouring under cost inflation,” says Leinart.
“In 2007 the average operating cost per tonne of copper ore was $14. In 2017 it was $21.”
Copper demand is not expected to slow in the medium-term. The world’s number two miner, Rio Tinto, says cost inflation and resource nationalism will continue to put pressure on mining costs.
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Creative commons image of copper mushrooms by Tony Hisgett
4 Comments
RockHopper
So what happens when the price of oil goes over $100 per barrel? Either commodity prices have to increase or mines will go out of business. Don’t tell me there is no inflation.
Copper Analyst
Please double check the chart… 207 billion tonnes at current annual production rates mean over 10,000 years of resource? Sounds too high to me….
Superstition
it might be referring to tonnage of ore. otherwise, you’re right, it makes no sense.
Jennifer Leinart
Hello: Sorry for the confusion. It is tonnes of ore – not tonnes of copper metal or contained metal. The data used here is by total resources at the average grade above – so therefore, 207 billion tonnes of ore at 0.53% average copper grade. The resources stated are taken directly from company statements. Much of the resources out there will never be recovered, but the important message here is that new projects are lower grade.